Daniel Kunz, Chairman of Kenai will join the Serabi board on closing (subject to satisfactory regulatory enquiries in compliance with the AIM Rules).
Announcing the details of the Transaction, Michael Hodgson the CEO of Serabi, said: "This is a very exciting development for Serabi. The Transaction will combine Kenai's high grade Sao Chico gold property with our Palito operation just 23 kilometres away. With the Palito plant currently under remediation, we see Sao Chico as the first satellite deposit to augment Palito mine production with further high grade feed, taking advantage of the excess plant capacity available. It therefore provides real potential to quickly expand and grow Serabi's future gold production. By completing this transaction at this time ensures that we are able to consider the processing of Sao Chico ore into our current plant remediation plans.
Whilst I remain excited by the value accretion that this transaction is expected to bring to Serabi, we are on schedule for, and fully focussed on, bringing the Palito mine into production by the end of 2013. Underground development and rehabilitation work continues to progress well at Palito. Development ore is currently being stockpiled on surface and the remaining underground mining fleet is scheduled to be at site in early Q3 2013.
Sao Chico has a current resource of approximately 25,000 Measured and Indicated ounces, and 71,000 Inferred ounces, both averaging over 26 g/t. However, the property is far from fully explored and we are very confident that in the near future we can increase the resource by commencing an exploration programme in the near term including a planned approx. 6,000 metre drill programme.
The current Sao Chico resource comprises just 3 veins and, with 10 more veins identified, we hope to add gold ounces by drilling these areas. This work will also support the upcoming application for a long term Mining Licence for the property. Both Boards consider the combination to be highly accretive and beneficial for both sets of shareholders as it unlocks value neither could have realised on their own."
Greg Starr the CEO of Kenai commented "The 152% premium over recent trading that Serabi is paying for Kenai is a very good outcome for Kenai shareholders in this very difficult environment for junior explorers. This transaction enables Kenai shareholders to have exposure to a near term gold producing asset at Serabi's Palito project, while maintaining the significant exploration exposure to the demonstrated high grade Sao Chico deposit.
The Kenai Board explored a number of alternatives to develop the Sao Chico project independently, however none matched the ability of the Serabi offer to realise the project's value in a timely manner.
Serabi's experience in Brazil, and more specifically within the Tapajos region, makes them an ideal partner to develop Sao Chico. With Palito's pending gold production and cash flow plus Serabi's strong shareholder base, Kenai Directors believe that the proposed acquisition will ensure the eventual production of gold from Sao Chico and give Kenai shareholders access to more immediate gold production. Kenai Directors also consider that the proposal represents the most viable alternative in the current market conditions, which are not favourable for junior gold miners seeking to obtain both/either exploration and/or production financing".
DETAILS OF THE TRANSACTION
The acquisition of Kenai shares under the Arrangement will result in Kenai shareholders receiving 0.85 of one Serabi Share in exchange for each Kenai Share held. The Arrangement will provide for the issuance by Serabi of replacement warrants to holders of 17,288,500 outstanding Kenai warrants on similar terms as adjusted by the Exchange Ratio. The Arrangement also provides for the issuance of replacement options to holders of 2,980,000 outstanding Kenai options as adjusted by the Exchange Ratio with expiry on similar terms or 12 months from the date from which the holder is no longer involved with the Company. The completion of the Arrangement will be subject to usual terms and conditions, including the following:
a. Approval of the Arrangement by special resolution of Kenai's shareholders requiring two-thirds of the votes cast to be in favour of the resolution;b. Court approval of the Arrangement;c. Receipt of any required third party approvals and consents;d. Receipt of all required regulatory approvals, including acceptance by the TSX Venture Exchange; ande. Admission of the new Serabi Shares to trading on AIM.