BACANORA MINERALS LTD.

TSX VENTURE : BCN.P


February 04, 2010 14:38 ET

Bacanora Announces Details of Qualifying Transaction and Concurrent Financing

CALGARY, ALBERTA--(Marketwire - Feb. 4, 2010) - BACANORA MINERALS LTD. (the "Corporation" or "Bacanora") (TSX VENTURE:BCN.P), a capital pool company, is pleased to provide further details concerning its previously announced binding letter agreement dated July 17, 2009, which has been amended by an amending agreement dated January 18, 2010 (collectively, the "Agreement"). The Agreement contemplates the acquisition by Bacanora of all of the outstanding shares of Mineramex Limited ("Mineramex"), together with outstanding loans owing by MIT (as defined below) to Tubutama Borax PLC ("Tubutama Borax") and a director thereof, for an aggregate purchase price of Cdn.$5,250,000, consisting of: (a) a cash payment in the amount of Cdn.$250,000; and (b) the issuance of an aggregate of 21,739,130 common shares in the capital of Bacanora (each, a "Bacanora Share") at an ascribed price of Cdn$0.23 per share. Mineramex is a BVI company whose sole assets consist of 99.9% of the issued and outstanding shares of Minera Sonora Borax, S.A. de C.V. ("MSB") and 60% of the issued and outstanding shares of Minerales Industriales Tubutama, S.A. de C.V. ("MIT"). MSB and MIT are two Mexican corporations that hold certain exploration and development stage borate and other mining claims in the Magdalena and Tubutama regions in the northern Sonora State of Mexico. All of the issued and outstanding shares of Mineramex are held by Tubutama Limited (a U.K. company) ("Tubutama"), which is, in turn, 100% owned by Tubutama Borax (a U.K. company). Upon closing, Bacanora (either directly, or through MSB and MIT) will also grant or reserve a 3% royalty to Tubutama, or as Tubutama may otherwise direct, in respect of all minerals that are produced from the lands held by MSB and MIT. At such time, Bacanora will be considered a "mining issuer" under the policies of the TSX Venture Exchange (the "Exchange").

The Agreement calls for the completion of a private placement of a minimum of 6,000,000 Bacanora Shares at a price of Cdn.$0.25 per share, for minimum aggregate gross proceeds of $1,500,000 (the "Financing"). Bacanora has received irrevocable subscriptions for an aggregate of 8,045,110 Bacanora Shares under the Financing, for aggregate gross proceeds of $2,011,278. Such subscriptions are being held pending receipt of conditional approval by the Exchange in respect of the proposed Qualifying Transaction. The Financing is expected to close concurrently with the closing of the proposed Qualifying Transaction. No fees or commissions have been paid or are payable in connection with the Financing. The proceeds from the Financing will be used for the purposes of Phase I of the recommended work program that is described below.

Having regard to the foregoing share issuances, upon closing of the proposed Qualifying Transaction, Bacanora will issue to Tubutama (being the sole holder of Mineramex shares) an aggregate of 21,739,130 Bacanora Shares and will issue a further 8,045,110 Bacanora Shares in connection with the closing of the Financing. As there are currently a total of 4,785,500 Bacanora Shares, 400,000 options to acquire Bacanora Shares (each, a "Bacanora Option") and 154,840 agent's options to acquire Bacanora Shares ("Agent's Options") issued and outstanding, upon closing of the proposed Qualifying Transaction and giving effect to the above mentioned issuances of Bacanora Shares, it is expected that there will be 34,569,740 Bacanora Shares, 400,000 Bacanora Options and 154,840 Agent's Options issued and outstanding.

Bacanora has previously advanced $25,000 to preserve the assets of Mineramex. Up to $100,000 in additional funds may be advanced by Bacanora to Mineramex as a refundable deposit upon receipt of acceptance by the Exchange. Bacanora has submitted a request for such approval to the Exchange.

The Corporation has received a final technical report prepared in accordance with National Instrument 43- 101 – Standards of Disclosure for Mineral Projects ("NI 43-101"), entitled, Independent Technical Report 43-101, Magdalena-Tubutama Exploration Concessions, Northern Sonora State, Mexico, Latitude: North 30º30', Longitude: West 110º45', Report Prepared in Compliance with National Instrument 43-101 for Bacanora Minerals Ltd. and dated September 18, 2009 (the "Technical Report"). The Technical Report was prepared by MineTech International Limited of Halifax, Nova Scotia ("MineTech"). The author of the report is Doris Fox, M.Sc., P.Geo., who is a "qualified person" within the meaning of NI 43-101 and is independent of the Corporation.

The Corporation has also received a final valuation report entitled Technical Valuation Report, Magdalena Basin Borate Project, Magdalena, Sonora State, United States of Mexico, Latitude: North 30º30', Longitude: West 110º45', prepared for the Corporation by MineTech (the "Valuation"). The author of the Valuation is Patrick J. Hannon, M.A.Sc., P.Eng., who is a "qualified person" within the meaning of NI 43-101 and is independent of the Corporation

Both the Technical Report and the Valuation will be filed on SEDAR under the Corporation's profile at www.sedar.com and a detailed news release relating to the Technical Report will be issued prior to February 15, 2010. Copies of the foregoing documents will also be made available to shareholders upon request.

MGI Securities Inc. (the "Sponsor"), 26 Wellington Street East, Suite 900, Toronto, Ontario M5E 1S2, has agreed to act as sponsor in connection with the proposed Qualifying Transaction. The sponsorship agreement dated August 31, 2009 provides for the Sponsor to be paid a sponsorship fee of $35,000, plus expenses. An agreement to sponsor should not be construed as any assurance with respect to the merits of the transaction or the likelihood of completion.

The proposed Qualifying Transaction is not a "non-arm's length qualifying transaction" within the meaning of Policy 2.4 of the Exchange and, as such, shareholder approval is not required, unless otherwise required by the Exchange.

A filing statement in respect of the proposed Qualifying Transaction will be prepared and filed in accordance with Policy 2.4 of the Exchange on SEDAR at www.sedar.com no less than 7 business days prior to the closing of the proposed Qualifying Transaction. A press release will be issued once the filing statement has been filed as required pursuant to Exchange policies.

Completion of the Qualifying Transaction is subject to a number of conditions, including, but not limited to: the satisfaction of the minimum listing requirements of the Exchange; Exchange approval of the Qualifying Transaction; completion of the Financing; a satisfactory due diligence review by Bacanora; receipt of a report completed in accordance with NI 43-101; receipt of a satisfactory valuation; completion or waiver of sponsorship;and the approval of the board of directors of Bacanora. As noted above, a number of these conditions have been satisfied.

Mineramex Limited

Mineramex is a private company that was incorporated under the laws of the Territory of the British Virgin Islands on December 1, 2005. The head office and registered office of Mineramex is located at the offices of Trident Trust Company (B.V.I.) Limited, Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands. The sole assets of Mineramex consist of 99.9% of the issued and outstanding shares of MSB and 60% of the issued and outstanding shares of MIT. All of the outstanding shrares of Mineramex are held by Tubutama Limited. Tubutama Limited is, in turn, 100% owned by Tubutama Borax PLC. There are no other shares, options, warrants, anti-dilution or other rights to purchase shares of Mineramex issued or outstanding. The following diagram illustrates these relationships.

To view this diagram, please click the following link: http://media3.marketwire.com/docs/204bcn1.pdf

It is anticipated that upon closing of the Qualifying Transaction, Bacanora will hold 100% of the issued and outstanding shares of Mineramex, which will be a wholly-owned subsidiary of the Corporation. MSB will continue to be a 99.9% owned subsidiary of Mineramex and MIT will continue to be a 60% owned subsidiary of Mineramex. The following diagram illustrates these relationships.

To view this diagram, please click the following link: http://media3.marketwire.com/docs/204bcn2.pdf

Mineramex was formed for the purpose of acquiring an interest in certain properties in the Tubutama region (the "Tubutama Properties") and the Magdalena regions (the "Magdalena Properties") (the foregoing are collectively referred to as the "Properties") of the Sonora State of Mexico, interests in which had been previously acquired by MIT and MSB, respectively. The Magdalena and Tubutama Properties consist of 13 individual concessions, totalling 16,503 and 1,661 hectares respectively, in Sonora State, Mexico. All of the foregoing concessions are 100% owned by MSM and MIT, respectively. The Magdalena Properties are also subject to a 3% gross overriding royalty on revenues deriving from raw and processed borate products. The Properties are located roughly 300 km north of the city of Hermosillo, and about 80 km south of the international border with Arizona, USA. The two basins are separated by a narrow, low range and the Properties are approximately 100 km apart. Pursuant to the Technical Report, additional work on the concessions is recommended to delineate an economic

borate deposit. Concessions on the Magdalena Properties are considered high priority targets, while the concessions on the Tubutama Properties are of secondary interest. Recommended work includes:

  • Phase I: $760,000 is recommended for drilling, to better define known mineralized lenses and for 3-D modeling to assist in the drill program and allow for better conceptualization of the lenses for possible future definition drilling.
  • Phase II: approximately $1 million is recommended for follow-up drilling, metallurgical and feasibility studies and an assessment of the gold, silver and gypsum potential on the concessions. Metallurgical work recommended includes bench scale and pilot scale studies.

Under the Valuation, the authors thereof have followed the "Cost Approach" in valuing the Properties, as the Properties do not have mineral reserves or a Feasibility Study, and there are no comparable market transactions known to the author. The Valuation contemplates that the value of exploration work completed on the Properties for the period 2002 – 2009 amounts to $3,709,000 for the Magdalena Properties and $1,431,000 for 2005 – 2009 work on the Tubutama Properties, for a total of $5,140,000. Drilling makes up 44% of the cost, geology, geochemical and geophysical surveys make up 24%, surveying, geodetic and photogrammetric surveys 7%, vehicles, maintenance and transportation 14% and the remaining 7% storage, camp and field office upkeep. The Valuation concludes that only 70% of the holes drilled increased the value of the Properties, 30% of the holes drilled did not add value to the Properties, thus the value of the Properties as of the valuation date of September 18, 2009, in Canadian dollars, is estimated to be $3.6 million, plus or minus 20%, giving a range of value between $2.9 million and $4.3 million.

It is expected that subsequent to the closing of the Qualifying Transaction, all of the Bacanora Shares that are issued as partial consideration to Tubutama will be distributed by way of dividend or such other means as determined by Tubutama and Tubutama Borax, in their discretion, to the holders of common shares in the capital of Tubutama Borax (each, a "Tubutama Borax Share"). As there are currently 111,644,989 Tubutama Borax Shares issued and outstanding, it is expected that holders of such shares will receive one (1) Bacanora Share for every 5.1357 Tubutama Borax Shares. The principal holder of Tubutama Borax Shares is Mr. Colin Orr-Ewing of London, England. It expected that upon completion of the Qualifying Transaction (and after giving effect to the aforementioned distribution by Tubutama and Tubutama Borax of all Bacanora Shares), Mr. Orr-Ewing will hold or exert control or direction over an aggregate of 14,680,109 Bacanora Shares, being 42.47% of the issued and outstanding Bacanora Shares (non-diluted).

Proposed Management and Insiders

Bacanora's current management will continue as officers and directors of the Corporation upon completion of the Qualifying Transaction. Accordingly, the directors of the Corporation upon closing of the Qualifying Transaction will be Paul Conroy, Derek Batorowski, Raymond Hodgkinson and George Jones. Mr. Conroy will continue to serve as President and Chief Executive Officer and Mr. Batorowski will continue to serve as Chief Financial Officer and Corporate Secretary. In addition, Mr. Colin Orr- Ewing, the principal shareholder of Tubutama Borax, will also be considered an "Insider" of the Corporation upon completion of the Qualifying Transaction by virtue of his shareholdings exceeding 10% of the issued and outstanding Bacanora Shares upon closing. The following are brief descriptions of the current directors and officers and Insiders that will, collectively, bear management responsibility for the Corporation upon completion of the Qualifying Transaction:

Paul Conroy – President, Chief Executive Officer and a Director. Mr. Conroy is the founder, President, Chief Executive Officer and a Director of Bacanora. It is anticipated that he will continue as President, Chief Executive Officer and a Director of the Corporation upon completion of the Qualifying Transaction. He also serves as President, Chief Executive Officer and a Director of Westcore Energy Ltd. (TSXV) and of Lakota Resources Inc., both of which are public mining companies. He also serves as a director of Troy Energy Corp. (NEX). Over the past 40 years he has been involved in numerous resource companies holding the positions of principal, officer and director. Mr. Conroy matriculated from Presentation College in Dublin, Ireland in 1959.

Derek Batorowski – Chief Financial Officer, Corporate Secretary and a Director. Mr. Batorowski currently serves as Chief Financial Officer, Corporate Secretary and a Director of Bacanora. It is anticipated that he will continue as Chief Financial Officer, Corporate Secretary and a Director of the Corporation upon completion of the Qualifying Transaction. Mr. Batorowski currently serves as the Chief Financial Officer and a director of Westcore Energy Ltd. (TSXV), a public mining company, and was previously employed as the Chief Financial Officer of Regal Energy Ltd. (TSXV). Since 1993, he has been an independent consultant to the oil and gas industry, having held various financial positions with junior private and public companies. Mr. Batorowski received his Business Administration Diploma from Mount Royal College in Calgary, Alberta in 1989. He has been a member of the Certified General Accountants Association of Alberta since June 21, 2000.

Raymond Hodgkinson – Director. Mr. Hodgkinson is a Director of Bacanora. It is anticipated that he will serve as a Director of the Corporation upon completion of the Qualifying Transaction. He currently acts as an engineering consultant to Ripper Oil & Gas Inc. He has also served as the Chief Operating Officer and Vice-President, Engineering of Aztek Energy Ltd. (TSXV, then NEX) since October 2005 and currently serves as a director of Westcore Energy Ltd. (TSXV), a public mining company and as a director of Troy Energy Corp. (NEX). Mr. Hodgkinson received his Bachelor of Science in Engineering from the University of Calgary in 1977. He has been a member of the Alberta Association of Professional Engineers, Geologists and Geophysicists of Alberta.

George Jones – Director. Mr. Jones is a Director of Bacanora. It is anticipated that he will serve as a Director of the Corporation upon completion of the Qualifying Transaction. He has practiced law since 1959, formerly as a prosecutor for what was then Revenue Canada, and since 1964 in private practice, where his preferred area of practice is taxation litigation. He is the senior partner of the law firm, Jones Emery Hargreaves Swan, Barristers & Solicitors, operating out of Victoria, British Columbia. Mr. Jones has been extensively involved in community sports and charitable institutions and has served as a director of several public companies and registered societies, both charitable and not-for-profit. He currently also serves as a director of Westcore Energy Ltd. (TSXV), a public mining company, and as a director of Troy Energy Corp. (NEX). He previously served as a director of Paramax Resources Ltd. (TSXV).

Colin Orr-Ewing. Mr Orr-Ewing began his career as an investment manager for the Shell Pension Fund in London after qualifying as a Certified Accountant. He has a wealth of over 35 years experience spanning both the oil and mining industries and has been a director of UK and Canadian oil companies and Irish and Canadian mining companies. Mr Orr-Ewing also currently acts as an adviser to a fund management company on its natural resources portfolios. He was actively involved in the oil industry from 1971 through to 1987 working with numerous companies in the North Sea, Libya, Nigeria and Algeria. Mr. Orr-Ewing is a geography graduate of Oxford University.

Other Information

Completion of the Qualifying Transaction is subject to a number of conditions including, but not limited to, the satisfaction of the minimum listing requirements of the Exchange and Exchange approval of the Qualifying Transaction. There can be no assurance that the transaction will be completed as proposed, or at all. The Qualifying Transaction will be an arms' length transaction.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the 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 corporation should be considered highly speculative.

Except for statements of historical fact relating to the Corporation, the information contained herein constitutes forward-looking statements. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Except as required by applicable securities requirements, the Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

Neither 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 the release.

Contact Information

  • Bacanora Minerals Ltd.
    Paul Conroy
    President and Chief Executive Officer
    (403) 697-4005
    (403) 263-0271 (FAX)