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First Cobalt Notes Former eCobalt Executives'' Opposition to Value-Destroying Jervois Transaction

ID: 1550842
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(PresseBox) - First Cobalt Corp. (TSX-V: FCC, OTCQX: FTSSF) (?First Cobalt? -https://www.commodity-tv.net/c/search_adv/?v=298892 ) notes that former key executive and directors of eCobalt Solutions Inc. (TSX:ECS) (?eCobalt?) have disseminated the following press release opposing the proposed merger with Jervois Mining Limited (ASX:JRV) (?Jervois?).

The Company did not participate in the preparation of the letter but believes it to be of interest to all eCobalt shareholders and we have therefore reproduced it in its entirety:


Dear Shareholders,

We have profound concerns regarding the proposed nearly ?at-market? merger between eCobalt and Jervois and the disclosure found in eCobalt?s Management Information Circular dated June 19, 2019 (the ?Circular?).& CEO and a former Vice President of eCobalt, we are writing this open letter to communicate how we intend to vote in regard to the Arrangement resolution at eCobalt?s upcoming shareholders meeting on July 19, 2019 and the reasons for this decision.

It appears to us that the Jervois team has demonstrated they are shrewd negotiators as they have secured the ?YES? votes from all of eCobalt?s Directors and Officers, as well as from one of eCobalt?s largest shareholders, Dundee Corporation.l where: Jervois did not have to face alternate bidders in an auction process in regard to eCobalt; only a symbolic nominal premium is theoretically to be paid to eCobalt?s shareholders utilizing recently depreciating shares of Jervois in order to acquire control of eCobalt and its prized Idaho Cobalt Project; no specific significant alternative transactions were disclosed as being considered and developed by eCobalt; disclosure available to eCobalt?s shareholders in the Circular is brief and opaque (while paradoxically being encased in a 382-page document); and the definitive deal terms found in the Arrangement Agreement provide for only a theoretical (rather than practical) potential that a ?superior proposal? could arise due to the existence of major cash penalties - basically a hefty ?break fee? in the millions of dollars, to be effectively borne by the shareholders of eCobalt in terd for Jervois, bad for eCobalt.



During the weeks after eCobalt announced the proposed Arrangement (April 1, 2019), we were contacted by Robert Quinn (another eCobalt alumnus, who was a member of eCobalt?s board for approximately 18 years and is its former Chairman) and Jim Engdahl (another eCobalt alumnus, who was a member of eCobalt?s board for approximately 24 years).

Some details about some of our concerns include:

Not the Prettiest Dance Partner: Jervois is an Australian company with a history of little cash and three early-stage mineral property assets.development and may take multi billions of dollars in research, development and capital expenditures to reach their full potential production.

Ethically Sourced and US-Based Idaho Cobalt Project: eCobalt?s US-based, advanced, near-term, permitted, Idaho Cobalt Project is considered an ethical source of this critical metal.his may create potential future liabilities or financing challenges for New Jervois and its shareholders.

Destination = a Junior Stock Exchange: Jervois is utilizing the proposed transaction with eCobalt to gain direct entry to the North American capital markets through its listing on the TSX Venture Exchange (?TSXV?).eeting held on June 21, 2013.

Wow - How Many Shares?: Should this proposed merger and Jervois? recently announced conditional private placement financing be completed (see #5 below), then we estimate that New Jervois will have approximately 640,000,000 shares outstanding.cted to issue more shares and raise more equity financing if it does not merge with Jervois, at least all of the funds raised by eCobalt would be utilized for the Idaho Cobalt Project; whereas, far less than a third of Jervois? current conditional equity financing may be used for advancement of the

Even More Shares: Since the date of the announcement of the proposed transaction by eCobalt and Jervois (April 1, 2019), and since the date of eCobalt?s Circular (June 19, 2019), Jervois has undertaken a private placement whereby Jervois has accepted irrevocable subscriptions for the conditional issuance of 82,500,000 ordinary shares at a price of A$0.20 per share.ly approximately 41% of New Jervois as opposed to the pro forma 47% that is described in eCobalt?s Circular.

Process, Process, Process (Part 1): It is concerning to us that no alternative transactions or deliberate process to both foster and optimize an outcome are specifically described in the ?Background to the eCobalt Arrangement? section of eCobalt?s Circular. While we expect that the names of any specific parties would remain undisclosed due to confidentiality agreements, we would have expected eCobalt to have fostered and procured at least one or more feasible alternative transactions or alternative parties to negotiate with when considering the sale or merger of the entire company.s and optimize the outcome for eCobalt.would not have been expected to pay more (or would have been able to pay with superior consideration ? being cash or non-speculative shares); or (iii) that an alternative transaction (or even sticking with the status quo) would not have been a superior decision in terms of maximizing shareholder val

Process, Process, Process (Part 2): Our concerns regarding #6 above are heightened because the ?Background to the eCobalt Arrangement? section of eCobalt?s Circular leads us to believe that eCobalt?s CEO, Michael Callahan, principally negotiated the deal with Jervois on behalf of eCobalt. We are concerned about how the CEO?s conflicting interests were managed in that: (a) Mr. Callahan?s personal financial interests are not well aligned with eCobalt?s shareholders? interests (Mr. Callahan only owns 100,000 common shares of eCobalt); (b) he was negotiating with Jervois regarding a change of control share exchange arrangement effectively on behalf of eCobalt?s shareholders; while (c) at the same time expecting he would soon be terminated from eCobalt and would become a director of Jervois.or US$570,000) in the event of change of control. The change of control obligation was subsequently amended to 2 years of base salary ($1,036,792 or US$760,000) on March 14, 2019 and was retroactively effective on October 1, 2018.? It appears the revised LOI included a gratuitous increase in the CEO

On March 14, 2019, eCobalt and Jervois executed and formally entered into the revised LOI.role in the substantive negotiations (as would be evidenced by any substantive changes to the proposed deal after the Special Committee was created): or (ii) conducted a robust review of the circumstances leading to the transaction, the alternatives to the transaction that were available in the circumstances (including the status quo), and the transaction itself.clearly free from any undue influence, whether express or even implied.

Process, Process, Process (Part 3): After recognizing our concerns as described in #6 and #7 above, we were hoping to be comforted by the Fairness Opinion that was provided to eCobalt by its financial advisor. According to page 53 of the Circular, the eCobalt Board requested its financial advisor to assess the fairness, from a financial point of view, of the consideration to be received by eCobalt Shareholders pursuant to the Arrangement.t fee and was therefore entirely disinterested in the outcome of the proposed transaction.

Also, there are a couple of other concerns related to the Fairness Opinion.ccurred and therefore this fact influences a person?s ability to rely upon the conclusion arrived at in the Fairness Opinion.fectively there?s no operative fairness opinion at this time in support of the proposed Arrangement (or even when the decision was made to enter into the Arrangement Agreement, along with its break-fee terms and significant transaction costs) then what were and are eCobalt?s directors relying upon t

The Adequacy of eCobalt?s Disclosure: Given our concerns in #1 through #8 above, we were hoping to find sufficient disclosure in eCobalt?s 382-page Circular to allow us to make an informed decision about the merits of the proposed Arrangement and how we should vote.

Alternative Transactions: The Circular does not address any specific alternative transactions that were considered by eCobalt.Committee in regard to the search for and the analysis of alternative transactions (including maintaining the status quo) and the pros and cons of each alternative (including the Arrangement).

Financial Analyses: Either the information was not considered, or eCobalt chose not to disclose the financial analysis information that the Special Committee or eCobalt?s Board of Directors reviewed when determining the reasonableness of the proposed Arrangement (as compared to the alternatives) and when it made the decision to enter into the Arrangement Agreement and recommend it to shareholders.&A transactions were considered as precedent or comparable transactions?he specific valuations, appraisal work or financial analyses that were performed or relied upon by anyone in support of eCobalt?s decision or its Board of Directors determination to recommend the transaction to shareholders.

Very Little Emerging Market Issuer Risk Disclosure: eCobalt?s operations and business experiences have traditionally been in the United States and Canada.f the investment risk we would face as shareholders of New Jervois and how the company is handling such circumstances.

No Detailed Disclosure About the Minority Shareholder Protections Lost as a Result of the Migration from the TSX to the TSXV: Although the Circular does in Schedule ?J? contain some disclosure comparing the rights of eCobalt shareholders as compared to Jervois shareholders pursuant to corporate law and otherwise, we would have liked to have been provided with more information about the minority shareholder protections, governance requirement differences and continuous disclosure differences that will result from exchanging shares of eCobalt (a TSX-listed issuer) with Jervois (an ASX and TSXV listed issuer).

Disclosure Regarding Fees to Financial Advisors: Page 100 of the Circular states that eCobalt will incur C$1,632,000 in fees payable to its financial advisors.ction, run a structured process to ensure that an optimal transaction and price was proposed, and provide detailed analyses regarding the proposed transaction and the alternatives thereto.

Conflicts of Interest Disclosure: Page 78 of the Circular states that ?Certain officers and directors of eCobalt may have interests in the eCobalt Arrangement that may be different from, or in addition to, the interests of eCobalt Shareholders generally.?

We observe that Mr. Callahan joined eCobalt on October 1, 2018 when there was more than C$18.3 million in cash in eCobalt?s treasury.2 million reduction in cash over 6 months in a depressed metals market is a questionable burn rate.

We understand that the current cobalt markets are depressed, but we also understand as loyal eCobalt shareholders, the value of the Idaho Cobalt Project.

Sincerely,

Paul Farquharson Rick Honsinger?

What You Can Do

We urge shareholders to VOTE AGAINST the plan of arrangement and all related proposals to be voted upon at the Special Meeting. The proposed transaction requires the support of 662/3% of total votes cast at the eCobalt Special Meeting and the deadline to vote is July 17, 2019 at 10:00 am Pacific time.

EVEN IF YOU HAVE ALREADY VOTED ON THE PROXY CARD SENT TO YOU BY eCOBALT, YOU CAN STILL CHANGE YOUR VOTE BY SIMPLY RECASTING YOUR VOTE. ONLY YOUR LATEST DATED PROXY CARD WILL COUNT.

If you have any questions, or need help voting, contact Gryphon Advisors Inc. at: 1-833-335-6118 or 1-416-661-6592 or email inquiries(at)gryphonadvisors.ca. There is a team standing by to assist you.

About First Cobalt

First Cobalt is a North American cobalt company and owner of the only permitted primary cobalt refinery in North America. The Company is exploring a restart of the First Cobalt Refinery in Ontario, Canada, which could produce over 5,000 tonnes of contained cobalt in sulfate per year from third party feed. First Cobalt?s main cobalt project is the Iron Creek Cobalt Project in Idaho, USA, which has an inferred mineral resource estimate available on the Company?s website. The Company also controls a significant land package in the Canadian Cobalt Camp, spanning over 100 km2 which contains more than 50 past producing mines.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Information in Support of Public Broadcast Solicitation

First Cobalt is relying on the exemption under section 9.2(4) of National Instrument 51-102 ? Continuous Disclosure Obligations (?NI 51-102?) to make this public broadcast solicitation. The following information is provided in accordance with securities laws applicable to public broadcast solicitations.

This press release and any solicitation made by First Cobalt in advance of the Special Meeting is, or will be, as applicable, made by First Cobalt and not by or on behalf of the management of eCobalt.

First Cobalt has filed a copy of this press release containing the information required in section 9.2(4) of NI 51-102 on eCobalt?s company profile on SEDAR at www.sedar.com. All costs incurred for any solicitation will be borne by First Cobalt, provided that, subject to applicable law, First Cobalt may seek reimbursement from eCobalt of First Cobalt?s out-of-pocket expenses, including proxy solicitation expenses and legal fees, incurred in connection with the Special Meeting. The anticipated cost of First Cobalt?s solicitation is estimated to be C$30,000 plus disbursements and customary fees.

First Cobalt has retained Gryphon Advisors Inc. (?Gryphon?) as its proxy solicitor. Gryphon?s responsibilities will principally include providing strategic advice and advising First Cobalt with respect to any solicitations made by or on behalf of First Cobalt in relation to the Special Meeting. Any proxies solicited by or on behalf of First Cobalt, including by Gryphon, may be solicited by way of public broadcast, including through press releases, speeches or publications and by any other manner permitted under applicable laws. A proxy may be revoked by instrument in writing executed by a shareholder or by their attorney authorized in writing or, if the shareholder is a body corporate, by an officer or attorney thereof duly authorized or by any other manner permitted by law.

First Cobalt is not currently proposing any transaction with or involving eCobalt. However, First Cobalt has in the past proposed, and may in the future propose, a transaction with or involving eCobalt.

The head office of eCobalt is 1810-999 West Hastings Street, Vancouver, British Columbia, Canada.

Important Disclosure Information

This press release contains our current views on the value of securities of eCobalt and Jervois. Our views are based on our own analysis of publicly available information and assumptions we believe to be reasonable. There can be no assurance that the information we considered and analyzed is accurate or complete. The actual performance and results of eCobalt and Jervois may differ materially from our assumptions and analysis. Our views and our holdings could change at any time. We may sell any or all of our position or increase our exposure by purchasing additional securities. We may take any of these or other actions regarding eCobalt and Jervois without updating this letter or providing any notice whatsoever of any such changes (except as otherwise required by applicable law). The information contained above is not and should not be construed as investment advice and does not purport to be and does not express any opinion as to the price at which the securities of eCobalt and Jervois may trade at any time. Investors should make their own decisions regarding eCobalt and Jervois and their prospects based on such investors? own review of publicly available information. Neither First Cobalt nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained above.

Cautionary Note Regarding Forward-Looking Statements

This letter and news release may contain forward-looking statements and forward-looking information (together, ?forward-looking statements?) within the meaning of applicable securities laws. All statements, other than statements of historical facts, are forward-looking statements. Generally, forward-looking statements can be identified by the use of terminology such as ?plans?, ?expects?, ?estimates?, ?intends?, ?anticipates?, ?believes? or variations of such words, or statements that certain actions, events or results ?may?, ?could?, ?would?, or ?might? ?occur? or ?be achieved?. In this press release, forward-looking statements include, but are not limited to, statements concerning the benefits to First Cobalt of merging or otherwise engaging in a business transaction with eCobalt. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results, performance and opportunities to differ materially from those implied by such forward-looking statements. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in the management discussion and analysis and other disclosures of risk factors for First Cobalt, filed on SEDAR at www.sedar.com. Although First Cobalt believes that the information and assumptions used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed times frames or at all. Except where required by applicable law, First Cobalt disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.



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Date: 07/19/2019 - 07:41
Language: English
News-ID 1550842
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