Nickel North Exploration Corp (TSX-V:NNX) has provided additional information on the debt settlements that shareholders are due to consider at its upcoming annual general meeting on July 29, 2022.
Among the settlements to be considered are the shares-for-debt settlements with Yingting Guo, Andrew Lee Smith and SinoTech (Hong Kong) Corporation Ltd, and the settlement of an aggregate amount of $1,654,995 in loans from SinoTech (Hong Kong) through the issuance of a convertible debenture.
The company said the settlements are "related party transactions" under Multilateral Instrument 61-101--Protection of Minority Security Holders in Special Transactions (MI 61-101) exempting them from formal valuation and minority approval requirements as the settlements form less than 25% of the company's market capitalization.
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The company said it will be seeking disinterested shareholder approval in accordance with the requirements of the TSX Venture Exchange under an omnibus resolution with the 50,221,860 votes attached to the common shares of Yingting Guo, Andrew Lee Smith and SinoTech being excluded for the purposes of the resolution.
Nickel North said SinoTech has been advancing funds to maintain the company's operations because it is an exploration stage company and does not have the ability to generate revenues. Over the years, the total debts owed to SinoTech increased to over $1,650,000.
The company's management, therefore, proposed the SinoTech settlement be discussed at its April 2, 2022 board meeting and it was discussed and further negotiated with SinoTech thereafter. The discussion revolved around the company's finances and on how to make the company better able to attract other financing sources.
Fair deal
Nickel North said its board believed that the 10% interest rate for the convertible debenture was fair because it was the interest rate accruing on the outstanding debts owed to SinoTech. The board also believed that the $0.05 per share conversion price of the convertible debenture was fair because it was at or higher than the closing prices of the company's shares around that time.
At the April 2, 2022, board meeting, all of the board members participated in the discussion of the proposed SinoTech settlement and Dr Jingbin Wang (chair of the board) was excluded from voting on the resolution to present the settlement to SinoTech.
Following completion of the debt settlements, there will not be any outstanding debts owned to Yingting Guo, Andrew Lee Smith and SinoTech - other than the outstanding convertible debenture issued in connection with the SinoTech settlement.
Following completion of the management debt settlements, Yingting Guo, Andrew Lee Smith and SinoTech will each beneficially own 3,446,660, 772,590 and 50,471,860 common shares, respectively, representing 3.65%, 0.82% and 53.45% of the issued and outstanding common shares, respectively. Assuming the conversion of the convertible debenture and after completion of the management debt settlement, SinoTech would own 83,571,760 common shares, representing 65.53% of the issued and outstanding common shares.
The debt settlements still require approval of the exchange if they are approved by disinterested and minority shareholders at the upcoming meeting.
Nickel North Exploration is a Canadian-based explorer focused on defining a Ni-Cu-PGE resource at its Hawk Ridge Project in Northern Quebec.
Contact the author at jon.hopkins@proactiveinvestors.com