NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN THE
UNITED STATES OF AMERICA
Sandspring Resources Ltd. (the "Corporation") (TSX VENTURE:SSP.P) announces that
further to its press releases dated June 27, 2008 and September 3, 2008, the
Corporation, GoldHeart Investment Holdings Ltd. ("GoldHeart"), the shareholders
of GoldHeart (the "GoldHeart Shareholders") and certain creditors of GoldHeart
(the "Lenders") entered into a formal acquisition agreement on May 11, 2009 (the
"Acquisition Agreement ") relating to the acquisition by the Corporation (the
"Acquisition") of 100% of the issued and outstanding shares of GoldHeart (the
"GoldHeart Shares") and certain corollary transactions. The Acquisition is an
arm's length transaction and upon completion thereof, it is expected that the
Corporation will be a Tier 2 Mining Issuer on the TSX Venture Exchange (the
"Exchange").
GoldHeart and its wholly-owned subsidiary, ETK, Inc. ("ETK"), are private
companies existing under the laws of the British Virgin Islands and the Republic
of Guyana, respectively. GoldHeart was incorporated on October 15, 2008 and its
sole asset is its share ownership position in ETK. The GoldHeart Shareholders
are Crescent Global Gold Ltd. ("CGG") and Mercedario Limited
("Mercedario"), both of which are private companies existing under the laws of
the British Virgin Islands. The principals of CGG include P. Greg Barnes, John
R. Adams, Gregory K. Graham and Richard A. Munson, businessmen residing in
Colorado, U.S.A and the principals of Mercedario are Alfro Alphonso, a Guyanese
businessman and the wife of Alfro Alphonso. ETK controls a mineral prospect
located in the Republic of Guyana, South America (the "Toroparu Gold-Copper
Prospect"), as more specifically discussed in the Corporation's press release
dated June 27, 2008. Subject to Exchange approval, the Corporation intends to
disseminate a press release in respect of the Toroparu Gold-Copper Prospect, as
soon as practicable.
Highlights of the Acquisition
The Corporation is a Capital Pool Company (a "CPC") as defined by the policies
of the Exchange, and intends for the Acquisition to constitute the "Qualifying
Transaction" of the Corporation (as such term is defined in the policies of the
Exchange). Upon completion of the Acquisition and other corollary transactions,
GoldHeart will be a wholly-owned subsidiary of the Corporation.
Pursuant to the Acquisition Agreement, the Corporation will issue to the
GoldHeart Shareholders, in exchange for the acquisition of 100% of the
outstanding GoldHeart Shares, an aggregate of 38,156,288 common shares ("Common
Shares") of the Corporation (the "Purchase Shares") at a deemed per-share price
of CDN$0.6552, representing a deemed aggregate acquisition price of
USD$20,000,000 (utilizing a CDN$/USD$ exchange rate agreed upon by the Lenders
and the Corporation, of CDN$1.25 equals USD$1.00) . In addition, pursuant to the
terms of the Acquisition Agreement, the Corporation will: (i) assume and pay the
Convertible Debt (as defined below) through the issuance of Common Shares and
Convertible Debt Units (as defined below); (ii) pay up to a maximum of
USD$850,000 in respect of the Revolving Debt (as defined below); and (iii) pay
up to a maximum of USD$150,000 in respect of reasonable costs and expenses
incurred by GoldHeart and ETK in connection with the Acquisition. The Purchase
Shares will be subject to the escrow requirements of the Exchange, if
applicable.
Upon completion of the Acquisition, the Corporation will hold all of the issued
and outstanding GoldHeart Shares and thereby control all of the outstanding
common shares of ETK, a company engaged in the business of exploring for, with
the ultimate goal of developing and producing, precious and base metals from its
Guyana, South America mineral prospect.
Assumption and Payment of Revolving Debt and Convertible Debt
Pursuant to the Acquisition Agreement and in conjunction with the closing of the
Qualifying Transaction, the Corporation will assume and pay convertible debt
(the "Convertible Debt") owing to the Lenders in the amount of USD$2,395,944
(principal amount and accrued interest to May 31, 2009). The Convertible Debt
will be paid through the issuance by the Corporation of 3,282,740 Common Shares
(the "Convertible Debt Shares") at a deemed per-share value of CDN$0.50 and
1,804,747 units of the Corporation (the "Convertible Debt Units") at a deemed
per-unit value of CDN$0.75. The Convertible Debt Units will be issued on and
subject to the same terms and conditions as the Units issued in the Private
Placement (as defined and outlined below). In the event the issuance price of
the Units is reduced prior to the closing of the Private Placement, the deemed
per-unit value of the Convertible Debt Units will be reduced by the
corresponding amount. If the Qualifying Transaction is not completed on or
before May 31, 2009, additional Convertible Debt Shares and Convertible Debt
Units will be issued to the Lenders in payment of the additional interest
accrued in respect of the Convertible Debt.
In addition, in conjunction with the closing of the Qualifying Transaction, the
Corporation will assume and pay up to a maximum of USD$850,000 in respect of a
revolving credit line (the "Revolving Debt") owed by ETK to Crescent Global
Resources Ltd. ("CGR") against receipt of a full release and forgiveness by CGR
of any and all amounts owing under the Revolving Debt that exceeds USD$850,000.
The Revolving Debt will be paid from the proceeds of the Private Placement.
Sponsorship of Qualifying Transaction
Sponsorship of a qualifying transaction of a CPC is required by the Exchange
unless an exemption from this requirement can be obtained in accordance with the
policies of the Exchange. Richardson Partners Financial Limited has agreed,
subject to completion of satisfactory due diligence, to act as sponsor in
connection with the Qualifying Transaction. An agreement to act as sponsor
should not be construed as any assurance with respect to the merits of the
transaction or the likelihood of completion.
Summary Financial Information
Financial statements as required by the Exchange, were not available at the time
of this press release. However, the Corporation will in due course make
available to the Exchange, all financial information as required by the Exchange
and will provide, in a press release to be disseminated at a later date, summary
financial information derived from such statements.
Conditions of the Acquisition
Pursuant to the Acquisition Agreement, the closing of the Acquisition is subject
to certain conditions, including, but not limited to: (i) conditional approval
of the Exchange and satisfaction of all Exchange conditions of approval,
including delivery of a satisfactory title opinion in respect of the Toroparu
Gold-Copper Prospect; (ii) completion of the Private Placement; (iii) assumption
and payment by the Corporation of the Revolving Debt and the Convertible Debt;
and (iv) satisfaction or waiver of the closing conditions of the parties to the
Acquisition Agreement.
Board of Directors and Management of the Resulting Issuer
It is anticipated that concurrent with the closing of the Acquisition, Mark C.
Maier will resign as President, Chief Executive Officer and Chief Financial
Officer of the Corporation and Charles G. Gryba will resign as a director of the
Corporation but will be appointed as Vice President Technical. In addition, the
following directors and officers will be appointed: John R. Adams, director;
Abraham P. Drost, President; Richard A. Munson, Chief Executive Officer,
Corporate Secretary and director and Jeffrey L. Vigil, Chief Financial Officer.
Brief biographies of the above-noted individuals who are anticipated to be
appointed as directors and/ or officers of the Corporation in connection with
the closing of the Acquisition, are set out below.
John R. Adams - Proposed Lead Director - Age 63
John Adams resides in Steamboat Springs, Colorado. In 1982, Mr. Adams took over
control of the privately held Energy Fuels group of companies ("Energy Fuels").
The uranium businesses of Energy Fuels were sold in 1993 and subsequent to the
sale, Mr. Adams continued to be active in the coal mining business and other
mineral, real estate and banking businesses. Mr. Adams was a co-founder of ETK
and as President and Director of ETK, has directed all Guyana operations of ETK
since its formation. Mr. Adams remains the Chairman, President and a director of
Energy Fuels and of other international companies.
Abraham P. Drost - Proposed President - Age 50
Abraham Drost, of Thunder Bay Ontario, is currently the President and Chief
Executive Officer of Skybridge Development Corp. (TSX VENTURE:SBD), the
President, Chief Executive Officer and a director of Source Exploration Corp
(TSX VENTURE:SOP) and a director of Marksmen Capital Inc. (TSX VENTURE:MKS). In
addition, Mr. Drost served as President of Sabina Silver Corporation (TSX
VENTURE:SBB), from December 2004 to August 2007 and as a director of that
company, from September 2004 to June 2008.
Richard A. Munson - Proposed Chief Executive Officer, Corporate Secretary and
Director - Age 57
Richard Munson of Littleton, Colorado, has served as an officer and director of
various natural resource companies over the past 20 years. He has been involved
in numerous domestic and international natural resource acquisitions, joint
ventures, sales, environmental permitting and planning activities, mining
ventures and oil and gas operations and reclamation activities.
Mr. Munson has also been affiliated with the privately held Energy Fuels group
of companies since 1985, where he has focused on domestic and international
interests in the natural resource area. Mr. Munson also serves as an officer and
director of the various Energy Fuels entities and of other international
entities. Prior to joining Energy Fuels, Mr. Munson was a resident Partner in
the Denver, Colorado office of a Montana-based law firm. Mr. Munson obtained a
B.A. from Montana State University, his J.D. from the University of San Diego
School of Law and an L.L.M. (Taxation) from the University of Denver.
Jeffrey L. Vigil - Proposed Chief Financial Officer - Age 55
Jeffrey Vigil of Denver, Colorado, has served as a finance and accounting
consultant to GoldHeart since September 2008. From March 2007 to December 2008,
Mr. Vigil provided finance and accounting services, including interim CFO
assignments, to a number of companies in the Denver, Colorado area. From May
1996 to March 2007, Mr. Vigil was the Chief Financial Officer of Koala
Corporation (formerly OTCBB: KARE), a Denver based durable goods manufacturing
company. From 1980 to 1989 and from 1993 to 1996, Mr. Vigil held various
positions, including the position of Accounting Manager, Contract Administrator,
Controller and Vice President of Finance, at Energy Fuels Corporation, a
privately owned Colorado natural resources company. From 1990 to 1993, Mr. Vigil
was self-employed as a financial consultant and prior thereto (1976 to 1979),
was an auditor with Arthur Andersen LLP. Mr. Vigil holds a Certified Public
Accountant certificate (currently in inactive status) and received a B.A. degree
in Accounting from the University of Wyoming.
Brokered Private Placement of Subscription Receipts
Pursuant to an engagement letter (the "Engagement Letter") between the
Corporation and Research Capital Corporation (the "Agent"), the Corporation
intends to complete, on a best-efforts agency basis, a private placement (the
"Private Placement") of subscription receipts of the Corporation ("Subscription
Receipts"), subject to receipt of applicable regulatory approvals and compliance
with applicable laws. Conditional approval for the Private Placement was granted
by the Exchange on May 14, 2009. The Agent has the right to form a syndicate in
respect of the Private Placement (the "Syndicate") and has announced that
Richardson Partners Financial Limited will be a member of the Syndicate. The
Agent may add other members to the Syndicate at its discretion.
Pursuant to the Engagement Letter, 16,666,667 Subscription Receipts will be
offered at a price of CDN$0.75 per Subscription Receipt, for gross proceeds of
CDN$12,500,000. Each Subscription Receipt shall be deemed to be exercised at the
closing of the Qualifying Transaction, into one unit (a "Unit") of the
Corporation, with each Unit consisting of one (1) Common Share and one half
(1/2) of one (1) Common Share purchase warrant (a "Warrant"). Each one (1) whole
Warrant will entitle the holder thereof to purchase, at any time during the
twenty-four (24) month period commencing immediately after the closing of the
Qualifying Transaction (the "Warrant Expiry Period"), one (1) Common Share at a
price of CDN$1.25 per Common Share. Pursuant to the terms of the Private
Placement, commencing on the date that is four (4) months following the closing
of the Qualifying Transaction, the Corporation will have the right, upon giving
written notice to holders of Warrants ("Notice"), to accelerate the Warrant
Expiry Period to a period of thirty (30) days from the date of the Notice, where
the average closing price of a Common Share on the Exchange is greater than
CDN$2.00 for any consecutive twenty (20) day period (the "20 Day Period"). To be
valid, the Notice must be sent to holders of Warrants within five (5) trading
days of the 20 Day Period.
The gross proceeds of the Private Placement (the "Gross Proceeds"), less any
amounts paid to the Agent as commissions and expenses (the "Escrowed Funds"),
will be deposited into an interest-bearing escrow account, releasable to the
Corporation at the closing of the Qualifying Transaction and upon the
satisfaction or waiver of customary conditions of the Agent (the "Release
Conditions"). In the event the Release Conditions are not satisfied or waived by
the Agent within one hundred and twenty (120) days following the closing of the
Private Placement (the "Escrow Deadline"), the Escrowed Funds, together with the
interest accrued thereon, and the Agent's Commission (as defined below), will be
returned to subscribers; provided, however, that the Corporation shall have the
right to extend the Escrow Deadline by up to sixty (60) days upon receipt of
written consent of holders of Subscription Receipts that represent more than
fifty percent (50%) of the Units issuable upon exchange of the Subscription
Receipts. To the extent that the Escrowed Funds and accrued interest thereon,
plus the Agent's Commission (as defined below) is less than the Gross Proceeds,
subscribers will receive less than their full subscription amount and the
Corporation will not be liable to pay the difference.
The Engagement Letter provides that the Agent will receive a cash commission
(the "Agent's Commission") equal to eight percent (8%) of the aggregate Gross
Proceeds raised through the Private Placement and an option to purchase that
number of Units as is equal to ten percent (10%) of the number of Units issued
in exchange for Subscription Receipts sold in the Private Placement, such
options being exercisable for a period of twenty-four (24) months from the
closing of the Qualifying Transaction. Final terms and conditions of the agency
relationship between the Corporation and the Agent shall, in due course, be
negotiated by and agreed upon among the Corporation and the Agent.
The net proceeds of the Private Placement will be used by the Corporation to pay
costs associated with the closing of the Qualifying Transaction (including
payment of up to a maximum of USD$850,000 in respect of the Revolving Debt) and
costs associated with the Private Placement, to finance an initial work program
relating to Toroparu Gold-Copper Prospect and for general working capital
purposes of the Corporation.
History of the Corporation
The Corporation was incorporated on September 20, 2006 and completed its initial
public offering on May 15, 2007, pursuant to which it issued 2,000,000 Common
Shares at a per-share price of CDN$0.10, for aggregate gross proceeds of
CDN$200,000. The Common Shares began trading on the Exchange effective August
24, 2007, under the symbol "SSP.P" and were halted from trading immediately upon
the commencement thereof, in connection with the Qualifying Transaction. In
accordance with Exchange policy, the Corporation's shares are currently halted
from trading and will remain halted until such time as determined by the
Exchange, which, depending on the policies of the Exchange, may not occur until
the completion of the Qualifying Transaction.
The Corporation will provide further details in respect of the Qualifying
Transaction, in due course by way of press release.
Completion of the Qualifying Transaction is subject to a number of conditions,
including, but not limited to, Exchange acceptance, and if applicable pursuant
to Exchange requirements, majority of the minority shareholder approval,
satisfactory due diligence reviews, availability of prospectus and registration
exemptions or the obtaining of exemptive relief therefor and necessary
governmental and third-party approvals. Where applicable, the Qualifying
Transaction cannot close until the required shareholder approval is obtained.
There can be no assurance that the Qualifying Transaction will be completed as
proposed or at all. Investors are cautioned that, except as disclosed in the
filing statement to be prepared in connection with the Qualifying Transaction,
any information released or received with respect to the Qualifying Transaction
may not be accurate or complete and should not be relied upon. Trading in the
securities of a capital pool company should be considered highly speculative.
The Exchange has in no way passed upon the merits of the Qualifying Transaction
and neither the Exchange nor its Regulation Services Provider (as that term is
defined in the policies of the Exchange) accepts responsibility for the
adequacy, accuracy or content of this release.
Certain information contained in this press release may contain forward-looking
statements. This information is based on current expectations that are subject
to significant risks and uncertainties that are difficult to predict. Actual
results might differ materially from results suggested in any forward-looking
statements. The Corporation and the parties (the "Parties") to the Qualifying
Transaction assume no obligation to update any forward-looking statements or to
update the reasons why actual results could differ from those reflected in the
forward-looking statements unless and until required by securities laws
applicable to the Corporation and the Parties. Additional information
identifying risks and uncertainties is contained in filings of the Corporation
with Canadian securities regulators, which filings are available under the
Corporation's profile at www.sedar.com.
This press release does not constitute and the subject matter hereof is not, an
offer for sale or a solicitation of an offer to buy, in the United States or to
any "U.S Person" (as such term is defined in Regulation S under the U.S.
Securities Act of 1933, as amended (the "1933 Act")) of any equity or other
securities of the Corporation. The securities of the Corporation to be issued in
connection with the Private Placement have not been registered under the 1933
Act and may not be offered or sold in the United States (or to a U.S. Person)
absent registration under the 1933 Act or an applicable exemption from the
registration requirements of the 1933 Act.
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