Alloy Capital Corp.
TSX VENTURE : AYL.P

August 30, 2010 09:00 ET

Alloy Capital Corp. Announces Letter of Intent for Acquisition of Lancaster Exploration Ltd. as Its Qualifying Transaction

CALGARY, ALBERTA--(Marketwire - Aug. 30, 2010) -

NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. WIRE SERVICES

Alloy Capital Corp. (TSX VENTURE:AYL.P) ("Alloy") is pleased to announce that it has entered into a letter of intent dated August 16, 2010 (the "Letter Agreement") to acquire, directly or indirectly, Lancaster Exploration Limited ("Lancaster"). If completed, the proposed transaction will constitute Alloy's Qualifying Transaction as set forth in Policy 2.4 of the TSX Venture Exchange ("TSXV").

Lancaster is a wholly-owned subsidiary of Leo Mining and Exploration Limited. Both Lancaster and Leo Mining and Exploration Limited ("Leominex") are private companies incorporated in the British Virgin Islands. Lancaster is engaged in the exploration for rare earth elements in Africa.

The Proposed Transaction

The structure of the proposed transaction will be determined by mutual agreement of the parties and is expected to take the form of a reverse take-over, merger, plan of arrangement or other form of business combination (the "Proposed Transaction") resulting in the creation of a new company ("Resultco") being called "African Mining Corporation" or such other name that will be acceptable to the parties and the regulatory authorities. The parties have agreed that the structure will ultimately permit (i) the holders of Lancaster common shares (the "Lancaster Shares") to collectively receive 19,852,899 common shares of Resultco (each one a "Resultco Share") at a deemed value of $0.50 per Resultco Share; and (ii) each holder ("Alloy Shareholders") of the common shares of Alloy (the "Alloy Shares") shall receive one (1) Resultco Share at a deemed value of $0.50 per share for each two and an half (2.5) Alloy Shares held.

Alloy's acquisition of Lancaster is an arm's length transaction and the principal shareholders of Leominex, the parent company to Lancaster, are William Dawes and Alexander Lemon, each of whom are resident in London, England.

Trading in the Alloy Shares may remain halted pending the review of the proposed Qualifying Transaction by the TSXV. There can be no assurance that trading in the Alloy Shares will resume prior to the completion of the Qualifying Transaction.

Private Placement

In conjunction with the Proposed Transaction, Alloy has entered into an engagement letter dated August 24, 2010 with Byron Securities Limited to undertake a private placement (the "Offering") to raise gross proceeds of $5,000,000, with an over allotment (the "Over Allotment") of $2,500,000. Under the terms of the Offering, Alloy would issue up to 15,000,000 securities (assuming full exercise of the Over Allotment) at a minimum price of $0.50 per security (an "Offering Security"). Each Offering Security consists of one common share and one-half of one common share purchase warrant (the "Warrant"). Each whole Warrant entitles the holder to acquire one common share at the exercise price of $0.75 for a period of twenty-four (24) months from issuance. It is contemplated that the holders of the Offering Securities will ultimately receive one Resultco Share and one half of one Resultco Warrant, with a whole Resultco Warrant entitling the holder to acquire one Resultco Share at an exercise price of $0.75.

As compensation for completion of the Offering, Byron Securities Limited (the "Agent") shall be entitled to a commission of 7% of the gross proceeds of the Offering. In addition, the Agent shall be entitled to receive Agent's warrants (the "Agent's Warrants") equal to 7% of the number of Offering Securities sold under the Offering and a corporate finance fee of $25,000 upon completion of the Offering.

The proceeds of the Offering will be released on completion of the Proposed Transaction and will be used to complete the proposed exploration program for Resultco, working capital and general corporate purposes.

Lancaster Exploration Limited

Lancaster currently has 1,000 shares issued and outstanding and there are no existing stock options or any other convertible securities to acquire Lancaster Shares.

Lancaster's primary business is the exploration for rare earth elements and associated minerals in the Republic of Malawi. Lancaster holds a 100% interest in an exclusive prospecting license over an area of 1,283 km2 in southeast Malawi. Its main exploration target is the Songwe Hill deposit, which features carbonatite hosted rare earth mineralization and was subject to previous exploration programs in the late 1980s and in 2010, the latter funded and managed by Lancaster. Lancaster is obtaining a National Instrument 43-101 compliant report (the "Report") on the Songwe Hill deposit. Additional information on the Songwe Hill deposit will be provided in a subsequent news release.

Lancaster's corporate strategy is to further delineate the rare earth mineralization at Songwe Hill and secure additional rare earth element and other mineral opportunities in Malawi and elsewhere in Africa.

Financial statements of Lancaster, as required by the TSXV, are not currently available. Financial information respecting Lancaster, however, is being audited and, once available, will be included in a subsequent news release.

Resulting Issuer

Upon completion of the Proposed Transaction, it is expected that the Resultco will have 36,852,899 common shares issued and outstanding, being the aggregate of: (i) 2,000,000 Resultco Shares to be issued for all of the issued and outstanding shares of Alloy; (ii) 19,852,899 Resultco Shares to be issued for all of the issued and outstanding Lancaster Shares; and (iii) 15,000,000 Resultco Shares to be issued in exchange for the Offering Securities, assuming the maximum exercise of the Over Allotment. Upon completion of the Proposed Transaction, the shareholders of Lancaster would then hold approximately 54% of the issued and outstanding capital of Resultco, on an undiluted basis.

The directors and officers of Resultco are expected to be as follows:

William Dawes

William Dawes, CFA, is a graduate of Bristol University (BSc Geology) and Imperial College, London (MSc Mineral Exploration). He previously worked as a mining analyst based in London and then for Rio Tinto's exploration division. Subsequently, he gained significant global mining transaction experience in the metals and mining team of Robert Fleming & Co, Chase Manhattan Bank and JPMorgan. In 2007, he co-founded Lancaster's parent company, Leominex.

Alexander Lemon

Alexander Lemon is a graduate of Oxford Brookes University (BSc Geological Sciences) and Imperial College, London (MSc Mineral Exploration). He was previously Managing Director of Gold and Mineral Excavation Inc. (GMEI), which owned and operated a producing gold mine in Central Asia, where he gained extensive operating experience in emerging markets including government negotiations and project management. Subsequently, he worked for Allied Commercial Exporters as an investment advisor. In 2007, he co-founded Lancaster's parent company, Leominex.

It is expected that Resultco will have three additional directors, one of whom will be a nominee of Alloy and two independent directors that are jointly acceptable to Alloy and Lancaster.

Sponsorship of the Qualifying Transaction

Byron Securities Limited, subject to completion of satisfactory due diligence, has agreed to act as sponsor in connection with the Proposed Transaction. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Proposed Transaction or the likelihood of completion.

Significant Conditions to Completion of the Proposed Transaction

Completion of the Proposed Transaction is subject to a number of conditions, including but not limited to: (a) entering into of a formal agreement; (b) completion of due diligence; (c) TSXV acceptance and if applicable pursuant to TSXV requirements, majority of the minority shareholder approval; (d) approval of the shareholders of Lancaster and Alloy; and (e) completion of the Offering for gross proceeds of not less than $5,000,000.

The Proposed Transaction cannot close until the required shareholder approvals are obtained. There can be no assurance that the Proposed Transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular 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 Alloy Capital Corp. should be considered highly speculative.

Cautionary Note Regarding Forward-Looking Statements

This news release contains forward-looking statements relating to the Proposed Transaction, including statements regarding the exchange ratio for the Proposed Transaction, the anticipated acquisition of Lancaster, the anticipated election of additional directors for Resultco, the completion of the Offering, the sponsorship by the Agent, the completion of a Report, the receipt of all necessary regulatory approvals and satisfaction of all other closing conditions in connection with the Proposed Transaction and other statements that are not historical facts. Readers are cautioned not to place undue reliance on forward-looking statements, as there can be no assurance that the plans, intentions or expectations upon which they are based will occur. By their nature, forward-looking statements involve numerous assumptions, known and unknown risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and other forward-looking statements will not occur, which may cause actual performance and results in future periods to differ materially from any estimates or projections of future performance or results expressed or implied by such forward-looking statements. These assumptions, risks and uncertainties include, among other things: the risk that the Proposed Transaction will not be completed if a formal agreement is not reached or that the necessary approvals and/or exemptions are not obtained or some other condition to the closing of the Proposed Transaction is not satisfied; the risk that closing of the Proposed Transaction could be delayed if Alloy and Lancaster are not able to obtain the necessary approvals on the timelines planned; the risk that the Offering is not completed for minimum gross proceeds of $5,000,000; the assumptions relating to the parties entering into the formal agreement in respect of the Proposed Transaction, its structure, and the timing thereof, the timing of obtaining required approvals and satisfying closing conditions for the Proposed Transaction, state of the economy in general and capital markets in particular, investor interest in the business and future prospects of Alloy and Lancaster.

The forward-looking statements contained in this press release are made as of the date of this press release. Except as required by law, Alloy, Leominex and Lancaster disclaim any intention and assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable securities law. Additionally, Alloy, Leominex and Lancaster undertake no obligation to comment on the expectations of, or statements made, by third parties in respect of the matters discussed above.

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

Not for distribution to U.S. Newswire Services or for dissemination in the United States of America. Any failure to comply with this restriction may constitute a violation of U.S. Securities Laws.

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 this release

Contact Information

  • Alloy Capital Corp.
    David Berg
    President and Chief Executive Officer
    (403) 923-7716
    davidberg@shaw.ca