TVI - TVI Pacific (TSX) - Page 3

TVI set to grow , investing in oil

TVI to acquire TG shares under arrangement agreement

2010-12-23 17:56 PT - News Release

Also News Release (C-TGE) TG World Energy Corp

Mr. Dean Callaway of TG World Energy reports

TVI PACIFIC INC. AND TG WORLD ENERGY CORP. ANNOUNCE ARRANGEMENT AGREEMENT FOR THE ACQUISITION OF TG WORLD ENERGY CORP. BY TVI PACIFIC INC.

TVI Pacific Inc. and TG World Energy Inc. have entered into a definitive arrangement agreement, under which TVI has agreed to acquire all of the outstanding common shares of TG not owned by it as of the effective date of the acquisition on the basis of 0.67 of a TVI common share for each TG common share. The Arrangement Agreement provides that the Transaction will be structured as a plan of arrangement under the Business Corporations Act (Alberta) (the "Arrangement").

In addition, TVI has agreed to purchase 29,650,000 TG common shares and invest $1,317,500 by way of a convertible promissory note to assist TG in financing its immediate obligations.

TVI's principal assets are its interest in the producing Canatuan copper-zinc mine in Mindanao, Philippines, its interest in the Balabag epithermal gold/silver deposit also in Mindanao and its interest in a broad array of prospective mining tenements in the Zamboanga Peninsula, Philippines.

TG's principal assets are its interest in an offshore oil and gas concession located in the Philippines, its interest in a joint venture covering certain oil and gas prospects located on the Alaska North Slope and its interest in a joint venture with an affiliate of China National Petroleum Corporation relating to exploration prospects in Niger, Africa.

Details of the Transaction

Upon completion of the Transaction, all TG common shares not owned by TVI at such time will be automatically exchanged on the basis of 0.67 of a TVI common share for each TG common share. The consideration to be received by TG shareholders pursuant to the Arrangement represents an approximate 48% premium over TG's 20-day volume-weighted average trading price, and an approximately 78% premium over TG's closing price as at December 22, 2010.

Upon completion of the Transaction (and after giving effect to the private placement transactions described below), TVI will have approximately 577.9 million common shares issued and outstanding, of which current TVI shareholders will own approximately 84.4 % and former TG shareholders will own approximately 15.6%.

The total value of the Transaction to TVI has been estimated at $13.5 million, consisting of a combination of cash to be invested in connection with the purchase of TG common shares and TG convertible note and the common shares of TVI to be issued upon completion of the Arrangement (with each such TVI common share having an ascribed value equal to TVI's 20 day volume weighted average trading price of $0.12).

Business Rationale for the Transaction

In authorizing the Transaction, the TVI Board of Directors determined that the acquisition of TG would allow TVI to leverage its extensive relationships in the Philippines by entering the Philippine oil and gas sector. This could provide TVI with access to a second cash flow stream that would help to offset TVI's exposure to base and precious metals commodity pricing risk.

The TVI Board of Directors believes that this Transaction will allow TVI to capitalize on broader development opportunities opening up in the Philippines.

Following completion of the Transaction, TVI is expected to:

-- have a second resource base, which will include additional assets in the Philippines; and

-- have an attractive mix of production, development and exploration stage resource assets.

"We believe that the Transaction represents an attractive opportunity for TVI shareholders," said Cliff James, President and CEO of TVI. "TVI has a strategic need for an acquisition to expand its cash flow sources, but high commodity prices are making advanced acquisitions in the Philippines mining sector difficult to secure. This opportunity will also allow TVI to build scale and scope through an investment in an additional resource that is expected to help mitigate the risks associated with a single commodity."

"The TVI Board of Directors views the acquisition of TG, including its assets in the Philippines, as an important addition to TVI's existing portfolio, "added Brian Cramm, the Chairman of the independent Special Committee of TVI's Board of Directors. "The combined cash flows from operations should allow TVI to pursue production from wells drilled within the offshore Philippines concession, to continue the Company's mining exploration and development activities on the North Zamboanga tenement package and to pursue other resource opportunities."

Mr. Wayne Thomson, Chairman of TG added, "the planned combination represents a unique opportunity for TG's shareholders. The Transaction will merge anticipated cash flow from the offshore Philippines wells (and possibly North Tarn, Alaska) with a corporation that will have the financial and technical capacity to move TG's oil and gas projects forward. TVI is a well-managed Canadian mining company with roots going back over 15 years. TG is pleased to be able to offer it shareholders an opportunity to become a part of this larger and stronger enterprise".

Private Placements

Subsequent to the execution and delivery of the Arrangement Agreement, TVI entered into a subscription agreement with TG (the "TVI Subscription Agreement"), which provides for TVI to purchase 29,650,000 common shares of TG, at an aggregate subscription price of $1,482,500, representing a per share sale price of $0.05. The TVI Subscription Agreement also provides for the purchase by TVI of a $1,317,500 principal amount convertible promissory note of TG (the "Note"). The TVI Subscription Agreement contemplates that the principal amount of the Note (and accrued interest) may be converted into TG common shares, at a conversion price of $0.05 per share, in certain circumstances, including: (i) the TG Board of Directors having resolved to accept an acquisition proposal from a third party that constitutes a "superior proposal" for purposes of the Arrangement Agreement; (ii) if, after conversion, the number of TG common shares held by TVI would be less than 19.5% of the total number of issued and outstanding TG common shares; (iii) if the conversion is approved by the TG shareholders; (iv) if the TG common shares are delisted from the TSX Venture Exchange; (v) if the TSX Venture Exchange provides its consent to conversion; or (vi) at any time following December 31, 2015. After giving effect to the purchase of TG common shares pursuant to the TVI Subscription Agreement, TVI will own approximately 19.5% of the total number of issued and outstanding TG common shares (not including TG common shares that may be issued upon the conversion of indebtedness owing under the Note or the 12 million TG common shares proposed to be issued to LIM Asia Special Situations Master Fund Limited in connection with the private placement transactions described below).

The TVI Subscription Agreement provides that the net proceeds from the sale of TG common shares and the Note will be used by TG to pay amounts owing, or that may become owing, in respect of the oil and gas assets of certain TG subsidiaries in the Philippines and Alaska and (to the extent of any balance) for other corporate purposes.

TVI intends to vote the 29,650,000 TG common shares referred to above in favour of the Arrangement at the special meeting of the TG shareholders, optionholders and warrantholders that is to be called and held to consider and vote upon the Arrangement (the "Meeting").

In addition, TG has entered into a subscription agreement with LIM Asia Special Situations Master Fund Limited (the "LIM Subscription Agreement"), under which LIM has agreed to purchase 12 million TG common shares, at an aggregate subscription price of $600,000, representing a per share sale price of $0.05.

The private placement transactions contemplated by the TVI Subscription Agreement and the LIM Subscription Agreement are expected to close promptly following receipt of all required regulatory approvals.

TG Board Recommendation

Negotiations concerning the Transaction were conducted on behalf of TVI by a special independent committee of the TVI Board of Directors consisting of Messrs. C. Brian Cramm and Jan Horejsi and on behalf of TG by a special independent committee of the TG Board of Directors consisting of Messrs. Wayne Thomson, Gordon Hoy, David Moscovitz and Michael Ames.

The TG Board of Directors, on the unanimous recommendation of its independent special committee, has determined that the Transaction is in the best interests of TG and the TG shareholders and has resolved to recommend that TG shareholders vote in favour of the Arrangement. Management and the directors of TG and certain other shareholders, who beneficially own or exercise control or direction over approximately 4.01% of the issued and outstanding TG common shares, and options entitling them to purchase up to an aggregate of approximately 3,950,000 TG common shares, have entered into support agreements with TVI under which such persons have agreed to vote their TG common shares in favour of the Arrangement. Two additional shareholders of the Corporation, who currently own (in the aggregate) approximately 31.39% of the outstanding TG common shares have advised TVI of their support for the Transaction and have indicated that they plan to vote their TG common shares, and any TG common share purchase warrants held by them, in favour of the Arrangement at the Meeting.

The Arrangement Agreement prohibits TG from soliciting or initiating any discussions concerning the sale of material assets or any other business combination involving TG and provides TVI with the right to match any competing proposal that TG receives from a third party. Under the terms of the Arrangement Agreement, TVI is entitled to receive a $500,000 termination fee from TG in certain circumstances. Additional details relating to the Arrangement Agreement will be included in the information circular to be delivered to TG shareholders, optionholders and warrantholders in connection with the Meeting. Copies of the Arrangement Agreement and certain other documents will be filed with the applicable Canadian securities regulatory authorities and will be available at www.sedar.com.

TG'S Financial Advisor And Fairness Opinion

Jennings Capital Inc. acted as financial advisor to TG and has provided a verbal opinion to the TG Board of Directors that, as of December 21, 2010 and subject to the assumptions and limitations contained therein, the Transaction is fair, from a financial point of view, to TG shareholders. MacLeod Dixon LLP acted as legal counsel to the Special Committee of the TG Board of Directors and Borden Ladner Gervais LLP acted as legal counsel to the Special Committee of the TVI Board of Directors.

Certainly a buy here imo, lots of news going to happen for TVI in the next year or two. I am still very bullish on the prospects for gold , silver and copper, and TVI of course profitable producer of those. OIL also looks good for the future , closing over 91$ today and TVI's ability to have cash available to purchase these undervalued assets will be a real reward for those invested long here.

Appears to be lots of management bashing on the bullboards, but the reality is that this is a profitable producer , made over 2.9 $ million last Q alone. Please show me another mining producer with a market cap under 60 million and showing 11 or 12 million$ a year in earnings ( I doubt you can find one unless they carry huge debt). Last year TVI earned 18.9 million$ and this year chose to retire the main part of thier debt ahead of schedule. Gold , copper and silver prices have improved a lot in the past 6 months and this should refelect a surprising earnings per share increase in the 4th Q , due out in early 2011.
And as to the acquisition, this was the dec 06 news for TGE:
2010-12-06 06:13 PT - News Release

Mr. Dean Callaway reports

TG WORLD PROVIDES TINDALO OPERATIONS UPDATE

TG World Energy Corp.'s project partner and operator of service contract 54A in the Philippines, Nido Petroleum Ltd., has provided the following update on the Tindalo-1 sidetrack following the completion of recent workover operations.

"To allow the greatest chance of test results being a true indication of the flow characteristics of each part of the wellbore, each of four potentially productive zones are separated by inflatable external casing packers and tested individually. Since the last operations update on Nov. 23, 2010, testing has been completed on the two deepest sections of the near horizontal wellbore with the following results:

* Each zone was flow tested for 24 to 48 hours to assess its productivity and potential water cut development;
* Initial results from the testing are as follows:
o Zone 1 -- average flow rate of approximately 4,500 barrels of oil per day from a 20-metre section, with water cut steady between 16 to 18 per cent. A step-change decrease in the fluid rate occurred close to the end of the test which was thought to be due to a (now-cleared) wellbore blockage;
o Zone 2 -- demonstrated lower flow rates up to approximately 1,500 bopd from a 40-metre section, with water cut increasing from 6 per cent to approximately 30 per cent during the test;
* During testing of both zones, the well was flowed naturally, that is, without the use of the downhole electric submersible pump (ESP);
* Water samples were taken to determine whether the water produced is completion fluid or formation water. Following preliminary analysis of these results, the joint venture has taken the decision to defer testing zones 3 and 4 and resume testing zone 1 for a more extended period initially on natural flow. Depending on water cut and productivity observed with time, further testing with the use of the ESP may be undertaken prior to returning to test zones 3 and 4.
TGE gave an update dec 24 th.

tg at .05 or .06 appears to be the better buy at the moment, altho there is a chance the deal wont go thru, and you may not get the shares converted into TVI.
By the way , here is a bit more info on the oil play, TGE earned in 12.5% interest.
Project details

In 2008, Nido completed a two-well exploration program in SC54A that resulted in the Tindalo and Yakal oil discoveries. Both wells were suspended without testing as potential oil producers based on interpretation of well log and drilling data. The Tindalo well identified a 124-metre to 144-metre-plus oil column and Nido has since fast-tracked a low-cost, well development program. Nido has commissioned drilling contractor Vantage Drilling for the development and completion of the Tindalo discovery which is positioned at water depths of approximately 100 metres. Completion and extended well test operations are scheduled to commence in the second quarter of 2010 with first oil expected shortly thereafter.

Nido has anticipated initial oil production from the Tindalo well at 7,000 to 15,000 barrels of oil per day, based upon independent party assessment. The production estimate is based upon subsurface geological modelling and reservoir simulation consistent with production history matching of two nearby oil fields (Nido A and Nido B fields located nine miles to the south) that have produced 19 million barrels to date from the same age reservoir. Recoverable oil over an approximate 18-month life may range between five million to six million barrels for Tindalo. There is no assurance that this well can produce as estimated and there is no certainty that it will be commercially viable to produce any portion of the resources mentioned in this release as there is no flow test data. The contingencies which currently prevent the classification of the resource as a reserve are geological/economic in nature based on maintaining simulated reservoir oil production volumes for 18 months. The Yakal well identified a 78- to 93-metre oil column and will likely be developed subsequent to Tindalo. Yakal is a crestal offset to the vintage Nido 1 well that was tested at 1,400 barrels per day.

"Our involvement in SC54A not only provides near-term cash flow if successful, but also places us in the middle of a prolific development and exploration fairway," stated Cliff James, TG World's president and chief executive officer. "In addition to the four discoveries identified (Tindalo, Yakal, Nido 1X1 and Signal Head 2), SC54A contains some 19 other identified pinnacle reef targets that may offer follow-up successes."

Mr. James went on to state: "The oil and gas potential and advantageous fiscal regime of the Philippines has been recently validated by the continued participation and new entry of major players in the Palawan basin, including Shell, Chevron, BHP Billiton and Exxon Mobil. Nido has had a first-rate history in the Philippine oil and gas industry and we look forward to a fruitful working relationship.

Interesting reading on the M,D and A for TVI , Edco is a drilling company , wholly owned subsidiary of TVI.
Drilling Company

The current fleet of seven drill rigs will increase to fourteen drill rigs upon the arrival of seven more rigs
from Kyrgyzstan during Q1, 2011. These rigs are expected to augment exploration activities at
Siennalynn, Balabag and Tamarok.
Lots of upside from mining exploration for tvi as well.

had to repost this from SH , it was an email reply to a poster from Rhonda Bennetto of TVI .
Of course TVI knew of the Tindalo well results only 4 days ago but had to wait for the Operator (Nido) to release. The TG assets are not centered around that one well. Nido has a "chain or pearls" in the area and the rig will be moved to the next location (which is a re-entry). The cash flow assumptions and asset valuations have been run in the absence of Tindalo. All of the info will be avialable soon on SEDAR in the Arrangement Agreement and subsequent Information Circular.

Here are the facts in a nutshell that may help.

TVI will do a private placement in TG tomorrow for $1.7 Million
LIM is exercising its TVI warrants and putting the $1.1 million into the TG PP as well
LIM is also putting up an additional $600,000 to fully meet TG’s short term obligations of $3.6 million

LIM has agreed to postpone all interest and principle payments to them from TG until June 2011
LIM also agrees to convert those P&I payments into shares

If Yakal and North Tarin do not work, TVI does have an “out” and will only have risked the above amount (for proven reserves, not exploration).
Of course, if the wells come in prior to the meeting and the soft lock-ups in place decide to vote against the deal, TVI will still benefit from the increase in TG share price (because we will own significant shares)

If North Tarin is successful (drill date of Jan 25th) TG’s 20% interest could amount to 200 million barrels of oil. Plus it is net cash as the government provides reimbursement tax credits which cover our costs on N. Tarin. Free well.
We were aware of the water problems at Tindalo (as you saw released tonight) BUT our evaluation excluded TindaloNiger is a free bee – TG get a free carry

The fact is is TVI is risking $2.8 million to see if two large wells are successful and, if not, we exercise our "out clause" in the arrangement agreement. The only way the terms of the deal can change are if someone else makes a higher offer. The TG shareholders, who’s soft lock-up votes account for more than needed, could change their minds, but if they do, TVI will reap the rewards of the shareholdings it will have in TG.

I think for $2.8 million, TVI has an opportunity to either benefit greatly, or leave the deal. I’m not sure a complete and total analysis of all of TG’s assets are necessary today – (we wil lprovide them in any case) but more important is folks understand the “terms” of the deal and decide whether they want to be patient or not.

The TVI growth plan stays as is (with $15 million in cash and another 20 or so in short term lines of credit), the spending for TVI for 2011 remains unchanged. Drilling is ongoing 24/7, assays are ongoing 24/7. TG has their own staff and won’t take any manpower from us – nothing changes for TVI if TG isn’t successful (except the $2.8 million).

I hope that gives you some comfort
Regards,
Rhonda

TVI Pacific Announces Completion of Nineteenth Shipment of Copper Concentrates Produced at Canatuan

12/29/2010
CALGARY, ALBERTA--(Marketwire - Dec. 29, 2010) - TVI Pacific Inc. (TSX:TVI)(OTCQX:TVIPF) ("TVI" or the "Company") announced today that its Philippine operating affiliate, TVI Resource Development (Phils.), Inc. ("TVIRD"), completed its nineteenth shipment of copper concentrates produced at the Canatuan mine on December 21, 2010.

-- Gross revenue expected from nineteenth shipment US$9.7 million

-- Gross revenue year to date US$77.9 million

-- Copper concentrates shipped year-to-date 46,756 dry metric tonnes

("dmt")

Due to the consistency of the concentrate shipment schedule, TVI will no longer be issuing separate news releases to announce individual concentrate shipments. Instead, all figures will be reported on a quarterly basis in TVI's financial documents. Information regarding the shipment schedule, and any changes to the timing of the schedule, will continue to be made available on the Company' s website at www.tvipacific.com.

Yes simply amazing for a company that is profitably producing copper, gold and silver . Next Q report should actually see even more earnings per share as all of those 3 metals have hit 30 year highs in the last Q, which ended Dec 31.
New zinc circuit coming online should add to the profits.
Apparently the market not endeared with their latest use of cash , in buying up shares of distressed TGE, a company also ran by the Ceo of TVI.
Reality is tho that TVI got TGE shares for a very cheap price considering the assets they have and their market valuation.
This one still a buy imho. Ther bull market for copper gold and silver is far from over. TVI has currently 7 of their 14 drills! going in the Phillipines and have terrific potential for some good results , to go along with the OIL exploration from TGE.

THE market doesnt seem to have any set rules for buying up value. In fact explorers with nada are valued higher than a producer with profitable mining , proven reserves, drilling and mining equipment worth several 10s of millions.
Most of these explorers own nothing, rent some office space , drill a few holes and stand around them lying about how great this deposit will be and hoping someone is dumb enuff to come along and buy them. 99% of these companies do not have the expertise or desire to even take it close to mining.
When will the street dummy up to this? Maybe never.
But one thing i have found is that value DOES eventually work its way into the share price. Hype with no value eventually creates big bagholders.
For daytraders , chasing the flavor of the day works, for investors , buying value and patiently waiting works as well. You have to decide which type of player you are.