Avion Resources to take over Dynamite Resources

2009-02-09 04:57 PT - News Release

Also News Release (C-DNR) Dynamite Resources Ltd

Mr. John Begeman of Avion reports

AVION RESOURCES CORP. AND DYNAMITE RESOURCES LTD. AGREE TO BUSINESS COMBINATION

Avion Resources Corp. and Dynamite Resources Ltd. have signed a letter of agreement, dated Feb. 9, 2009, whereby Avion will acquire all of the outstanding common shares of Dynamite in exchange for common shares of Avion. As a result of the business combination, Avion, with its near-term gold-producing Segala mine and experienced operating technical team, will be combined with Dynamite, which has a 40-per-cent interest in the Segala mine and a cash position of approximately $11-million. This combination will provide both sets of shareholders with an opportunity to participate in the consolidation of the Tabakoto-Segala gold mine into a single company, with significant organic growth possibilities through exploration, as well as the potential to acquire other African gold assets and companies with production or capable of near-term production capability.

Pursuant to the transaction, each Dynamite common share will be exchanged for 0.75 of an Avion common share (exchange ratio). Based on the closing prices on Feb. 6, 2009, this implies an offer price of 15 cents per Dynamite share or a premium of 15.4 per cent and a premium of 11.9 per cent based on the 20-day volume-weighted average trading prices on the TSX Venture Exchange of both Avion and Dynamite. Each outstanding Dynamite convertible security will be exercisable for Avion common shares based on the exchange ratio. In addition, prior to the closing of the transaction, Dynamite will undertake to dispose of all or a portion of its interest in the Mike Lake project and its Kyrgyzstan assets with proceeds of the disposition, up to a deemed realized total value of $2.5-million (Canadian), for the sole benefit of Dynamite shareholders. Upon completion of the combination, Dynamite shareholders will own approximately 40 per cent of Avion.

The boards of directors of both Dynamite and Avion unanimously support the proposed business combination.

Highlights of the transaction

Upon completion of the transaction, the combined company will have:

• Approximately $13-million in cash and cash equivalents and will be fully financed to production;
• Full ownership of the Segala and Tabakato projects in Mali, subject to the government of Mali's 20-per-cent interest;
• An operational 2,100-tonne-per-day gold mill;
• Projected 2009 production of 66,000 ounces of gold from Segala and Tabakoto, which is projected to increase to approximately 90,000 ounces of gold per year in 2011;
• Proven management and board of directors with experience in financing, developing and operating mines;
• Substantial exploration upside.

John Begeman, president and chief executive officer of Avion, commented: "We are excited about the proposed transaction, which returns full ownership of the Segala project to one company and adds significantly to the treasury, which we plan to use to propel the new company toward further opportunities to expand production capacity at the Tabakoto mill and acquire and develop additional assets."

David Argyle, president and chief executive officer of Dynamite, stated: "This merger will provide Dynamite shareholders with further exposure to Avion's near-term gold production from the Segala and Tabakoto projects in Mali, adding an operational dimension to Dynamite beyond its cash and incoming cash flow from Segala. We believe that the combination allows Dynamite's shareholders to participate in a major gold consolidation play and that Avion's team has the ability to identify and acquire other gold production opportunities."

Transaction details

The transaction is subject to the execution of a definitive agreement by Feb. 23, 2009, regulatory approvals, court approval (if required) and requisite Dynamite shareholder approval. The transaction shall also be subject to the receipt of fairness opinions by the board of directors of both Avion and Dynamite that the transaction is fair, from a financial point of view, to their respective shareholders. Canaccord Capital Corp. has been engaged as financial adviser to Avion's special committee. Macquarie Capital Markets Canada Ltd. has been engaged as financial adviser to Dynamite. Dynamite has agreed to pay a break fee of $650,000 to Avion in certain circumstances and has granted Avion the right to match competing offers.

The board of directors of Dynamite has appointed a special committee of the board, comprising independent directors. By recommendation of the special committee, the board of directors of Dynamite will recommend that Dynamite shareholders vote in favour of the transaction, subject to the terms and conditions of the letter agreement including the receipt of fairness opinions. The board of directors of Avion has also appointed a special committee of the board. By recommendation of the special committee, Avion's board of directors has agreed to support the transaction.

The exchange ratio was calculated based on the net cash position of Dynamite being approximately $11-million. In the event that upon closing of the transaction, Dynamite's net cash position is less than $11-million, in certain circumstances, the exchange ratio shall be adjusted on a pro rata basis to reflect this reduction.

Pursuant to the letter agreement, the directors of Dynamite have agreed to support the transaction and each of the directors and officers of Dynamite will enter into lock-up agreements to vote their shares in favour of the transaction, subject to certain conditions, including the receipt of a fairness opinion.

As Avion and Dynamite have one director in common, being Stan Bharti and one officer in common, being Patrick Gleeson, the transaction will be considered to be non-arm's length for the purposes of the TSX-V. Mr. Bharti currently holds 1,363,636 Avion common shares and 1,925,000 Dynamite common shares. Mr. Gleeson currently holds 45,455 Avion common shares. Upon closing of the transaction, Mr. Gleeson will resign as corporate secretary and Brianna Davies will be appointed corporate secretary of the combined company.

Mr. Begeman, PEng, who is a qualified person as defined under National Instrument 43-101, has reviewed the scientific and technical disclosure relating to Avion in this press release.

Completion of the transaction is subject to a number of conditions, including TSX-V acceptance and potential disinterested shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular to be prepared by Dynamite in connection with the transaction, any information released or received with respect to the business combination may not be accurate or complete and should not be relied upon. Trading in the securities of Avion and Dynamite should be considered highly speculative