N@N

Canadian Royalties Inc.: Jien Canada and Canadian Royalties Sign Definitive Support Agreement

^{Published on 2009-10-16 05:09:21 - Market Wire}
 

MONTREAL, QUEBEC--(Marketwire - Oct. 16, 2009) - Canadian Royalties Inc. (the "Company", or "Canadian Royalties") (TSX:CZZ), Jilin Jien Nickel Industry Co., Ltd. ("Jilin Jien"), Goldbrook Ventures Inc. ("Goldbrook"), Jien Canada Mining Ltd. ("Jien Canada") and Jien International Investment Ltd. are pleased to announce that they have entered into a definitive support agreement (the "Support Agreement"), pursuant to which the board of directors of Canadian Royalties (the "Canadian Royalties Board") has agreed to support the making of amended offers (the "Offers") to acquire all of the issued and outstanding common shares (the "Shares") and all of the 7% Convertible Senior Unsecured Debentures due March 31, 2015 (the "Debentures") of Canadian Royalties. Pursuant to the Support Agreement, the Offers will be amended to (i) increase the price offered per Share to $0.80 in cash; (ii) increase the price offered for the Debentures to $800 per $1,000 principal amount of Debentures, plus accrued and unpaid interest up to, but excluding, the date the Debentures are taken up under the Debenture Offer; and (iii) extend the expiry of the Offers to 5:00 P.M. (Toronto time) on October 27, 2009.

The Honourable Dr. Arthur Porter, Chairman of the Special Committee, stated, "Today's press release marks the culmination of a comprehensive value-maximization strategic alternatives process undertaken by the Company and the Special Committee since Jien Canada made its initial announcement on August 7, 2009. We believe that this announcement represents the best available alternative for Shareholders and the Canadian Royalties Board will be recommending that Shareholders accept the Share Offer."

Subject to the conditions of the Offers being met or waived, each holder of Shares ("Shareholder") will receive $0.80 for each Share tendered under the share offer (the "Share Offer") and each holder of $1,000 principal amount of Debenture ("Debentureholder") will receive $800 per $1,000 principal amount of Debentures, plus accrued and unpaid interest up to, but excluding, the date the Debentures are taken up under the debenture offer (the "Debenture Offer"). A notice of variation (the "Notice of Variation") in respect of the Offers will be mailed to Shareholders and Debentureholders and will be filed with the applicable securities authorities in Canada and will be made available on [ www.sedar.com ].

The terms of the Offers will also be amended to change the process for the acquisition of Debentures that are not tendered to the Offers. If Jien Canada takes up and pays for at least 66?% of the outstanding aggregate principal amount of Debentures, Jien Canada intends (subject to any required approvals) to cause Canadian Royalties to enter into a supplemental indenture with Computershare Trust Company of Canada (the "Indenture Trustee") amending the terms of the trust indenture relating to the Debentures dated March 18, 2008 between the Indenture Trustee and Canadian Royalties (the "Trust Indenture") so as to, among other things, (i) disable the conversion feature of the Debentures; (ii) remove the provision of the Trust Indenture requiring the redemption of the Debentures at 101% of the principal amount, at the option of the holder, in event of a Change of Control (as such term is defined in the Trust Indenture); (iii) allow the Debentures to be redeemable at the Option of Jien Canada within 30 days thereafter at a redemption price equal to $800 per $1,000 principal amount of the Debentures to be redeemed plus accrued and unpaid interest thereon; and (iv) waive any and all Events of Default (as such term is defined in the Trust Indenture) that may arise in connection with the Offers or any other action or transaction contemplated by or disclosed in the formal offers and take-over bid circular (the "Trust Indenture Amendment and Waiver"). The acceptance of the Debenture Offer by a Debentureholder will also be such Debentureholder's approval of and consent to the Trust Indenture Amendment and Waiver.

Highlights of the Amended Offers

- Total cash consideration of approximately $192 million will be offered (including accrued interest on the Debentures).

- The Share Offer represents a premium of approximately 69.5% over the volume weighted average trading price for the 20 previous trading days ending August 6, 2009, the day before Jien Canada announced its intention to launch its take-over offer for the Company, and a premium of approximately 37.9% to the price of $0.58 at the close of trading on October 14, 2009, the last trading day prior to this announcement.

- The Debenture Offer represents a premium of approximately 196% over the volume weighted average trading price for the 20 previous trading days ending August 6, 2009, the day before Jien Canada announced its intention to launch its take-over offer for the Company, and a premium of 14.3% to the price of $700 per $1,000 principal amount of Debentures at the close of trading on October 15, 2009, the last trading day prior to this announcement.

- The Offers will remain open until 5:00 p.m. (Toronto time) on October 27, 2009.

Highlights of the Support Agreement

The following is a summary of certain provisions of the Support Agreement. It does not purport to be complete and is subject to, and is qualified in its entirety by reference to, all the provisions of the Support Agreement which is available at [ www.sedar.com ].

The Canadian Royalties Board, upon recommendation of the Special Committee of the Canadian Royalties Board, has determined that the Share Offer is fair to its Shareholders and that it is in the best interests of Canadian Royalties and its Shareholders. Accordingly, the Canadian Royalties Board supports and approves the Share Offer and will recommend that Shareholders accept the Share Offer. The Special Committee and has received an opinion of BMO Capital Markets, the financial advisor to the Special Committee of the Canadian Royalties Board, that the consideration to be received under the Share Offer is fair, from a financial point of view, to all Shareholders of Canadian Royalties, other than Jien Canada, Jilin Jien, Jien International Investment Ltd., Goldbrook and their respective associates, affiliates and joint actors.

The Support Agreement provides that the Canadian Royalties Board will issue a directors' circular that will contain its favourable recommendation to shareholders of Canadian Royalties. Such directors' circular will be issued within 2 business days after Jien Canada mails a Notice of Variation in connection with the Offers and will be filed with the applicable securities authorities in Canada and will be made available on [ www.sedar.com ]. The Support Agreement contains, among other things, provisions for a $3.6 million break free, non-solicitation of competing offers, notification by Canadian Royalties to Jien Canada of any alternative proposals from third parties and a right on the part of Jien Canada to match any such proposal.

Jien Canada has entered into lock-up agreements with certain directors and officers of Canadian Royalties and Debentureholders such that certain members of the Canadian Royalties Board and certain Debentureholders intend to tender all of their Shares or Debentures, as applicable, to the Offers.

Details of the Offers

Full details of the Offers are contained in the Offer Documents and the first notice of variation filed with securities regulatory authorities and will be contained in the Notice of Variation.

BMO Capital Markets is acting as financial advisor to Special Committee of the Canadian Royalties Board with respect to the Offers. Fraser Milner Casgrain LLP is acting as legal counsel to the Special Committee and Groia & Co. is acting as legal counsel to the Company.

About Canadian Royalties and the Nunavik Nickel Project

Canadian Royalties, based in Val-d'Or - Quebec, is a mineral exploration company whose principal active area is along the South Trend located in the Raglan mining district of Northern Quebec's Nunavik Region. Since 2001, the Company has discovered and delineated several potentially mineable nickel-copper-cobalt-platinum-palladium-gold deposits which collectively form the Nunavik Nickel Project (the "Project"). The Company has completed a Bankable Feasibility Study and has received its Environmental Certificate of Authorization; it has also received mine leases for four sites, namely the Ivakkak, Mequillon, Expo, and Mesamax deposits. An Impact and Benefits Agreement ("IBA") has been entered into between the Company, three (3) Inuit communities, and Makivik Corporation, the non profit legal representative of the Inuit; the IBA constitutes the Company's formal commitment to ensure a fair and sustainable distribution of the economic benefits stemming from the Project. Development of the Project was initiated in 2007; the Project was subsequently put on care and maintenance as a result of the 2008 financial crisis. The Company's objective is to develop and exploit the mineral resources comprising the Project either independently or through a partnership.

Forward-looking Statement

This news release contains certain forward-looking statements or forward-looking information. These forward-looking statements are subject to a variety of risks and uncertainties beyond the Company's ability and control, which could cause actual events or results to differ materially from those anticipated in such forward-looking statements. Some of these risks and uncertainties are identified and disclosed under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2008. Accordingly, all of the forward-looking information contained in this press release is qualified by this cautionary statement and there can be no assurance that actual results or developments anticipated by the Company, as expressed or implied by the forward-looking information, will be realized or, even if substantially realized, that they will have the expected consequences to or effects on the Company or its business operations,. All forward-looking statements speak only as of the date of this news release and the Company does not undertake any obligation to update or publicly disclose any revisions to such forward-looking statements to reflect events, circumstances or changes in expectations after the date hereof, except as required by applicable securities law. Accordingly, readers should not place undue reliance on forward-looking statements.