Skye Resources Inc.

Skye Resources Inc.

December 06, 2006 23:24 ET

Skye Sets Terms of Financing and Signs Underwriting Agreement

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Dec. 6, 2006) -


Skye Resources Inc. ("Skye") (TSX:SKR) today announced that it has finalized the terms of its previously announced financing (see Skye's press release dated November 22, 2006). Skye, together with the underwriters, have executed an underwriting agreement today and have determined that the financing (the "Financing") will consist of 7,450,000 units of Skye ("Units") at a price of Cdn$10.75 per unit for total gross proceeds of Cdn$80,087,500. Each Unit shall consist of one common share of Skye (each a "Common Share") and one-half of one Common Share purchase warrant, with each whole warrant (each, a "Warrant") entitling the holder thereof to acquire a further Common Share at an exercise price of $12.36 per share until the date that is fifteen months from the closing of the offering.

Pursuant to the terms of a share purchase master agreement between Skye and Inco Limited ("Inco"), a subsidiary of CVRD Canada Inc., Inco has the right (a "Pre-Emptive Right") to participate in the Financing to maintain its pro rata equity interest in Skye (currently, approximately 11.96%). Inco must notify Skye of its intent to exercise this right within 24 hours of being notified of the specific terms of the Financing. In the event that Inco exercises all or any part of its contractual Pre-Emptive Right to participate in the Financing, the Financing will increase to up to 8,462,153 Units for aggregate proceeds of Cdn.$90,968,145 (or 8,532,068 Units for aggregate proceeds of Cdn.$91,719,731 if Inco exercises warrants issued in connection with a previous offering, prior to the closing). Any Units issued to Inco in connection with its exercise of the Pre-Emptive Right will not be underwritten by the underwriters.

Subject to filing a final prospectus and receiving a receipt therefor, closing of the Financing is expected to occur on or about December 13, 2006. The underwriters (comprising TD Securities Inc. as lead underwriter, BMO Nesbitt Burns Inc., CIBC World Markets Inc., Paradigm Capital Inc., National Bank Financial Inc. and Orion Securities Inc.) will have an option (the "Over-Allotment Option"), exercisable for a period of 30 days from the date of closing, to purchase up to 1,117,500 additional Units of Skye (which amount could increase to 1,269,323 Units in the event Inco exercises its Pre-Emptive Right) at a price of Cdn$10.75 per Unit. Inco will have a Pre-Emptive Right with respect to the number of Units exercised by the underwriters in the Over-Allotment Option.

The Units are also being offered (a) in the United States to qualified institutional buyers on a private placement basis pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended, and (b) in certain jurisdictions outside of Canada and the United States.

The Units have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or any applicable exemption from the registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the Units in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful.

Net proceeds from the Financing will be used by Skye to initiate the development of the Fenix Project; for exploration at Fenix and other nickel properties, for further engineering studies on the hydromet expansion at Fenix, including work on Skye's proprietary sulphation atmospheric leaching process, and for general corporate purposes.

About Skye

Skye is an international mining company focused on becoming a new mid-tier nickel producer. Skye acquired the rights to its Guatemalan lateritic nickel project (the Fenix Project) in December 2004 and in September 2006 received the results of a feasibility study for a ferro-nickel operation project at Fenix using proven conventional smelting technology.

Cautionary Notices:

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities mentioned herein in the United States. The securities have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable securities laws or an exemption from such registration is available.

This news release contains certain forward-looking statements that involve risks and uncertainties, such as statements of Skye's plans, objectives, strategies, expectations and intentions. The words "may", "would", "could", "will", "intend", "plan", "anticipate", "believe", "estimate", "expect" and similar expressions, as they relate to Skye, or its management, are intended to identify such forward-looking statements. Many factors could cause Skye's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forwardlooking statements. The forward-looking statements included in this news release represent Skye's views as of the date of this news release. While Skye anticipates that subsequent events and developments may cause its views to change, it specifically disclaims any obligation to update these forward-looking statements. These forward-looking statements should not be relied upon as representing its views as of any date subsequent to the date of this news release. All subsequent written and oral forward-looking statements attributable to Skye or persons acting on its behalf are expressly qualified in their entirety by this notice.

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