Jervois would prioritize African exploration
at the expense of American cobalt interests
TORONTO, July 11, 2019 /CNW/ - First Cobalt Corp. (TSX-V:
FCC, OTCQX: FTSSF) ("First Cobalt") today sent a second open letter
to the shareholders of eCobalt Solutions Inc. (TSX:ECS) ("eCobalt")
reminding them to vote against eCobalt's proposed merger with
Jervois Mining Limited (ASX:JRV) ("Jervois").
The full text of the letter is below and has also been filed on
First Cobalt's website at www.firstcobalt.com.
Open Letter to Fellow eCobalt Shareholders
Dear eCobalt Shareholders:
As one of the largest eCobalt shareholders, we wrote a letter on
June 26 urging you to vote against
the proposed transaction with Jervois Mining Limited (click here).
Since then, each company has issued a public response but both have
failed to address the fact that eCobalt shareholders are facing
significant dilution with no clear benefits accruing to us. We are
therefore reaching out to you once again to express our deep
conviction that this deal destroys value for eCobalt shareholders
and should be rejected.
We urge fellow shareholders to vote AGAINST the transaction
utilizing the proxy mailed to you by eCobalt.
We find it unfortunate that the parties to the proposed
transaction have chosen to resort to personal attacks and
inaccurate statements rather than attempting to defend the
transaction on its merits. They are ducking the issue by attempting
to discredit the First Cobalt management team, which collectively
has 100 years of exploration, development and operating experience
spanning multiple commodities with global operators, including
First Quantum, Barrick Gold,
Noranda, Falconbridge and Inmet
Mining. The core issue, which has not been addressed, is the
quality of the assets that eCobalt shareholders are being asked to
accept in return for losing control over the Idaho Cobalt Project
("ICP").
Our previous letter outlined five principal reasons to oppose
the transaction. Proxy material and recent developments have
confirmed our views:
1. Incredibly Dilutive: eCobalt shareholders are
being asked to give up a majority control of the proforma company
while getting nothing of value in return.
Recent Developments: We were told that eCobalt
shareholders would own 46.9% of the new company but a proposed
financing by Jervois would see our pro forma interests drop to just
a 40.8% interest. To make matters worse, less than 25% of proceeds
would be used to advance the Idaho Cobalt Project. The
proposed transaction ascribes a higher value to Jervois assets than
eCobalt's permitted ICP, a position we find to be baffling and
nonsensical.
2. Fails to Advance the Idaho Cobalt Project: The
proposed Jervois transaction does not advance the ICP, either
technically or financially.
Recent Developments: Contrary to what we have been told,
Jervois does not appear to be "committed to aggressively advancing
the ICP". The detailed use of proceeds for the next 12 months
presented to Australian investors in late June proposes spending
A$6.3 million on exploration in
Uganda, A$6
million on G&A across three continents and a mere
A$4.1 million advancing the ICP. This
is at odds with representations Jervois made to eCobalt to spend
C$10 million on the ICP project over
the next 18 months, as the spending breakdown demonstrates a
greater focus on Uganda than
America. For a company that claims to be production-focused, most
of its budget is earmarked for speculative exploration and
administrative overhead.
3. Introduces New Risks: The Jervois transaction
introduces a number of new material risks that should concern
eCobalt shareholders, notably unproven exploration land in the
highly unstable African country of Uganda, a low-grade nickel project in
Australia, a management team based
half a world away from the ICP development project and a primary
stock listing in Australia.
Recent developments: Jervois has made it clear that its
immediate priority is to test new targets in Uganda, a country that ranked 70th in an
investment attractiveness index published by the Fraser Institute
in 2016, behind Ethiopia,
Tanzania and Papua New Guinea. By contrast, Idaho ranked 12th.
In addition, Jervois's conscious decision not to file an
application with the Committee on Foreign Investment in
the United States (CFIUS) creates
a risk, even after closing, that a U.S. court could unwind the
transaction. Given that Jervois is considering Chinese joint
venture partners for its Nico Young
project, we believe that the CFIUS risk should not be overlooked in
the current trade climate.
4. Sale Process Did Not Maximize Shareholder Value:
The eCobalt Board did not fulfil its fiduciary duty to explore all
other value-maximizing options before entering into an agreement
that triggers generous management severance payments and contains a
C$3 million break fee, which impedes
a superior offer.
Recent Development: The response that there were no other
bids is disingenuous and ignores the fact that interested parties
were not permitted to make an unsolicited bid under the
non-disclosure agreements that eCobalt required of them. The duty
to conduct a proper auction rests with the board and in this
regard, we have no evidence that this was even contemplated. The
notion that eCobalt conducted "multiple assessments" of other
assets is not credible as there is no supporting evidence that
management ever accepted confidential information offered to them.
We continue to believe that the Board did not properly exercise its
fiduciary duty prior to entering into this arrangement.
5. Circular Does Not Disclose All the Facts: We
understand that eCobalt received a letter from one of the
industry's top private equity funds interested in funding the
entire capital cost to build the ICP under different
circumstances that would preclude the Jervois transaction. Why was
this critical piece of information not disclosed to
shareholders?
Recent Development: In its press release defending the
transaction, eCobalt says "eCobalt has had numerous parties
interested in providing full project financing on the condition of
a completed feasibility study." Information about these financing
alternatives should have been fully disclosed to shareholders. Why
give away almost 60% of the ICP to Jervois for a $4.1 million ICP investment rather than pursue a
fully financed solution? This merely adds credence to the argument
that shareholders should wholeheartedly reject the proposed
transaction with Jervois and insist that management pursue these
project financing alternatives.
What You Can Do
We urge shareholders to VOTE AGAINST the plan of
arrangement and all related proposals to be voted upon at the
Special Meeting. Your vote matters. The proposed transaction
requires the support of 662/3% of total votes
cast at the eCobalt Special Meeting and the deadline to vote is
July 17, 2019 at 10:00 am Pacific time.
We thank shareholders for their strong support to date. There
are far better options for eCobalt than this value-destructive
transaction. The company will not collapse if the deal is voted
down. On the contrary, it can prosper in an improving
market.
EVEN IF YOU HAVE ALREADY VOTED ON THE PROXY CARD SENT TO YOU BY
eCOBALT, YOU CAN STILL CHANGE YOUR VOTE BY SIMPLY RECASTING YOUR
VOTE. ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.
If you have any questions, or need help voting, contact
Gryphon Advisors Inc. at: 1-833-335-6118 or 1-416-661-6592 or
email inquiries@gryphonadvisors.ca. There is a team standing by
to assist you.
About First Cobalt
First Cobalt is a North American cobalt company and owner of the
only permitted primary cobalt refinery in North America. The Company is exploring a
restart of the First Cobalt Refinery in Ontario, Canada, which could produce over
5,000 tonnes of contained cobalt in sulfate per year from third
party feed. First Cobalt's main cobalt project is the Iron Creek
Cobalt Project in Idaho, USA,
which has an inferred mineral resource estimate available on the
Company's website. The Company also controls a significant land
package in the Canadian Cobalt Camp, spanning over 100
km2 which contains more than 50 past producing
mines.
On behalf of First Cobalt Corp.
Trent Mell
President & Chief Executive Officer
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in policies of the TSX Venture
Exchange) accepts responsibility for the adequacy or accuracy of
this release.
Information in Support of Public Broadcast
Solicitation
First Cobalt is relying on the exemption under section 9.2(4) of
National Instrument 51-102 – Continuous Disclosure
Obligations ("NI 51-102") to make this public broadcast
solicitation. The following information is provided in accordance
with securities laws applicable to public broadcast
solicitations.
This press release and any solicitation made by First Cobalt in
advance of the Special Meeting is, or will be, as applicable, made
by First Cobalt and not by or on behalf of the management of
eCobalt.
First Cobalt has filed a copy of this press release containing
the information required in section 9.2(4) of NI 51-102 on
eCobalt's company profile on SEDAR at www.sedar.com. All costs
incurred for any solicitation will be borne by First Cobalt,
provided that, subject to applicable law, First Cobalt may seek
reimbursement from eCobalt of First Cobalt's out-of-pocket
expenses, including proxy solicitation expenses and legal fees,
incurred in connection with the Special Meeting. The anticipated
cost of First Cobalt's solicitation is estimated to be C$30,000 plus disbursements and customary
fees.
First Cobalt has retained Gryphon Advisors Inc. ("Gryphon") as
its proxy solicitor. Gryphon's responsibilities will principally
include providing strategic advice and advising First Cobalt with
respect to any solicitations made by or on behalf of First Cobalt
in relation to the Special Meeting. Any proxies solicited by or on
behalf of First Cobalt, including by Gryphon, may be solicited by
way of public broadcast, including through press releases, speeches
or publications and by any other manner permitted under applicable
laws. A proxy may be revoked by instrument in writing executed by a
shareholder or by their attorney authorized in writing or, if the
shareholder is a body corporate, by an officer or attorney thereof
duly authorized or by any other manner permitted by law.
First Cobalt is not currently proposing any transaction with or
involving eCobalt. However, First Cobalt has in the past proposed,
and may in the future propose, a transaction with or involving
eCobalt.
The head office of eCobalt is 1810-999 West Hastings Street,
Vancouver, British Columbia,
Canada.
Important Disclosure Information
This press release contains our current views on the value of
securities of eCobalt and Jervois. Our views are based on our own
analysis of publicly available information and assumptions we
believe to be reasonable. There can be no assurance that the
information we considered and analyzed is accurate or complete. The
actual performance and results of eCobalt and Jervois may differ
materially from our assumptions and analysis. Our views and our
holdings could change at any time. We may sell any or all of our
position or increase our exposure by purchasing additional
securities. We may take any of these or other actions regarding
eCobalt and Jervois without updating this letter or providing any
notice whatsoever of any such changes (except as otherwise required
by applicable law). The information contained above is not and
should not be construed as investment advice and does not purport
to be and does not express any opinion as to the price at which the
securities of eCobalt and Jervois may trade at any time. Investors
should make their own decisions regarding eCobalt and Jervois and
their prospects based on such investors' own review of publicly
available information. Neither First Cobalt nor any of its
affiliates accepts any liability whatsoever for any direct or
consequential loss howsoever arising, directly or indirectly, from
any use of the information contained above.
Cautionary Note Regarding Forward-Looking Statements
This letter and news release may contain forward-looking
statements and forward-looking information (together,
"forward-looking statements") within the meaning of applicable
securities laws. All statements, other than statements of
historical facts, are forward-looking statements. Generally,
forward-looking statements can be identified by the use of
terminology such as "plans", "expects", "estimates", "intends",
"anticipates", "believes" or variations of such words, or
statements that certain actions, events or results "may", "could",
"would", or "might" "occur" or "be achieved". In this press
release, forward-looking statements include, but are not limited
to, statements concerning the benefits to First Cobalt of merging
or otherwise engaging in a business transaction with eCobalt.
Forward-looking statements involve risks, uncertainties and other
factors that could cause actual results, performance and
opportunities to differ materially from those implied by such
forward-looking statements. Factors that could cause actual results
to differ materially from these forward-looking statements are set
forth in the management discussion and analysis and other
disclosures of risk factors for First Cobalt, filed on SEDAR at
www.sedar.com. Although First Cobalt believes that the information
and assumptions used in preparing the forward-looking statements
are reasonable, undue reliance should not be placed on these
statements, which only apply as of the date of this news release,
and no assurance can be given that such events will occur in the
disclosed times frames or at all. Except where required by
applicable law, First Cobalt disclaims any intention or obligation
to update or revise any forward-looking statement, whether as a
result of new information, future events or otherwise.
SOURCE First Cobalt Corp.