Red Hill Energy Inc.

Red Hill Energy Inc.
Prophecy Resource Corp.
OTC Bulletin Board : PCRYF

Prophecy Resource Corp.

March 04, 2010 09:00 ET

Red Hill Energy Inc. and Prophecy Resource Corp. Sign Definitive Agreement

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 4, 2010) - Red Hill Energy Inc. ("Red Hill") (TSX VENTURE:RH) and Prophecy Resource Corp. ("Prophecy")(TSX VENTURE:PCY)(OTCBB:PCRYF)(FRANKFURT:3P1) are pleased to announce that they have signed a definitive agreement (the "Arrangement Agreement") in connection with the business combination (the "Transaction") announced in their joint news release dated January 21, 2010.


The Transaction will be effected by way of court approved statutory plan of arrangement under the Business Corporations Act (British Columbia) involving Prophecy and its shareholders, and Red Hill and its shareholders.

For the purposes of the plan of arrangement, Red Hill will create a new class of common shares called "Class A Shares". As a result of the plan of arrangement, Red Hill Shareholders will receive 0.92 Class A Share for each common share of Red Hill and Prophecy Shareholders will receive one Class A Share for each common share of Prophecy. It is anticipated that approximately 55,531,084 Class A shares will be issued to the shareholders of Red Hill and approximately 29,892,266 Class A shares will be issued to the shareholders of Prophecy. In addition, each Red Hill stock option and warrant will entitle the holder to receive 0.92 Class A Share and each Prophecy stock option or warrant will be exchanged for an option or warrant to acquire one Class A Share.

As the first step in the plan of arrangement, Red Hill has the right but is not obligated to transfer $1,000,000 and its non-coal assets, principally the Red Lithium Property near Clayton Valley, Nevada and the Thor Rare Earth Property in Nevada, to a new British Columbia company "Spinco" in exchange for that number of Spinco common shares as is equal to the number of Red Hill shares issued and outstanding multiplied by 0.25. The Spinco common shares will then be distributed to the Red Hill shareholders prior to the Prophecy shareholders becoming holders of Class A Shares.

As a result of the Transaction, the Prophecy securityholders will be Class A securityholders of Red Hill, Prophecy will be amalgamated with a wholly-owned subsidiary of Red Hill, and Prophecy will apply for voluntary delisting of its common shares from the TSX Venture Exchange. Following the Transaction, Red Hill has agreed to change its name (the "Name Change") to "Prophecy Resource Corp." and will have a total of approximately 85,423,350 shares issued and outstanding, as well as options and warrants entitling holders to purchase approximately 24,654,901 Red Hill Class A Shares.

Red Hill formed a special committee comprised of two independent directors, the mandate of which was to consider the fairness of the Transaction and the Arrangement. The Transaction was reviewed by the independent directors of Prophecy. In accordance with their respective mandates, the special committee of Red Hill and the independent directors of Prophecy retained separate financial advisors to consider the fairness of the Arrangement to the shareholders of such companies from a financial point of view. Red Hill obtained a fairness opinion dated February 26, 2010 from Stephen Semeniuk and Prophecy obtained a fairness opinion dated March 1, 2010 from Glanville & Associates Ltd. and Bruce McKnight Minerals Advisor Services, each such opinion confirming that the terms of the Transaction are fair, from a financial point of view, to the shareholders of Red Hill and Prophecy, respectively.

In addition, as at the date hereof, certain directors, officers and insiders of Red Hill who hold an aggregate of 11,226,216, Red Hill shares and certain directors, officers and shareholders of Prophecy who hold an aggregate of 17,726,264 Prophecy shares, representing approximately 18.6% of the outstanding Red Hill shares and approximately 59.3% of the outstanding Prophecy shares, respectively, have signed support agreements pursuant to which they have agreed to vote all of the Red Hill and Prophecy shares beneficially owned by them in favour of the plan of arrangement.

Required Approvals

The Transaction is subject to customary conditions, including receipt of regulatory, shareholder and court approvals. If the Transaction is not completed due to a party deciding to accept a superior offer, a termination fee of $500,000 is payable by such party.

Red Hill and Prophecy have scheduled special meetings of their respective shareholders to be held on April 12, 2010 at which they will seek the shareholder approvals required in connection with the Transaction, including for Red Hill's meeting shareholder approval of the Name Change. It is anticipated that materials for such meetings will be mailed to shareholders on or about March 17, 2010. Subject to satisfaction of all conditions, completion of the Transaction is expected to occur on or before April 23, 2010.

Prophecy Resource Corp.

John Lee, Chairman and CEO

Red Hill Energy Inc.

G. Arnold Armstrong, Chairman and CEO

This news release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, including, without limitation, statements regarding potential mineralization, the estimation of mineral resources, the realization of mineral resource estimates, interpretation of prior exploration and potential exploration results, the timing and success of exploration activities generally, the timing and results of future resource estimates, permitting time lines, metal prices and currency exchange rates, availability of capital, government regulation of exploration operations, environmental risks, reclamation, title, and future plans and objectives of the companies are forward-looking statements that involve various risks and uncertainties. . Although Red Hill and Prophecy believe the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Forward-looking statements are based on a number of material factors and assumptions. Factors that could cause actual results to differ materially from those in forward-looking statements include unsuccessful exploration results, changes in project parameters as plans continue to be refined, results of future resource estimates, future metal prices, availability of capital and financing on acceptable terms, general economic, market or business conditions, risks associated with operating in foreign jurisdictions, uninsured risks, regulatory changes, defects in title, availability of personnel, materials and equipment on a timely basis, accidents or equipment breakdowns, delays in receiving government approvals, unanticipated environmental impacts on operations and costs to remedy same, and other exploration or other risks detailed herein and from time to time in the filings made by the companies with securities regulators. Readers are cautioned that mineral resources that are not mineral reserves do not have demonstrated economic viability. Mineral exploration and development of mines is an inherently risky business. Accordingly the actual events may differ materially from those projected in the forward-looking statements. For more information on Red Hill and Prophecy and the risks and challenges of their businesses, investors should review their filings that are available at

"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."

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