Honey Badger Silver Inc press release

Northern Superior Further Consolidates the Chapais-Chibougamau Gold Camp with the Acquisition of Royal Fox Gold Creating a Premier Gold Explorer in Quebec

2022-09-06

TSXV - TSX Venture Exchange · Silver · Gold · Zinc · Lead · Copper · Antimony · Tellurium · Arsenic · Bismuth · Iron · Gallium · Germanium · Canada · M&A / Asset Transactions

Vancouver, British Columbia--(Newsfile Corp. - September 6, 2022) - Northern Superior Resources Inc. (TSXV: SUP) (OTCQB: NSUPF) ("Northern Superior" or the "Company") and Royal Fox Gold Inc.(TSXV: FOXG) ("Royal Fox") are pleased to announce having entered into a definitive arrangement agreement dated September 6, 2022 (the "Definitive Agreement") pursuant to which Northern Superior has agreed to acquire all of the issued and outstanding common shares of Royal Fox (the "Royal Fox Shares") by way of a statutory plan of arrangement under the _Business Corporations Act _(Ontario) (the "Transaction"). Northern Superior and Royal Fox are arm’s length parties under the policies of the TSX Venture Exchange (the “TSX-V”)

Transaction Highlights Include:

Each shareholder of Royal Fox (a "Royal Fox Shareholder" and, collectively, the "Royal Fox Shareholders") will receive 0.12 of a Northern Superior share (each whole common share, a "Northern Superior Share") per Royal Fox Share, implying an initial premium of approximately 33% over the closing price of the Royal Fox Shares on the TSXV on September 2, 2022; Further consideration, via the issuance by Northern Superior of a Contingent Value Right ("CVR") for each Royal Fox Share, providing for the issuance of additional Northern Superior Shares to Royal Fox Shareholders following the upcoming mineral resource calculation on Royal Fox's Philibert gold project (the "Philibert Project"); Maximum additional consideration of 0.06 of a Northern Superior Share in the event of a declaration of a resource calculation of 2,000,000 ounces or more of gold in the measured, indicated or inferred categories (as such terms are defined in National Instrument 43-101 - _Standards of Disclosure for Mineral Projects _("NI 43-101")); Maximum additional consideration would result in total consideration of 0.18 of a Northern Superior Share per Royal Fox Share, an implied value of C$0.09, representing an approximate premium of 100% over the last closing price of Royal Fox Shares on the TSX-V on September 2, 2022; Holders of warrants and options of Royal Fox will be required to exercise their warrants and options by the effective date of the Transaction in order to be eligible to receive the CVRs; Ontario assets of Northern Superior, including the TPK project, to be considered for a spin out to the shareholders following completion of the Transaction; New Board to be comprised of four directors of Northern Superior and three directors of Royal Fox, namely Messrs. Frank Guillemette, Victor Cantore, who is expected to be appointed Executive Chairman, and Simon Marcotte, who will be appointed President and CEO; and Dr. Thomas Morris, President and CEO of Northern Superior, to be appointed as Chairman of the Company's high-profile Technical Committee, which will include Gordon Morrison (former VP Exploration of FNX Mining Co. Inc, and President of TMAC Resources Inc.), Catharine Farrow (former CEO and Director of TMAC Resources Inc., and current director of Franco Nevada Corp.), and David Beilhartz (former VP Exploration of Lake Shore Gold Corp.)

Proforma Fundamentals

Following the recent acquisition of Genesis Metals, the Transaction positions Northern Superior as a leading company in the Chapais-Chibougamau district, a mining-friendly region having produced over 6.7 million ounces of gold, and which hosts several major deposits including IAMGOLD Corporation's Nelligan deposit (inferred gold resource estimate of 3.2 million ounces at 1.02 g/t gold1); Largest land holdings in the district which is now estimated to be more than 62,000 hectares, including four major properties, each of which having either a NI 43-101 compliant mineral resource estimate (Croteau Est2and Chevrier3) or meaningful gold discoveries being advanced towards mineral resource calculations (Lac Surprise and Philibert);

Pro forma NI 43-101 compliant mineral resource estimates of approximately: 1,295,000 ounces in the inferred category (643,000 ounces at Croteau Est2and 652,000 ounces at Chevrier3), and 260,000 ounces in the indicated category (Chevrier3);

Additionally, two significant gold discoveries with potential to move towards a NI 43-101 compliant mineral resource calculation by the end of 2023: The Lac Surprise (Falcon Gold Zone), located just 12 km southwest of the Philibert Project, which has defined 900m of strike length and 380m of vertical continuity with all 33 holes drilled thus far intersecting gold mineralization, and The Philibert Project itself, which is building on a total of 75,000 metres of drilling and is being rapidly advanced with 120 holes completed in the 2022 winter drilling program. To date, more than C$13 MM has been spent on the property;

Largest property holdings and gold resources of any gold exploration company active in the Chapais-Chibougamau district; Strong pro forma balance sheet with approximately C$8 MM cash as of June 30, 2022; Improved trading liquidity with an enhanced capital markets profile better positioned to attract a broader base of institutional and retail investors; and Strong insider ownership with over 20% of the pro forma shares of the Company.

Thomas Morris, President, CEO and Director of Northern Superior, stated: "Northern Superior has always been a huge proponent of the potential of the Chapais-Chibougamau mining district. The recent geological success we, and others, have had in the camp has demonstrated that this camp has the potential of Tier-1 mining scale. By assuming a leading role in the consolidation of the camp via the recent acquisition of Genesis Metals and now the acquisition of Royal Fox, not only have we consolidated four of the most important properties in the camp under one company but have dramatically increased and accelerated the potential value creation by increasing the scale of the operation, providing geological and operational synergies.

We believe that the Philibert deposit has tremendous potential, and we see significant upside from it's upcoming mineral resource declaration scheduled to be released in 2023. Adding Philibert to our existing NI 43-101 compliant mineral resources at Croteau Est and Chevrier, along with the discovery at the Falcon Zone at Lac Surprise, groups together compelling gold resources all within a highly concentrated area.

I am proud of what we have been able to accomplish during my time at the helm of Northern Superior. This acquisition announced today will allow for my retirement and for the incoming executive team to work with the seasoned Board and technical advisory committee, which will put the Company in an even stronger position to continue to build on its robust success of the last several years. I look forward to continuing to support Victor, Simon, and the entire Board and team at Northern Superior."

Simon Marcotte, President, CEO and Director of Royal Fox, added: "Rarely are we presented with an opportunity to consolidate an emerging gold camp in such a favourable jurisdiction. The small radius within which the resources are being consolidated is expected to create synergies, which would improve the economic potential of the camp, and accelerate its development. I couldn't be more excited to see this opportunity taking hold and look forward to working with our new partners."

Background

Royal Fox Shareholders will be entitled to receive Northern Superior Shares in exchange for their Royal Fox Shares. Additional consideration will be in the form of the right, via the issuance of one CVR per Royal Fox Share, to a contingent payment in additional Northern Superior Shares tied to the declaration of an expected mineral resource estimate on the Philibert Project within 12 months from the closing of the Transaction (see further details below).

Exhibit 1: Chapais-Chibougamau Gold Camp

[](https://images.newsfilecorp.com/files/4156/136015_3d68e153c440ca0d_003full.jpg)

Source: Capital IQ and company materials | Note: Map is not to scale

To view an enhanced version of this graphic, please visit: https://images.newsfilecorp.com/files/4156/136015_3d68e153c440ca0d_003full.jpg

Terms of the Transaction

Under the terms of the Definitive Agreement, each Royal Fox Shareholder will receive 0.12 (the "Exchange Ratio") of a Northern Superior Share for each Royal Fox Share held (the "Base Purchase Price"). The implied value of the Base Purchase Price was calculated on September 2, 2022, the last day of trading prior to announcement of the Transaction, as C$0.06 per Royal Fox Share or approximately C$17 million for all of the outstanding Royal Fox Shares. The Base Purchase Price represents a premium of approximately 33% over the closing price of the Royal Fox Shares on the TSX-V on September 2, 2022, and an approximate 24% premium over Royal Fox's volume weighted average share price ("VWAP") over the 20 trading days prior to the announcement of the Transaction.

In addition to the Base Purchase Price, Royal Fox Shareholders will receive contingent consideration in the form of one CVR for each Royal Fox Share that will provide for the potential payment of additional consideration upon the declaration of a maiden mineral resource estimate on the Philibert project of Royal Fox (the "Resource Calculation") within 12 months from the closing of the Transaction (the "Contingent Purchase Price").

If the Resource Calculation confirms a mineral resource estimate of 1.2 million ounces or more of gold in the inferred, measured or indicated categories (as such terms are defined in NI 43-101), each CVR will be exchanged for:

0.02 of a Northern Superior Share, if the Resource Calculation is greater than or equal to 1.2 million ounces of gold and less than 1.6 million ounces of gold; 0.04 of a Northern Superior Share, if the Resource Calculation is greater than or equal to 1.6 million ounces of gold and less than 2.0 million ounces of gold; or 0.06 of a Northern Superior Share, if the Resource Calculation is greater than or equal to 2.0 million ounces of gold.

The considerations above represent a value of C$0.01, C$0.02 and C$0.03 per share, respectively, as of September 2, 2022, the last day of trading prior to announcement of the Transaction.

The CVRs provide further upside for Royal Fox Shareholders, including both further consideration value as well as enhanced pro forma ownership in the combined company. After giving effect to the Contingent Purchase Price under the 2.0-million-ounce scenario, the total consideration represents an approximate 100% premium over the closing price of the Royal Fox Shares on the TSX-V on September 2, 2022, and an approximate 86% premium over Royal Fox's VWAP over the 20 trading days prior to the announcement of the Transaction.

Following the completion of the Transaction, taking into account only the Base Purchase Price, current Royal Fox Shareholders will hold approximately 31% of the pro forma company and Northern Superior shareholders will hold approximately 69% of the pro forma company (on a fully diluted in-the-money basis). Following the completion of the Transaction, taking into account both the Base Purchase Price and the Contingent Purchase Price, based on an implied 0.18 exchange ratio, current Royal Fox Shareholders would hold approximately 43% of the pro forma company and Northern Superior shareholders would hold approximately 57% of the pro forma company (on a fully diluted in-the-money basis).

As part of the Transaction, all outstanding options of Royal Fox will be exchanged for economically equivalent options to purchase Northern Superior Shares (subject to an adjustment based on the Exchange Ratio) and holders of Royal Fox warrants will be entitled, in accordance with the terms of such warrants, to receive Northern Superior Shares on the exercise of such warrants (subject to adjustment based on the Exchange Ratio). Warrant holders and option holders of Royal Fox will be required to exercise their warrants and options prior to the effective date of the Transaction in order to be eligible to receive the additional CVR consideration.

After the closing of the Transaction, a new board will be formed consisting of four members of the current Northern Superior Board and three directors from Royal Fox, namely Messrs. Frank Guillemette, Victor Cantore, who will be appointed Executive Chairman, and Simon Marcotte, who will be appointed President & CEO.

It is contemplated that the Ontario assets of Northern Superior, which include the TPK project in Northern Ontario, will be considered for a spin out and creation of a separate company following completion of the Transaction.

Benefits to Northern Superior Shareholders

Increasing scale, exploration and development scenarios in the Chapais-Chibougamau camp by adding the Philibert Project, a major gold project with attractive growth potential strategically located within Northern Superior's assets, being only 12 km from the Falcon Gold Zone discovery at Lac Surprise, 18 km from Chevrier, and 56 km from Croteau Est; Further cements Northern Superior as the dominant player in the Chapais-Chibougamau camp with the largest land holdings, four key projects and material operational, economic and exploration based synergies; Synergies between Northern Superior's and Royal Fox's strong technical and management teams, both with significant experience in the Chapais-Chibougamau camp; Increased news flow based on multiple high-impact exploration assets; and Enlarged market capitalization increasing institutional relevance, trading liquidity, and capital market profile.

Benefits to Royal Fox Shareholders

Significant potential premium of up to 100% provided by theCVRs tied to potential mineral resources on the Philibert project; Continued consolidation of a highly prospective gold belt and trend (Lac Surprise and the Philibert project, Croteau Est and Chevrier) with continued exposure to Royal Fox's portfolio of exploration projects; Asset diversification via exposure to Northern Superior's 640,000 ounce mineral resource estimate at Croteau Est, 912,000 ounce mineral resource estimate at Chevrier, and the discovery of the Falcon Gold Zone at Lac Surprise which currently has a strike of 900 metres and vertical continuity of 382 metres with all 33 holes thus far intersecting the Falcon Gold Zone, with all three of these projects having considerable growth potential; Increased velocity of news flow with exposure to multiple high-impact exploration assets (Philibert, Lac Surprise, Croteau Est and Chevrier); Ability to leverage respective technical skills to continue growing and de-risking the combined asset base; Improved ability to finance continued exploration and development of the combined portfolio; Leverage to Northern Superior's strongtechnical team; Enlarged market capitalization increasing institutional relevance, trading liquidity, and capital markets profile.

Additional Details on the Transaction

Completion of the Transaction will, among other things, require the approval of: (i) at least two-thirds (662/3%) of the votes cast by the Royal Fox Shareholders; (ii) at least two-thirds (662/3%) of the votes cast by the Royal Fox Shareholders and the Royal Fox option holders voting as a single class; and (iii) a simple majority of the votes cast by Royal Fox Shareholders, excluding for this purpose the votes of "related parties" and "interested parties" and other votes required to be excluded under Multilateral Instrument 61‐101 - Protection of Minority Security Holders in Special Transactions, with all votes to occur at a special meeting of Royal Fox securityholders to be scheduled to take place in early November 2022(the "Royal Fox Meeting"). No shareholder vote is required by Northern Superior shareholders.

The Definitive Agreement includes mutual covenants typical for transactions of this nature, including non-solicitation covenants. The Definitive Agreement provides for a C$775,000 termination fee payable by Royal Fox in certain circumstances.

The Transaction is expected to close in November 2022, subject to the satisfaction (or waiver) of a number of conditions precedent, including, but not limited to receipt of all regulatory approvals, including the approval of the Ontario Superior Court of Justice and the acceptance of the TSX-V.

The Transaction has the full endorsement of the respective boards of Royal Fox and Northern Superior. The board of directors of Royal Fox (the "Royal Fox Board") has formed a special committee (the "Special Committee") to oversee the process and has evaluated the Transaction in the context of that process. The Special Committee, following a review of the terms and conditions of the Definitive Agreement and consideration of a number of factors, unanimously recommended that the Royal Fox Board approve the Transaction. After receiving the recommendation of the Special Committee and advice from its advisors, including a fairness opinion from Stifel GMP, the Royal Fox Board has unanimously determined that the Transaction is in the best interests of all Royal Fox's stakeholders and will recommend that Royal Fox Shareholders vote in favour of the Transaction.

Directors and officers of Royal Fox holding an aggregate number of Royal Fox Shares which represent approximately 32.5% of the currently outstanding Royal Fox Shares have entered into customary support agreements with Northern Superior to vote their shares in favour of the Transaction.

Full details of the Transaction will be included in the management information circular of Royal Fox describing the matters to be considered at the Royal Fox Meeting, which is expected to be mailed to the Royal Fox Shareholders in early October 2022. Copies of the management information circular and the Definitive Agreement will be made available on SEDAR (www.sedar.com) under the profile of Royal Fox.

Related Party Transaction

Messrs. Michael Gentile and David Medilek, both directors of Northern Superior, own securities of Royal Fox and, as a result, the Transaction is a "related party transaction" for Northern Superior under Multilateral Instrument 61-101 - _Protection of Minority Securityholders in Special Transactions_("MI 61-101"). The board of directors of Northern Superior determined that the Transaction is exempt from the formal valuation and minority shareholder approval requirements under MI 61-101 in reliance on the exemptions set forth in sections 5.5(a) and 5.7(1)(a) of MI 61-101 and, in connection therewith, have determined that neither the fair market value of the Northern Superior Shares nor the consideration to be received, insofar as it involves interested parties, exceeds 25% of Northern Superior's market capitalization. Closing of the Transaction remains subject to TSX-V acceptance.

Advisors

Cormark Securities Inc. is acting as a financial advisor to Northern Superior and Cassels Brock & Blackwell LLP is acting as legal counsel to Northern Superior in connection with the Transaction. Stifel GMP has provided a fairness opinion to the Royal Fox Board in connection with the Transaction and Fasken Martineau DuMoulin LLP is acting as legal counsel to Royal Fox.

Victor Cantore

Mr. Cantore is a seasoned capital markets professional specializing in the resource sector. He has more than 30 years of advisory and leadership experience having begun his career in 1992 as an investment advisor and then moving into management roles with both public and private companies. One of his most recent successes is being at the helm of Amex Exploration Inc. which has evolved from only a few million dollars of market capitalization when he took the leadership role, to a peak of $400 million and more recently at $200 million market capitalization. During his career, he has organized and structured numerous equity and debt financings, mergers and acquisitions, joint venture partnerships and strategic alliances. Mr. Cantore serves on the boards of various private and public companies.

Simon Marcotte

Simon Marcotte is a Chartered Financial Analyst with 25 years of experience focused on commodities, including more than 12 years in executive positions for junior mining companies.