Terminates Minority Equity Investment, Pursues Focused Warintza Strategy

Rhea-AI Summary

Solaris Resources announces the termination of a minority equity investment aimed at expanding the Warintza Project in Ecuador, including the purchase of an adjacent asset. Regulatory approval was not obtained within the expected timeframe, and the deal no longer reflects market value, given a 35% share price increase since the announcement.

The company has secured funding for 2024 and 2025 Warintza programs, with an additional US$40 million available through an offtake financing package. Solaris will focus on maximizing shareholder value and strategic flexibility. The Warintza Project timeline includes an Environmental Impact Assessment in H2/24 and a Pre-Feasibility Study in H2/25.

Positive

• Share price increased by 35% since the initial announcement.
• Company remains funded for 2024 and 2025 Warintza programs.
• Additional US$40 million available through offtake financing package.
• Pursuing an option to acquire ~40,000 hectares adjacent to Warintza.
• Expected delivery of Environmental Impact Assessment in H2/24.
• Expected delivery of Pre-Feasibility Study in H2/25.

Negative

• Termination of minority equity investment aimed at Warintza expansion.
• Regulatory approval not obtained within the expected timeframe.
• Deal no longer reflects market value due to a 35% share price increase.
• Share price has underperformed peers in the recent sector rally.
• Regulatory uncertainty and unattractive pricing deemed unfair to shareholders.

Financial Analyst

The voluntary termination of the minority equity investment reflects a significant strategic pivot for Solaris Resources Inc. While the transaction was initially attractive, the evolving regulatory environment and the appreciation in Solaris' share price have changed the dynamics. The 14% premium initially offered is now overshadowed by a 35% increase in the company’s share price, making the transaction less favorable. The lack of regulatory approval and heightened political sensitivity in Canada also contributed to this decision. The company's focus on enhanced strategic flexibility and long-term value for shareholders is a positive sign. However, investors should monitor how effectively the company will utilize the available US$40 million from the offtake financing package to support its 2024 and 2025 programs. The failure to secure the minority investment might cast a shadow of uncertainty, but the company's strong cash position helps mitigate some risks.

Market Research Analyst

From a market perspective, the decision to terminate the equity investment aligns with the larger trend of companies reassessing deals in light of regulatory and market shifts. Solaris' share price has appreciated by more than 35% over the past four months, outpacing the 14% premium involved in the original deal. This move highlights the importance of market timing and investor sentiment in strategic decisions. Despite the termination, Solaris remains well-funded, which is important for executing its Warintza Project. Investors should focus on the company's ability to maintain momentum and meet key deliverables such as the Environmental Impact Assessment and Pre-Feasibility Study in the coming years. Given the ongoing fieldwork on the recently acquired adjacent hectares, the company appears committed to expanding its resource base, which could yield long-term benefits.

Legal Expert

The regulatory challenges faced by Solaris underscore the complexities of navigating international transactions in an environment of heightened political scrutiny. The fact that the approval process extended beyond the anticipated timeframe indicates potential bottlenecks and uncertainties in Canada's regulatory environment for foreign investments. This situation could serve as a case study for other companies looking to engage in similar transactions. For investors, this highlights the importance of understanding the regulatory landscape and the risks associated with approvals. The company's decision to terminate the deal and focus on strategic flexibility demonstrates a proactive approach to managing these risks. However, the inability to secure the investment might raise questions about the predictability and efficiency of regulatory processes, which could impact future investment decisions in the sector.

VANCOUVER, British Columbia, May 21, 2024 (GLOBE NEWSWIRE) -- Solaris Resources Inc. (TSX: SLS; NYSE: SLSR) (“Solaris” or the “Company”) announces the voluntary termination of the previously announced minority equity investment intended to support the growth of the Warintza Project (“Warintza” or “the Project”) in Ecuador, including the potential major purchase of an adjacent asset. After four months of Canadian regulatory review in an evolving environment, approval has not been obtained and the transaction no longer adequately reflects market value. The Company remains funded for its 2024 and 2025 Warintza baseline programs and key deliverables with an additional US$40 million available through the offtake financing package announced in December and will pursue a focused strategy that maximizes long-term shareholder value with enhanced strategic flexibility.

Summary

• Solaris announces voluntary termination of minority equity investment intended to support an expansion of activities at Warintza, including the potential major purchase of an adjacent asset
• The transaction was priced at a 14% premium, however, Solaris’ share price has increased by greater than 35% in the four months since announcement and the transaction no longer adequately reflects market value
• Even with significant appreciation, Solaris’ share price has underperformed peers in the recent sector rally due to the overhang of Canadian regulatory uncertainty in an environment of heightened domestic political sensitivity
• Given the minority investment nature of the transaction and that it involved assets outside of Canada with a use of proceeds to expand Canadian interests in critical minerals, the parties expected regulatory approval within the four months that have now elapsed
• The inability to complete the transaction in a reasonable timeframe and remaining regulatory uncertainty together with the unattractive pricing in the context of the market are unfair to the Company’s shareholders and the investor
• In addition, the Company is pursuing the recently awarded option to acquire ~40,000 hectares adjacent to Warintza, with fieldwork already underway on a target with a similar geological and “bullseye” geophysical signature as the Warintza cluster (refer to release dated April 30, 2024)
• The Company remains funded for 2024 and 2025 Warintza baseline programs and key deliverables with a further US$40 million available through the offtake financing package announced in December
• The Company reiterates the Warintza Project timeline with expected delivery of an Environmental Impact Assessment in H2/24 and a Pre-Feasibility Study in H2/25

Mr. Daniel Earle, President & CEO, commented: “This transaction represented a minority equity investment from a well-known and respected, publicly-listed foreign company where the proceeds were intended to be used for the growth of a Canadian-controlled company’s principal asset in a foreign jurisdiction. That this transaction cannot be completed in a reasonable timeframe signals that Canada’s critical minerals policy is counterproductive in relation to foreign assets. We intend to deliver a strategy focused on the growth and de-risking of the Warintza Project by 2026 and maximize long-term shareholder value with enhanced strategic flexibility.”

Qualified Person

The scientific and technical content of this press release has been reviewed and approved by Jorge Fierro, M.Sc., DIC, PG, Vice President Exploration of Solaris who is a “Qualified Person” as defined in National Instrument 43-101 Standards of Disclosure for Mineral Projects.  Jorge Fierro is a Registered Professional Geologist through the SME (registered member #4279075).

On behalf of the Board of Solaris Resources Inc.

“Daniel Earle”
President & CEO, Director

For Further Information

Jacqueline Wagenaar, VP Investor Relations
Direct: 416-366-5678 Ext. 203
Email: jwagenaar@solarisresources.com

About Solaris Resources Inc.

Solaris is advancing a portfolio of copper and gold assets in the Americas, which includes a world class copper resource with expansion and discovery potential at its Warintza Project in Ecuador; a series of grass roots exploration projects with discovery potential in Peru and Chile; and significant leverage to increasing copper prices through its 60% interest in the La Verde joint-venture project with a subsidiary of Teck Resources in Mexico.

Cautionary Notes and Forward-looking Statements

This document contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). The use of the words “will” and “expected” and similar expressions are intended to identify forward-looking statements. These statements include statements that the Company remains funded for its 2024 and 2025 Warintza baseline programs with an additional US$40 million available through the offtake financing package announced in December and will pursue and deliver a focused strategy that maximizes long-term shareholder value with enhanced strategic flexibility, and the Company reiterates the Warintza Project timeline with expected delivery of an Environmental Impact Assessment in H2/24 and a Pre-Feasibility Study in H2/25, and the Company is pursuing the recently awarded option to acquire ~40,000 hectares adjacent to Warintza, with fieldwork already underway on a target with a similar geological and “bullseye” geophysical signature as the Warintza cluster. Although Solaris believes that the expectations reflected in such forward-looking statements and/or information are reasonable, readers are cautioned that actual results may vary from the forward-looking statements. The Company has based these forward-looking statements and information on the Company’s current expectations and assumptions about future events including assumptions regarding 2024 and 2025 baseline programs and funding, that all conditions required to draw down the remaining US$40 million of offtake financing will be obtained, that such remaining US$40 million of offtake financing will close, and the completion of the EIA, PFS and de-risking the Warintza Project by 2026. These statements also involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements, including the risks, uncertainties and other factors identified in the Solaris Management’s Discussion and Analysis, for the year ended December 31, 2023 available at www.sedarplus.ca. Furthermore, the forward-looking statements contained in this news release are made as at the date of this news release and Solaris does not undertake any obligation to publicly update or revise any of these forward-looking statements except as may be required by applicable securities laws.

FAQ

Why did Solaris Resources terminate the minority equity investment?

Solaris terminated the investment due to a lack of regulatory approval and the deal no longer reflecting market value after a 35% share price increase.

What impact did the share price increase have on the minority equity investment?

The 35% increase in Solaris' share price made the deal unattractive, as it no longer reflected market value.

What are Solaris Resources' plans for the Warintza Project?

Solaris plans to continue its 2024 and 2025 Warintza programs, with additional funding and a focus on maximizing long-term shareholder value.

What is the additional funding available for Solaris Resources?

Solaris has an additional US$40 million available through an offtake financing package announced in December.

What are the upcoming milestones for the Warintza Project?

The Warintza Project is expected to deliver an Environmental Impact Assessment in H2/24 and a Pre-Feasibility Study in H2/25.