Challenger Deep Capital Corp.
TSX VENTURE : CDE.P

Challenger Deep Capital Corp.

July 23, 2009 18:17 ET

Challenger Deep Capital Corp. Announces Acquisition of Redrock and Battle Mountain Projects as Proposed Qualifying Transaction and Concurrent Private Placement

CALGARY, ALBERTA--(Marketwire - July 23, 2009) -

NOT FOR DISTRIBUTION IN THE UNITED STATES OR THROUGH UNITED STATES WIRE SERVICES.

Challenger Deep Capital Corp. ("Challenger" or the "Corporation") (TSX VENTURE:CDE.P) is pleased to announce that it has entered into a binding letter agreement effective July 22, 2009 (the "LOI") with Ansell Capital Corp. ("Ansell") (TSX VENTURE:ACP), a Vancouver, British Columbia corporation, with respect to the proposed assignment and novation of Ansell's right, title, interest and obligations in, to and under two mining lease with option to purchase agreements relating to the Redrock and Battle Mountain gold projects, respectively, in Nevada, USA (the "Proposed Transaction"), subject to a back-in right retained by Ansell. The Proposed Transaction is intended to be the "Qualifying Transaction" of Challenger pursuant to Policy 2.4 of the TSX Venture Exchange (the "Exchange"). It is expected that the Corporation, after completion the Proposed Transaction (the "Resulting Issuer"), will qualify as a Tier 2 Mining Issuer pursuant to the requirements of the Exchange. The Proposed Transaction is an "arm's length" transaction as the directors and officers of Challenger currently have no interest in Ansell or the projects that are the subject of the Proposed Transaction, and will not require the approval of Challenger shareholders. Unless otherwise noted below, currency references contained in this press release are to Canadian Dollars ($).

THE REDROCK AND BATTLE MOUNTAIN PROJECTS

The Redrock Property

Ansell had previously secured a lease with an option to acquire a 100% interest in and to the Redrock property located in Lander County, Nevada from Arthur R. Leger ("Leger"), as Lessor (the "Redrock Lease"), which lease shall be assigned and novated to Challenger as part of the Proposed Transaction. The Redrock property consists of 269 unpatented lode mining claims covering approximately 2,177 hectares (5,380 acres) of federal land located 42 km south of Battle Mountain, Nevada.

The property lies within the Battle Mountain-Eureka mineral belt and within the greater Cortez mining district, which includes several major gold mines and deposits - Pipeline, Gold Acres, Cortez, Cortez Hills and Pediment. Specifically, the Redrock property is located approximately 23 km west of Barrick's Pipeline gold deposit, 45 km northeast of Barrick's Cortez Hill gold deposit, 19 km east of the Cove-McCoy past gold producer, and 24 km southeast of Newmont's Phoenix gold mine.

The aggregate consideration payable to the Lessor under the Redrock Lease consists of: (i) annually scheduled advance royalty payments in the aggregate amount of USD $2,000,000, payable over a 10 year period, of which USD $10,000 has previously been paid by Ansell, (ii) the annually scheduled issuance in separate tranches of an aggregate of 1,100,000 common shares to be issued over a 10 year period, and (iii) incurring an aggregate of USD $2,000,000 in qualifying expenditures on the property over 11 years in annually scheduled payments.

The Battle Mountain Property

Ansell had also previously secured a lease with an option to acquire a 100% interest in and to the Battle Mountain property located approximately 18 km north of Battle Mountain, Nevada from Leger, as Lessor (the "Battle Mountain Lease"), which lease shall be assigned and novated to Challenger as part of the Proposed Transaction. The Battle Mountain property consists of 36 unpatented lode mining claims covering approximately 145 hectares (360 acres).

The Battle Mountain property also lies within the Battle Mountain-Eureka mineral belt/fault zone, and specifically along the western edge of the Northern Nevada Rift. The Battle Mountain property is located approximately 48 km northwest of Newmont's Twin Creek gold mine, 47 km northwest of Barrick's Getchell gold mine, 37 km southeast of Newmont's Phoenix gold mine, and 5 km southeast of Newmont's Mule Canyon gold mine. Various gold/silver occurrences have been found along both the Battle Mountain-Eureka belt and within the Northern Nevada Rift zone.

The aggregate consideration payable to the Lessor under the Battle Mountain Lease consists of: (i) annually scheduled advance royalty payments in the aggregate amount of USD $1,500,000, payable over a 10 year period, of which USD $2,500 has previously been paid by Ansell, (ii) the annually scheduled issuance in separate tranches of an aggregate of 1,000,000 common shares to be issued over a 10 year period, of which 25,000 shares have previously been issued by Ansell, and (iii) incurring an aggregate of USD $1,900,000 in qualifying expenditures on the property over 11 years in annually scheduled payments.

Challenger has commissioned R.A. Lunceford, M.Sc., CPG, a "Qualified Person" (as such term is defined in National Instrument 43-101 ("NI 43-101")) to prepare a NI 43-101 compliant technical report on both the Redrock property and the Battle Mountain property (collectively, the "Technical Report"). Once the Technical Report has been completed, Challenger will issue a subsequent news release which will provide further information on the properties described above.

THE PROPOSED QUALIFYING TRANSACTION

Assignment and Novation of the Redrock Lease and the Battle Mountain Lease

Pursuant to the terms of the LOI, a copy of which has been filed on SEDAR and can be found under the Corporation's profile at www.sedar.com, Ansell has agreed to assign all of its right, title, interest and obligations in, to and under the Redrock Lease and the Battle Mountain Lease (collectively, the "Leases") to Challenger (or a US subsidiary of Challenger as the case may be) in consideration of: (i) a $25,000 refundable deposit paid by Challenger (the "Deposit"), which shall become non-refundable once the Exchange has confirmed that one or both of the properties is a property or properties of merit, (ii) Challenger's covenant to assume of Ansell's obligations under the Leases following the closing date of the Proposed Transaction, (iii) Challenger's covenant to reimburse Ansell for all assessment work, fees, state and federal taxes and any and all other levies made against the properties paid for or performed by Ansell from the effective date of the LOI to the date the assignment of the Leases is completed (the "Closing Date"), and (iv) Challenger incurring qualifying expenditures on the properties in a minimum amount of US$210,000 on or before April 18, 2011.

The parties have agreed to negotiate in good faith the terms and conditions of a definitive agreement (the "Definitive Agreement"), to validly effect the assignment of the leases, to be entered into on the Closing Date, which agreement shall contain terms and conditions customarily contained in such agreements for mining industry commercial transactions of similar size. In addition to the Deposit, non-refundable funds in the amount of approximately USD $12,000 to date have been advanced in connection with work required for the preparation of the Technical Report.

Future Ansell Back-In Option and Joint Venture

As further consideration to Ansell, the LOI also provides for the grant by Challenger to Ansell of a future back-in right (the "Back-In Option") to participate to the extent of a 25% participating interest in either or both of the properties, subject to certain terms and conditions, as more particularly set forth in the LOI. Upon exercise of Back-In Option, if exercised, Challenger and Ansell agree to associate themselves in a joint venture, as more particularly set forth in the LOI, for the purpose of: (i) acquiring any mineral interests and equipment not yet acquired, (ii) exploring for and developing ores, minerals and other products from the properties including opening, developing and operating mines on the properties, (iii) processing (including beneficiating, leaching, concentrating, smelting, refining or otherwise treating) ores, minerals or other products mined or produced from the properties, (iv) designing, engineering, constructing and operating production facilities to mine and remove ores, minerals or other products from the properties, and processing ores, minerals or other products mined or produced from the properties, (v) marketing, selling and delivering products derived from activities undertaken on the properties, (vi) performing any other operation or activity necessary, appropriate or incidental to any of the foregoing, and (vii) selling interests in all or part of the properties to third parties as may be approved unanimously by both parties.

Finder's Fee

In connection with the Proposed Transaction, subject to Exchange acceptance, Challenger has agreed to pay a finder's fee consisting of a cash payment of $30,000 to the party that introduced the Proposed Transaction to Challenger, which party is not a "Non Arm's Length Party" for purposes of applicable Exchange policy.

Application for Sponsorship Exemption and Trading Halt

Challenger intends to make an application to the Exchange for an exemption from sponsorship requirements in connection with the Proposed Transaction. There is no assurance that such exemption will be granted. Trading in Challenger's Common Shares will remain halted until such time as the sponsorship exemption has been granted and the Exchange has completed its preliminary background searches or, if not granted, a sponsor has been engaged and initial sponsorship materials have been filed with and satisfactorily reviewed by the Exchange.

Stock Options

Subject to Exchange acceptance, is intended that the Resulting Issuer will grant incentive stock options ("Stock Options") on closing of the Proposed Transaction, to employees, consultants, directors and officers of the Resulting Issuer and its subsidiaries, if any. Challenger hereby reserves the exercise price of $0.11 for the Stock Options. All such Stock Options shall be granted in accordance with Challenger's Stock Option Plan.

PROPOSED PRIVATE PLACEMENT

The Proposed Transaction will be completed in conjunction with a proposed non-brokered equity private placement financing by Challenger (the "Private Placement"). The Private Placement will consist of up to $300,000 being raised from the sale of units of Challenger (the "Units") at a price of $0.085 per Unit. Challenger hereby reserves the price of $0.085 for the Units.

Each Unit will consist of one (1) Challenger Common Share and one (1) non-transferable Challenger Common Share purchase warrant (a "Warrant"), with each Warrant entitling the holder thereof to purchase one (1) additional Challenger Common Share at a price of $0.165 for a period of five (5) years from the date of issuance. Challenger hereby reserves the exercise price of $0.165 for the Warrants to be issued as part of the Units.

The securities issued as part of the Private Placement will be subject to a four month hold period. No commissions will be paid in connection with the Private Placement; however "Principals" (as defined in applicable Exchange policy) of the Resulting Issuer may subscribe for up to twenty-five percent (25%) of the Units sold pursuant to the Private Placement.

The proceeds from the Private Placement, together with the Resulting Issuer's then available funds, will be used by the Resulting Issuer following completion of the Proposed Transaction to conduct the anticipated initial recommended work programs in respect of the properties. Additional amounts have been allocated for costs required to complete the Proposed Transaction, for unallocated working capital and for expected general and administrative expenses following completion of the Proposed Transaction. There may be circumstances where for sound business reasons, a reallocation of funds may be necessary in order for the Resulting Issuer to achieve its business objectives.

Capitalization of the Resulting Issuer

Following the completion of the Proposed Transaction and assuming that $300,000 worth of Units are sold under the Private Placement, approximately 14,529,412 Challenger Common Shares will be outstanding, and securities of Challenger exercisable or convertible into approximately 4,679,412 Challenger Common Shares are also anticipated to be outstanding, exclusive of the Stock Options, but inclusive of presently outstanding director and officer stock options and agent's compensation options that were granted in connection with the Corporation's initial public offering in June of 2008.

DIRECTORS AND SENIOR MANAGEMENT OF THE RESULTING ISSUER

Following the closing of the Proposed Transaction, the directors and senior officers of the Resulting Issuer are expected to include the following individuals.

Paul McKenzie, Vancouver, British Columbia - President, Chief Executive Officer and Director

Mr. McKenzie has over 15 years experience working in the Canadian equities markets. He has experience acquiring, selling, financing and developing international mineral and energy projects in North America, South America and Asia. Mr. McKenzie is also a director of two other mining exploration companies.

Darold H. Parken, Calgary, Alberta - Director

Mr. Parken is currently the President, Chief Executive Officer and a director of Chartwell Technology Inc., a software development company listed on the TSX. From 1980 to 1990, Mr. Parken practiced corporate and securities law with Burnet, Duckworth & Palmer. Since that time, he has been a Barrister and Solicitor with Parken & Company. Mr. Parken has public company management experience with companies listed on the TSX and the Exchange, and a range of experience in the areas of corporate finance and mergers and acquisitions in the technology, natural resources and real estate development industries.

Mr. Parken received his Bachelor of Arts Degree in Economics from the University of Calgary in 1977 and his Bachelor of Laws Degree from the University of Calgary in 1980. He is also a member of the Law Society of Alberta.

Leo R. Kelly, Calgary, Alberta - Director

Mr. Kelly is a Partner (through his professional corporation) of Kelly & Creaghan, Chartered Accountants, a Calgary, Alberta based accounting firm. Mr. Kelly serves a variety of clients in the financial services, construction and real estate industries. Mr. Kelly is a past president of the Alberta Institute of Chartered Accountants and has served on a variety of community and professional boards and committees. Mr. Kelly has served on the Tax Review Committee for the Province of Alberta and is currently a public representative on the Provincial Internal Audit Committee of the Province of Alberta.

Mr. Kelly received his Bachelor of Business Administration Degree from the University of Prince Edward Island in 1973. He received his Chartered Accountant designation in 1976 and was elected to the Chartered Accountants Governing Council in 1992, culminating as President in 1997-98. In 1997, Mr. Kelly was elected a Fellow of the Chartered Accountants, the profession's highest designation.

Ranjeet Sundher, Singapore - Director

Mr. Sundher is the President and a director of two natural resource exploration companies listed on the Exchange and is the founder of a Singapore-based business advisory firm. Mr. Sundher has experience in the areas of project acquisition, financing and development. Mr. Sundher was previously an equity trader with RBC and Wolverton Securities Limited in Vancouver, British Columbia.

Brent C. Stevenson, Calgary, Alberta - Director and Proposed Secretary

Mr. Stevenson is a Barrister and Solicitor and the principal of Brent C. Stevenson Professional Corporation. Mr. Stevenson's practice focuses on corporate and securities law for both private and public companies in a variety of industries, including various merger and acquisition transactions as well as private and public offerings of securities. He also advises on continuous disclosure and corporate governance compliance matters. In addition to his legal practice, Mr. Stevenson also provides consulting services to a various companies with respect to business development matters. Previously, he was an associate lawyer in the Business Law Group at Heenan Blaikie LLP in Calgary, Alberta and prior thereto, the Corporate Counsel and Secretary of Chartwell Technology Inc., a software development company listed on the TSX. Mr. Stevenson commenced his legal career at Borden Ladner Gervais LLP in Calgary, Alberta.

Mr. Stevenson received his Bachelor of Arts Degree in Psychology from the University of British Columbia in 1998 and his Bachelor of Laws Degree from the same university in 2002. He is also a member of the Law Society of Alberta.

In addition to the aforementioned individuals, and subject to Exchange acceptance, Challenger intends to appoint to its management team a Chartered Accountant as its Chief Financial Officer, as well as a Geologist as its Vice President of Exploration. The search for qualified candidates has commenced, and further information regarding the two new proposed senior officers will be provided in a subsequent news release and in the Filing Statement to be prepared by Challenger in connection with the Proposed Transaction.

CONDITIONS FOR COMPLETION OF THE PROPOSED TRANSACTION

The completion of the Proposed Transaction is subject to the approval of the Exchange as the "Qualifying Transaction" of Challenger. Apart from customary closing conditions which are typical for transactions of this nature, the completion of the of the Proposed Transaction is also subject to certain other additional conditions, including, but not limited to: (i) Challenger receiving the Technical Report and the Exchange having accepted the Technical Report confirming either one or both of the properties are properties of merit by not later than September 15, 2009; (ii) the entering into of the Definitive Agreement on or before October 15, 2009; (iii) Leger consenting to the terms of the assignment and agreeing to accept Challenger Common Shares in substitution for common shares otherwise due to be issued by Ansell under the Leases or a combination of Challenger and Ansell shares in the event Ansell exercises its Back-In Option; (iv) completion of due diligence satisfactory to Challenger by August 7, 2009; and (v) applicable United States and Canadian securities law exemptions being available for the issuance of the share consideration required to be issued to Leger under the Leases.

READER ADVISORY

Investors are cautioned that, except as disclosed in the information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed 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.

Statements in this press release may contain forward-looking information including, statements regarding expected costs, budgets, capital spending programs, access to capital, and the completion of the Proposed Transaction and Private Placement. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Challenger. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Readers are further cautioned that certain information provided in this news release regarding the properties mentioned herein has been compiled from third party sources believed to be reliable, but has not been independently verified by Challenger.

The forward-looking statements contained in this press release are made as of the date of this press release, and Challenger does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as required by securities law.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.

As indicated above, completion of the Proposed 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. Where applicable, the Proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

The TSX Venture Exchange Inc. has in no way passed upon the merits of the Proposed Transaction and has neither approved nor disapproved the contents of this press release. 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.

Contact Information

  • Challenger Deep Capital Corp.
    Paul McKenzie, President, Chief Executive Officer
    and Chief Financial Officer
    (604) 642-2625
    (604) 642-2629 (FAX)
    www.sedar.com