Xiana Mining to Acquire Producing Copper Operation in Chile and Announces Financing for up to C$20 Million

22.05.2018 | Newsfile

Vancouver, May 22, 2018 - Xiana Mining Inc. (TSXV: XIA) ("Xiana" or the "Company") is pleased to announce that it has entered into a definitive agreement (the "MAP Agreement") with subsidiaries of Glencore plc ("Glencore") to acquire 100% of Minera Altos De Punitaqui ("MAP"), a producing copper-gold operation in Chile, (the "MAP Acquisition").

Commenting on the MAP Acquisition, Carlos Ballon, Chairman & CEO said: "MAP is an excellent cornerstone asset for Xiana which combines an existing copper and gold production base with significant upside potential. The Xiana team has a track record of development and exploration successes and we are excited by the geological potential of MAP. We look forward to building upon MAP's potential and enhancing shareholder value through organic growth and further acquisitions in Chile & Peru."

Overview of MAP

MAP is a producing copper-gold operation located in Region IV of Chile
The operations are located ~400km north of Santiago and 35km south of Ovalle in the Coquimbo region. They benefit from water and power supply and excellent infrastructure
The operations are in an established mining district with over 90% of employees from Punitaqui or Ovalle
MAP has a 3,600 tpd concentrator on site, currently processing ore from 3 mines (open pit and underground)
2017 Production comprised ~8kt of copper metal and 21koz of gold (in concentrate)
The properties comprise of IOCG, vein and Mantos style of mineralisation and are located in a prolific copper-gold district
Current mine life of +5 years with significant upside potential to create a long life, sustainable medium sized copper producer

MAP Acquisition Agreement Summary

Xiana and Xiana Chile SPA (a wholly-owned subsidiary of Xiana) signed the MAP Agreement on May 18, 2018, to acquire the 100% interest in MAP pursuant to an arm's length transaction with Glencore
Xiana has agreed, pursuant to the terms of the MAP Agreement, to pay Glencore total cash consideration of US$25 million and to grant a net smelter royalty payable as follows:
- US$5 million payable in cash at closing of the MAP Acquisition ("Closing");
- US$20 million payable in cash, on the date of the second anniversary of the Closing; and
- a 1.5% net smelter royalty payable in excess of 9 million tonnes of ore being processed at MAP, following the Closing of the MAP Acquisition
No finder's fees are payable to any person in connection with the MAP Acquisition
Closing of the MAP Acquisition is subject to the receipt of various customary regulatory approvals, including approval of the TSX Venture Exchange (the "TSXV"). If the Closing of the MAP Acquisition has not occurred on or by September 30, 2018, either party may elect to terminate the Agreement

Concurrent Financing

Concurrently with the MAP Acquisition, Xiana will be conducting a financing for gross proceeds of up to C$10 million (the "Placement") through the issuance of units in the Company (each an "Equity Unit") at a price of C$0.48 per Equity Unit. Each Equity Unit will be comprised of one common share in the capital of the Company (a "Common Share") and one Common Share purchase warrant (a "Warrant"). Each Warrant will be exercisable to purchase one Common Share at a price of C$0.75 per Common Share for a period of five years from the date of issuance of the Warrant
Xiana's existing shareholder, Tembo Capital Mining Fund GP LP ("Tembo"), has confirmed its continued support for Xiana and agreed to subscribe for C$3.8 million of Equity Units as part of the Placement
In addition to the Placement, Tembo has agreed to advance to the Company a secured convertible loan facility in the principal amount of C$9 million (the "Loan", and together with the Placement, the "Concurrent Financing"). The Loan will be evidenced by a definitive agreement to be entered into by Tembo and Xiana (the "Loan Agreement") which will contain customary covenants, representations and warranties, events of default and conditions precedent
The Loan will be convertible, at the election of Tembo, into units of the Company ("Loan Unit") at a conversion price of C$0.60 per Loan Unit. Each Loan Unit will be comprised of one Common Share and one Common Share purchase warrant (an "Underlying Warrant"). Each Underlying Warrant will be exercisable to purchase one Common Share at a price of C$0.75 per Common Share for a period of five years from the date of the Loan Agreement.
C$$645, 000 of the loan amount will be available for drawdown upon execution of the Loan Agreement. The remainder of the C$8.4 million loan amount will be available for drawdown concurrent with the closing of the MAP Acquisition (the "Drawdown Date")
The Loan shall be repayable on the date that is 18 months from Drawdown Date.
The Loan will carry an interest rate of 10% per annum for the first year and thereafter 12% per annum (inclusive of funding costs), payable semi-annually. Interest on the Loan will be payable in cash or in Common Shares, subject to TSXV approval, or at the election of Tembo such interest may be added to the outstanding loan balance. Interest payments which are payable in Common Shares shall be based on the current market price of the Common Shares at the time such interest is payable which will be calculated based on the 20 day volume weighted average price per Common Share immediately prior to the date such interest is payable
The Loan will be secured by a pledge over the shares of Xiana Chile SPA and the intercompany loans held by Xiana's subsidiaries (to the extent relevant)
In connection with providing the Loan, Tembo will be entitled to receive an arrangement fee equal to 3% of the amount of the Loan payable in cash
Following completion of Placement, Tembo's stake in Xiana will increase to 21% of the Company (before conversion of the Loan or exercise of any warrants issued in connection with the Concurrent Financing).
The proceeds from the Concurrent Financing will be utilised for purposes of completing the MAP Acquisition (including payment of the consideration due at Closing and the transaction costs), funding required for MAP in respect of asset optimisation, conducting development and exploration activities and general corporate overhead expenses
Carlos Ballon and Tembo have each undertaken to enter into customary lock-up arrangements in respect of their holdings in the Company for a period of 24 months from the date of closing of the Concurrent Financing

Commenting on the Concurrent Financing, Carlos Ballon, Chairman & CEO said: "We are delighted to have Tembo as our cornerstone investor and a continuing supporter of Xiana. The Concurrent Financing enables Xiana to complete the MAP Acquisition and move forward on a strong financial footing to deliver value from the transaction. We look forward to working with the team on the execution of our strategy."

Additional Items

The Concurrent Financing is integral to the proposed MAP Acquisition and therefore the Company expects to rely on the "part and parcel pricing exemption" allowed by the TSXV policies. Completion of the MAP Acquisition and the Concurrent Financing are expected to occur during the third quarter of 2018 and are subject to satisfaction of a number of customary conditions precedent, including, without limitation, obtaining shareholder approval of the Concurrent Financing and the resulting creation of a new control person, the acceptance of the TSXV and the satisfaction of any conditions which the TSXV may impose.

All securities issued under the Concurrent Financing will be subject to a hold period of four months and a day from the date of issuance under applicable securities laws.

NRG Capital Partners is acting as Financial Adviser to Xiana.

Fasken Martineau LLP and Baker Mackenzie are acting as legal counsel to Xiana in relation to the MAP Acquisition.

McCarthy Tétrault LLP is acting as legal counsel to Xiana in relation to the Concurrent Financing.

Qualified Person

The technical information contained in this news release has been reviewed and approved by Robert Baxter (FAusIMM), a Director of Xiana Mining Inc. and a qualified person as defined by National Instrument 43-101. Mr. Baxter is not independent of the Company.

About Xiana Mining Inc.

Xiana Mining Inc. is a mineral exploration and development company focused on acquiring and developing mining assets in Peru and Chile.

ON BEHALF OF THE BOARD OF DIRECTORS OF
XIANA MINING INC.

Carlos Ballon

Carlos Ballon, Chairman & CEO

For further information please contact:

Tony Drescher (Chief Financial Officer)
Telephone: +1 (604) 685-1017
E-mail: ajd@harbourpacific.com

Rita Adiani
NRG Capital Partners
Telephone: +44 (0)203 709 4504
E-mail: rita.adiani@nrgcapitalpartners.com

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.

Forward Looking Statements

This press release contains forward looking statements within the meaning of applicable Canadian securities legislation, which includes without limitation statements concerning completion of the MAP Acquisition and the Concurrent Financing. Although Xiana believes that the expectations reflected in these forward looking statements are reasonable, undue reliance should not be placed on them because Xiana can give no assurance that they will prove to be correct. Since forward looking statements address future events and conditions, by their very nature they involve inherent risks and uncertainties. The MAP Acquisition and the Concurrent Financing may not be completed if required approvals or some other condition to closing is not satisfied. The closing of the MAP Acquisition and the Concurrent Financing could be delayed if Xiana is not able to obtain the necessary regulatory and stock exchange approvals on the timelines it has planned. The MAP Acquisition and the Concurrent Financing will not be completed at all if these approvals are not obtained or some other condition to the closing is not satisfied. Accordingly, there is a risk that the MAP Acquisition and the Concurrent Financing will not be completed within the anticipated time or at all. There is 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 forward looking statements. Accordingly, readers should not place undue reliance on forward looking statements. The forward looking statements contained in this press release are made as of the date hereof and Xiana undertakes no obligations to update publicly or revise any forward looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

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