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Sept. 3, 2019, 7:48 p.m. EDT

Fusion Gold Ltd. Announces Binding Letter Agreement with Battery Mineral Resources Limited for Proposed Qualifying Transaction

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Vancouver, British Columbia--(Newsfile Corp. - September 3, 2019) - Fusion Gold Ltd. /zigman2/quotes/207006811/delayed CA:FML.P -8.33% (" Fusion " or the " Company "), is pleased to announce that it has entered into a binding letter agreement, dated August 30, 2019 () Letter Agreement "), with Battery Mineral Resources Limited. () Battery "), which sets out the principal terms upon which Fusion will acquire all of the issued and outstanding securities of Battery () Transaction "). Fusion, after giving effect to the completion of the Transaction, is referred to in this News Release as the " Resulting Issuer ".

Fusion is a "capital pool company" that completed its initial public offering in September 2018. The common shares of Fusion (the " Fusion Shares ") are listed for trading on the TSX Venture Exchange () TSXV " or the " Exchange ") under the stock symbol "FML.P". It is intended that the Transaction, when completed, will constitute the "qualifying transaction" of Fusion for the purposes of Policy 2.4 - Capital Pool Companies of the TSXV.

On closing of the Transaction, Fusion will change its name to "Battery Mineral Resources Inc." or such other similar name as Battery may direct and which is acceptable to the Exchange and other applicable regulatory authorities.

From and upon completion of the Transaction, the Resulting Issuer will carry on the mineral exploration business conducted by Battery, and the common shares of the Resulting Issuer (the " Resulting Issuer Shares ") will be listed under the trading symbol "BMR". Fusion and Battery anticipate that, on closing of the Transaction, the Resulting Issuer will meet the TSXV's initial listing requirements for a Tier 1 or Tier 2 mining issuer.

The Letter Agreement was negotiated at arm's length and is dated August 30, 2019. The terms and conditions outlined in the Letter Agreement are binding on the parties, and the Letter Agreement is expected to be superseded by a definitive agreement (the " Definitive Agreement ") to be negotiated between Fusion and Battery and entered into on or before September 30, 2019.

About Battery

Battery was incorporated on June 14, 2016 under the Corporations Act 2001 (Cth) Australia (the " Corporations Act (Australia) "). Battery's principal business focus is the exploration and development of cobalt prospects in Canada, as well as other minerals critical to the lithium-ion battery market and energy storage sector. Battery's business activity since incorporation has been the acquisition and consolidation of underexplored cobalt, lithium and graphite mineral properties.

Battery's principal property is its Cobalt District Project, a significant aggregation of mineral exploration rights in Ontario and Quebéc comprising multiple target areas, with Battery's focus being on the McAra and Gowganda prospects in Ontario, and the Fabré prospect in Quebéc. The McAra target area is Battery's most advanced target to date with more than 6,000 metres of completed drilling in 2017-2018, and an additional 21 drillholes for 4,398 metres completed during 2019. With historical exploration in the district having been primarily focused on silver, Battery believes the Cobalt District Project is underexplored for cobalt. Battery intends to continue exploration and drilling activities at identified cobalt occurrences throughout the project area with the goal of defining additional mineral resources.

A technical report in respect of the Cobalt District Project will be filed in connection with the Transaction, which will include 2019 drilling results, and an update of the mineral resource estimate for the McAra prospect.

Battery's head office is located at 100 King Street West, Suite 5600, Toronto M5X 1C9 and its registered office is located at Nexia Sydney, Level 16, 1 Market Street, Sydney, New South Wales 2000.

Battery's largest shareholder is Weston Energy LLC (" Weston "), a limited liability company formed under the laws of Delaware as an investment platform to acquire energy and natural resources assets. Weston's outstanding voting securities are owned by Yorktown Partners LLC and other investors. Yorktown Partners LLC is a private equity investment group based in New York City, which has deployed over US$8 billion in energy related investments over the past 23 years. In addition to purchasing 23 million ordinary shares of Battery () Battery Shares "), as of the date hereof, Weston has advanced approximately US$4 million by way of a convertible bridge loan to Battery, and, prior to completion of the Transaction, Weston may advance up to an additional US$2 million () Bridge Loan "). Amounts outstanding under the Bridge Loan are convertible into Battery Shares at a conversion price of US$0.50 per Battery Share. Pursuant to the Support Agreement (as defined below), Weston will convert at least US$4 million of the Bridge Loan into Battery Shares prior to the closing of the Transaction. Following its exchange of Battery Shares for Resulting Issuer Shares upon completion of the Transaction (including Battery Shares issued upon the conversion of amounts outstanding under the Bridge Loan) and completion of the Concurrent Financing (as described below) and the purchase of Fusion Shares under the Share Purchase Agreements (as described below), Weston is expected to be a "Control Person" (as that term is defined under TSXV policies) of the Resulting Issuer as it will own more than 20% of the Resulting Issuer Shares then outstanding.

Selected Financial Information

The following table sets out selected financial information with respect to Battery as at the dates noted. Battery's financial statements have been prepared in accordance with International Financial Reporting Standards, issued by the International Accounting Standards Board, and are denominated in Australian dollars.

Balance Sheet Data As at December 31, 2018
AUD$ (unaudited)
As at June 30, 2018
AUD$ (unaudited)
As at June 30, 2017
AUD$ (unaudited)
Total assets 37,452,328 29,680,032 10,887,129
Total liabilities 15,098,999 4,734,467 739,646
Shareholders' equity 22,353,329 24,945,565 10,147,483


T he Transaction

Fusion and Battery currently intend to effect the Transaction in reliance upon a court sanctioned scheme of arrangement under the Corporations Act (Australia) (the " Arrangement "), pursuant to which Fusion will acquire all of the issued and outstanding securities of Battery in consideration for securities of Fusion, and Battery will become a wholly-owned subsidiary of Fusion. Fusion and Battery have agreed to cooperate with each other in structuring the Transaction in an efficient manner and the final Transaction structure may differ from that presented above following receipt of final tax, securities, corporate law and other advice.

In connection with the Transaction, Fusion intends to consolidate its common shares on a 2.5:1 basis (the " Share Consolidation ").

The Arrangement must be approved by (i) the affirmative vote of not less than 75% of the Battery Shares voted in person or by proxy at a meeting of shareholders (the " Meeting "), which will be convened by order of the Federal Court of Australia () Court "); and (ii) the affirmative vote of a simple majority of the number of Battery shareholders who or which vote Battery Shares either in person or by proxy at the Meeting, excluding, in each case, votes attached to Battery Shares held by Weston and other interested shareholders, if any. Following receipt of all necessary Battery shareholder approvals, the Arrangement must be approved by the Court by an order made pursuant to section 411(4)(b) of the Corporations Act (Australia).

In addition, as part of the Transaction, directors, officers and shareholders of Battery holding more than 5% of the currently issued and outstanding ordinary shares of Battery, will be asked to enter into support agreements under which they will agree to vote their Battery Shares in favour of the Arrangement at a meeting of the Battery shareholders called for such purpose (the " Lock-Up Agreements ").

Completion of the Transaction is subject to the satisfaction of certain conditions, including but not limited to: (i) the completion of the Concurrent Financing (as defined below); (ii) completion of the Share Consolidation; (iii) approval of the Arrangement by the shareholders of Battery and the Court, as set out above; (iv) if and to the extent required by applicable law, approval of the requisite majority of Fusion shareholders (however as currently contemplated, the Transaction will not require approval of Fusion shareholders); (v) the absence of any material adverse change in the business, assets, liabilities or prospects of either Fusion or Battery; (vi) no proceeding or law being enacted or commenced that enjoins, prohibits or renders illegal the consummation of the Transaction; (vii) completion of satisfactory due diligence reviews of each of Fusion and Battery by the other; (viii) neither the Share Purchase Agreements nor the Support Agreement (each, as defined below) shall have been terminated; (ix) executed resignations and releases from current officers and directors of Fusion; and (x) receipt of all requisite regulatory, stock exchange, court or governmental authorizations and third party consents and approvals, including the approval of the TSXV, the Court, and the Australian Securities and Investment Commission. Accordingly, there can be no assurance that the Transaction will be completed on the terms proposed or at all.

Each of Fusion and Battery has agreed to not, directly or indirectly, make, solicit, initiate, discuss, entertain, encourage, promote or facilitate any alternative transactions or enter into any agreement, arrangement or understanding related to any proposal with respect to any alternative transaction.

Subject to satisfaction or waiver of the conditions to the Transaction, Fusion and Battery anticipate that the Transaction will be completed on or before January 30, 2020.

Each of Fusion and Battery will bear its own costs in respect of the proposed Transaction, except that Battery will pay all regulatory fees including those related to sponsorship, if applicable.

In the event the Transaction is not consummated for any reason other than as a result of Fusion exercising its right to terminate the Letter Agreement as a result of its due diligence review of Battery, or the failure of Fusion to fulfill a material condition or obligation under the Letter Agreement or the Definitive Agreement, Battery has agreed to pay, or cause to be paid, to Fusion, C$150,000, as an expense reimbursement.

Share Purchase Agreement

Concurrently with execution and delivery of the Letter Agreement, Weston entered into share purchase agreements (the " Share Purchase Agreements ") with David DeWitt and January Vandale () Fusion Vendors "). Under the Share Purchase Agreements, the Fusion Vendors have agreed to sell and transfer to Weston, concurrently with the completion of the Transaction, an aggregate of 3,200,000 outstanding common shares of Fusion (prior to giving effect to the Consolidation) at a price of C$0.08 per share. Those shares are currently held in escrow pursuant to an escrow agreement, dated June 19, 2018, among Fusion, the Fusion Vendors and Odyssey Trust Company of Canada as escrow agent.

Support Agreement

In the Letter Agreement, Battery has agreed to use its reasonable best efforts to cause Weston to enter into a support agreement with Fusion and Battery (in form and substance satisfactory to Fusion, acting reasonably) (the " Support Agreement "), pursuant to which (i) Weston will agree to convert on or prior to closing of the Transaction at least US$4 million of the Bridge Loan for Battery Shares on the same terms as the Concurrent Financing; (ii) to the extent permitted by applicable securities laws including the policies of the Exchange, Weston (and others, expected to include members of Battery's management group) will be entitled to transaction incentives of up to 10 million post-Consolidation common shares of Fusion; (iii) Fusion and Battery will undertake not to complete the Transaction unless the transactions contemplated by the Share Purchase Agreements have been completed or will be completed concurrently with the completion of the Transaction; and (iv) Weston will agree to enter into a lock-up agreement having terms and conditions similar to those contemplated in the Lock-Up Agreements described above.

Concurrent Financing

In connection with the Transaction, Battery proposes to complete a "best efforts" non-brokered private placement of at least 8,000,000 subscription receipts (each, a " Subscription Receipt "), at a price of US$0.50 per Subscription Receipt, for gross proceeds of at least US$4,000,000 () Concurrent Financing ").

The gross proceeds of the Concurrent Financing (the " Escrowed Funds ") will be delivered to and held by a licensed Canadian trust company or other escrow agent () Escrow Agent "), in an interest bearing account, pending the satisfaction of certain escrow release conditions (including among other things, the satisfaction or waiver of all conditions to the Transaction) (the " Escrow Release Conditions ") by a prescribed date () Escrow Release Deadline ").

Fusion and Battery expect that the net proceeds of the Concurrent Financing will be used by the Resulting Issuer for continued mineral exploration activities across its mineral properties, including drilling and resource development and general operating expenses.

Upon the satisfaction of the Escrow Release Conditions, each Subscription Receipt will be automatically converted, without payment of any additional consideration, into one post-Consolidation Fusion Share.

If: (i) the Escrow Release Conditions are not satisfied or waived on or before the Escrow Release Deadline, or (ii) prior to the Escrow Release Deadline, the Letter Agreement or Definitive Agreement is terminated or Battery advises the Escrow Agent or publicly announces that it does not intend to satisfy the Escrow Release Conditions (i) the Subscription Receipt holders will be entitled to a return of the total subscription price paid, (ii) the Escrowed Funds (plus accrued interest earned thereon) will be returned to the Subscription Receipt holders on a pro rata basis and (iii) the Subscription Receipts will be cancelled without any further action on the part of the holders. Battery will be responsible for the payment of any shortfall between the Escrowed Funds and the subscription price paid by the holders of the Subscription Receipts.

The Resulting Issuer

Pursuant to the Arrangement, Fusion will issue to former shareholders of Battery an aggregate of 116,447,768 Fusion Shares at a deemed price of US$0.50 per share and an approximate total value of US$58.22 million. Upon completion of the Transaction, and after giving effect to (i) the sale of 3,200,000 Fusion Shares to Weston under the Share Purchase Agreements, (ii) the conversion of US$6 million of amounts outstanding under the Bridge Loan (assuming an additional US$2 million is extended to Battery under the Bridge Loan and converted into Battery Shares prior to completion of the Transaction), (iii) the issue of 8,000,000 Subscription Receipts pursuant to the Concurrent Financing (assuming a Concurrent Financing of US$4 million) and the conversion of those Subscription Receipts in accordance with their terms; and (iv) the issuance of certain transaction incentives consisting of up to 10 million Resulting Issuer Shares in the aggregate to certain persons instrumental to the completion of the Transaction (expected to include Weston and members of Battery's management group), and assuming TSXV approval of the aforementioned transactions, there will be an aggregate of approximately 149 million Resulting Issuer Shares issued and outstanding and an additional 140,000 convertible securities of the Resulting Issuer exercisable to purchase Resulting Issuer Shares. Former Battery shareholders will hold approximately 62.31% of the Resulting Issuer Shares, Weston will hold approximately 28.15% of the Resulting Issuer Shares (based on the assumptions noted above), pre-Transaction Fusion shareholders will hold 0.81% of the Resulting Issuer Shares, subscribers in the Concurrent Financing will hold 5.37% of the Resulting Issuer Shares, and the remainder will represent Resulting Issuer Shares issued as transaction incentives.

Directors, Management and Insiders

Upon completion of the Transaction, it is expected that the management of the Resulting Issuer will consist of Lazaros Nikeas, Ronald Phillips, Jack Cartmel, Peter Doyle, Dr. Henry Sandri and Dr. Ian Pringle. It is anticipated that the board of directors of the Resulting Issuer will consist of Lazaros Nikeas, George Pirie, Stephen Dunmead, James Hughes, and one additional Battery nominee. All directors and officers of Fusion will resign at the closing of the Transaction.

The following individuals are expected to be directors or senior officers of the Resulting Issuer:

Lazaros Nikeas - Chief Executive Officer and Director

Mr. Nikeas is the current Chief Executive Officer of Battery and was appointed to the board of directors of Battery (the " Battery Board ") on January 1, 2018. He is currently a principal investment manager for Weston, a portfolio company of New York private equity group, Yorktown Partners LLC. Prior to this, he was a Partner of Traxys Capital Partners, a private equity vehicle focused on mining, chemicals and industrial investments in partnership with The Carlyle Group. Before moving into private equity, he served as the Head of Corporate Finance Advisory for Materials, Mining and Chemicals for North America for BNP Paribas for five years. Other investment banking roles included Partner in Mergers & Acquisitions Advisory at Hill Street Capital for eight years and as a Corporate Finance Analyst at Morgan Stanley, where he began his career. Altogether, he has advised on over US$25 billion of mergers and acquisitions transactions. Mr. Nikeas holds a Bachelor of Arts from Amherst College in Massachusetts, U.S.

Ronald Phillips - Vice President, Business Development

Mr. Phillips is currently a principal at Weston,. Mr. Phillips was a director of Oilsands Quest Inc. (" Oilsands ") between February 2006 and September 2011 and served as the Chair of the Compensation Committee and a member of the Governance and Nominating Committee and Audit Committee of Oilsands. In addition, Mr. Phillips was the fund manager for the US$600 million DKR Capital Event Driven Fund between 2002 and 2008. Prior to his role at DKR, Mr. Phillips co-managed the Weiss, Peck & Greer Merger Arbitrage Fund and he was a Vice President at ING Barings Furman Selz.

After attaining his Bachelor's degree from Brown University and his J.D. from Stanford Law School, Mr. Phillips served as a Captain in the U.S. Army Judge Advocate's General Corp., primarily serving at the Pentagon as an assistant to the Department of Defense General Counsel, and spent two years at Wachtell, Lipton, Rosen & Katz as an Antitrust Associate.

Jack Cartmel - Chief Financial Officer

CA : Canada: TSX Venture
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Aug. 1, 2019 8:48a
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