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AuRico Metals to Acquire Kiska Metals

TORONTO, Dec. 22, 2016 /PRNewswire/ - AuRico Metals Inc. (AMI.TO) ("AuRico") and Kiska Metals Corporation (KSK.V) ("Kiska") are pleased to announce that they have entered into a definitive arrangement agreement (the "Agreement") pursuant to which AuRico will acquire all of the issued and outstanding securities of Kiska by way of a statutory plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement").

Under the terms of the Agreement, the holders of common shares ("Kiska Shares") of Kiska ("Kiska Shareholders"), other than AuRico, will receive approximately: (i) 0.0667 of an AuRico common share ("AuRico Share"), plus (ii) C$0.016 in cash for each Kiska Share held. Based on AuRico's December 22, 2016 closing share price, the Arrangement values the Kiska Shares at approximately C$0.078 per share. The total value of this Arrangement is approximately C$9.6 million. The number of AuRico Shares to be issued as part of the Arrangement is approximately 8.2 million, assuming conversion of Kiska's in-the-money options and warrants, representing approximately 5.5% of the current issued and outstanding AuRico Shares.

Arrangement Highlights

Key Benefits to Kiska Securityholders (defined below):

  • Premium to Kiska Shareholders: The Arrangement provides an immediate and significant premium to recent trading ranges of Kiska Shares, being a premium of 95% to Kiska's closing share price on the TSX Venture Exchange on December 22, 2016 and a 70% premium on the basis of Kiska's and AuRico's respective 20-day VWAPs as of the same date; and also provides shareholders with significantly enhanced trading liquidity.

  • Complementary High-Quality Assets: The combined company will have paying royalties focused on tier-1 jurisdictions, the Kemess development project in British Columbia which is well advanced with a Feasibility Study recently released and an Environmental Assessment certificate expected in the near-term, and a large high-quality portfolio of earlier stage royalties and exploration projects with royalty generation potential.

  • Exciting platform: Participation in an exciting new platform, positioned to create securityholder value through the advancement of Kemess and further development of a strong royalty and project pipeline.

  • Diversification: The combination of Kiska's projects and royalties with the advanced stage Kemess project and AuRico's five paying royalties provides excellent asset diversification for securityholders.

  • Growth Potential: Enhanced ability to transact on accretive acquisitions and grow the royalty and project portfolio.

Key Benefits to AuRico Shareholders:

  • Royalty Diversification and Long Term Optionality: Kiska's royalty portfolio consists of six existing royalties including royalties on the East Timmins and Boulevard properties operated by Kirkland Lake Gold and Independence Gold, respectively. In addition, Kiska's six wholly-owned exploration projects present organic royalty creation opportunities. All assets are located in North America and are expected to further enhance AuRico's existing high quality royalty pipeline.

  • Near Kemess Exploration Upside: The Arrangement would add several new wholly-owned exploration properties, many of which are located in British Columbia, including the Kliyul project which is located approximately 50 km south of AuRico's 100%-owned Kemess project. These properties present AuRico with organic royalty-creation opportunities in the context of property partnership or divestitures.

  • Strong Balance Sheet and Other Financial Synergies: The Arrangement is expected to further strengthen AuRico's financial position as well as provide administrative and tax synergies going forward.

Mr. Chris Richter, President and CEO of AuRico, stated; "This transaction presents a unique opportunity to expand our royalty portfolio with a focus on Canadian assets. We are confident that this transaction represents a significant value creation opportunity and we are very pleased to bring this transaction forward to the benefit of both sets of shareholders."

Mr. Grant Ewing, President and CEO of Kiska, stated; "We are excited to enter into this agreement, as it offers Kiska shareholders an immediate and significant premium to the market, and results in excellent diversification for securityholders by combining an early stage portfolio of royalties and projects with a high-quality suite of paying royalties and an advanced development asset in Kemess."

Additional Information Regarding the Arrangement

The Arrangement Agreement includes standard non-solicitation and superior proposal provisions and Kiska has provided AuRico with certain other customary rights, including a right to match competing offers. Full details of the Arrangement will be included in Kiska's management information circular to be mailed to "Kiska Securityholders" (Kiska Shareholders and the holders of options of Kiska and warrants of Kiska), in due course.

The Arrangement is subject to customary closing conditions, including the approval by the Kiska Securityholders, as well as court and regulatory approvals. Assuming the timely receipt of such approvals, the Arrangement is expected to close in the first quarter of 2017.

A copy of the Agreement will be filed under Kiska's profile on SEDAR at www.sedar.com.

Support for the Arrangement and Fairness Opinion

Prior to entering into the Agreement, the board of directors of Kiska (the "Kiska Board") received a verbal fairness opinion (the "Fairness Opinion") from Primary Capital Inc. ("Primary Capital"), to the effect that, as of the date thereof, based upon and subject to the assumptions, limitations and qualifications in the Fairness Opinion, the consideration to be received pursuant to the Arrangement is fair, from a financial point of view, to Kiska Shareholders (other than AuRico). Kiska expects to receive a written Fairness Opinion from Primary Capital prior to mailing the management information circular to Kiska Securityholders.

The Kiska Board, after receiving financial and legal advice and following receipt of the Fairness Opinion, unanimously determined that the Arrangement is fair to the Kiska Securityholders and that the Arrangement is in the best interests of the Company and recommends that Kiska Securityholders vote in favour of the Arrangement.

In addition, prior to entering into the Agreement, AuRico entered into support and voting agreements with Kiska's  management and the Kiska Board (together, the "Locked-Up Shareholders"), collectively holding approximately 7.3% of the issued and outstanding Kiska Shares, whereby the Locked-Up Shareholders have agreed to vote their securities in favour of the Arrangement at the special meeting of Kiska Securityholders.

The AuRico Board of Directors has unanimously approved the Arrangement.

Private Placement Transaction

In connection with the Arrangement, AuRico and Kiska have also agreed that AuRico will subscribe for approximately 12.9 million Kiska Shares on a private placement basis, representing approximately 9.9% of the outstanding Kiska Shares after giving effect to the private placement. The Kiska Shares will be acquired at a price of C$0.055 per share, for total gross proceeds to Kiska of approximately C$709,500. Completion of the private placement is subject to the satisfaction of certain regulatory requirements but is not contingent on completion of the Arrangement.

Kiska Securityholder Approval

Completion of the Arrangement will be subject to customary closing conditions, including receipt of the required approvals at a special meeting of Kiska Securityholders expected to be held in February 2017 (the "Meeting"). The Arrangement will be subject to the approval of (i) at least two-thirds of votes cast by Kiska Securityholders (voting as a single class and excluding Kiska Warrants that will expire in accordance with their terms prior to the Meeting); (ii) at least two thirds of the votes cast by Kiska Shareholders (voting together as a single class); and, (iii) if required by Multilateral Instrument 61-101 – Protection of Minority Securityholders in Special Transactions, "minority approval" in accordance with section 8.1 of MI 61-101.

Advisors and Counsel

Osler, Hoskin & Harcourt LLP is acting as legal counsel to Kiska and Primary Capital Inc. is acting as the exclusive financial advisor to Kiska. Fasken Martineau DuMoulin LLP is acting as legal counsel to AuRico.  

About Kiska

Kiska employs the "Royalty and Project Generator" business model to finance exploration, leverage exploration dollars and data, and preserve shareholder equity. Kiska partners its projects with mining and exploration companies who share its vision and commitment with respect to environmentally and socially responsible mineral exploration and development. Kiska holds a high-quality portfolio of gold and copper projects throughout North America, large technical databases, and an extensive royalty portfolio.

About AuRico

AuRico is a precious metals royalty and mining development company whose producing gold royalty assets include a 1.5% NSR royalty on the Young-Davidson Gold Mine, a 0.25% NSR royalty on the Williams Mine at Hemlo, and a 0.5% NSR royalty on the Eagle River Mine – all located in Ontario, Canada. AuRico Metals also has a 2% NSR royalty on the Fosterville Mine and a 1% NSR royalty on the Stawell Mine, located in Victoria, Australia. Aside from its diversified royalty portfolio, AuRico wholly owns the advanced Kemess Gold-Copper Project in British Columbia, Canada. AuRico Metals' head office is located in Toronto, Ontario, Canada.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

Cautionary Statement on Forward-Looking Information

All statements, other than statements of historical fact, contained or incorporated by reference in this news release constitute ''forward-looking information'' or ''forward-looking statements'' within the meaning of certain securities laws, including the provisions of the Securities Act (Ontario) and are based on expectations, estimates and projections as of the date of this news release. Forward-looking statements contained in this news release include, without limitation, statements with respect to: any information as to the future financial or operating performance of AuRico and Kiska,  the completion of the Arrangement, the expected synergies and benefits of the Arrangement, the completion of the private placement, the "Transaction Highlights", the success of Kiska in its litigation against St. Andrew Goldfields with respect to the East Timmins Royalty (the "Litigation"), the future price of gold, copper and silver, the estimation of mineral resources, costs and timing of the development of projects and new deposits, success of exploration, currency fluctuations, requirements for additional capital, government regulation of mining operations, and environmental risks. The words "anticipates", ''estimates'', ''expects'', "focus", ''forecast", "indicate", "initiative", "intend", "model", "opportunity", "option", "plans'', "potential", "projected", "prospective", "pursue", "strategy", "study" (including, without limitation, as may be qualified by "feasibility" and the results thereof), "target", "timeline" or variations of or similar such words and phrases or statements that certain actions, events or results ''may'', ''could'' or ''would'', and similar expressions identify forward-looking statements.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by AuRico and Kiska as of the date of such statements, are inherently subject to significant business, economic, regulatory and competitive uncertainties and contingencies. The estimates, models and assumptions of AuRico and Kiska referenced, contained or incorporated by reference in this news release, which may prove to be incorrect, include, but are not limited to, the various assumptions set forth herein and in AuRico's and Kiska's most recently filed Annual Information Forms and Management's Discussion and Analysis as well as: (1) the exchange rate between the Canadian dollar and the U.S. dollar being approximately consistent with assumed levels; (2) certain price assumptions for gold, copper and silver; (3) the results of the Kemess Underground Feasibility Study will be realized within a margin of error consistent with AuRico's expectations; (4) the accuracy of the current mineral resource estimates of the Kemess East project; and (5) access to capital markets, including but not limited to identifying financing options and securing partial project financing for the Kemess project, being consistent with AuRico's current expectations.

Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to: the results of shareholder and regulatory approvals for the Arrangement, the integration of Kiska with AuRico, the quality of the title of Kiska to its assets and the extent of any known, unknown or contingent liabilities of Kiska,  the results of the exploration at Kemess East and the accuracy of the mineral resource estimates at Kemess East; relations with First Nations partners and the Province of British Columbia; exploration for additional mineral resource potential; fluctuations in the currency markets; changes in the market valuations of peer group companies, AuRico and Kiska, and the resulting impact on market price to net asset value multiples; changes in various market variables, such as interest rates, foreign exchange rates, gold, copper or silver prices; changes in national and local government legislation, taxation, controls, policies and regulations; political or economic developments in Canada, the United States or elsewhere; business opportunities that may be presented to, or pursued by, us; employee relations; litigation against the Company; the speculative nature of mineral exploration and development including, but not limited to, the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; and contests over title to properties. In addition, there are risks and hazards associated with the business of mineral exploration, development and mining.  Many of these uncertainties and contingencies can directly or indirectly affect, and could cause, AuRico's and Kiska's actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, AuRico or Kiska.

There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Forward-looking statements are provided for the purpose of providing information about management's expectations and plans relating to the future. All of the forward-looking statements made in this news release are qualified by these cautionary statements and those made in the most recently filed Annual Information Form, Short-Form Prospectus and Management Discussion and Analysis of AuRico or Kiska, as applicable. These factors are not intended to represent a complete list of the factors that could affect AuRico, Kiska or the Arrangement. AuRico and Kiska disclaim any intention or obligation to update or revise any forward-looking statements or to explain any material difference between subsequent actual events and such forward-looking statements, except to the extent required by applicable law.