Alloy Capital Corp.
TSX VENTURE : AYL.P

November 09, 2010 17:54 ET

Alloy Capital Corp. enters into Share Exchange Agreement with Lancaster Exploration Limited and Leo Mining and Exploration Limited

CALGARY, ALBERTA--(Marketwire - Nov. 9, 2010) -

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.

Alloy Capital Corp. ("Alloy" or the "Corporation") (TSX VENTURE:AYL.P) has, as contemplated in its press release of August 26, 2010, entered into a Share Exchange Agreement ("Share Exchange Agreement") dated as of October 16, 2010 with Lancaster Exploration Limited ("Lancaster") and Leo Mining and Exploration Limited ("Leominex"), with respect to a proposed acquisition of all of the issued and outstanding shares in the capital of Lancaster from its sole shareholder, Leominex, in exchange for the aggregate purchase price of $9,926,449.50 (the "Purchase Price").

Acquisition

Pursuant to the terms and conditions of the Share Exchange Agreement, the Purchase Price shall be satisfied by the issuance of 19,852,899 common shares of Alloy (the "Common Shares") at a deemed price of $0.50 per Common Share to Leominex after a consolidation (the "Consolidation") of the Common Shares on a 2.5 for one basis (the "Acquisition"). Immediately after the completion of the Acquisition, Alloy will amend its articles to change its name (the "Name Change") to "Mkango Resources Ltd." (the "Resulting Issuer"), or such other name as may be selected by the board of directors of Alloy and accepted by the TSX Venture Exchange (the "Exchange"). The shareholders of Alloy (the "Shareholders") have approved the Consolidation and the Name Change at the annual general and special meeting of Shareholders held on October 27, 2010. All of the outstanding Alloy stock options shall become options of the Resulting Issuer.

Upon completion of the Acquisition, Lancaster will be a wholly-owned subsidiary of the Resulting Issuer and Leominex will be an Insider (as such term is defined in the Corporate Finance Manual of the Exchange) of the Resulting Issuer.

Completion of the Acquisition is subject to various closing conditions, including but not limited to:

  1. receipt of all necessary regulatory approvals and in particular the Exchange's approval of the Acquisition as Alloy's Qualifying Transaction; and
  2. the completion of the brokered private placement financing of Alloy for gross proceeds of not less than $5,000,000.

The Acquisition will constitute a reverse take-over by Lancaster of Alloy as the former shareholder of Lancaster, Leominex, will own up to 49.9% of the outstanding Common Shares on a fully diluted basis and 62.3% on a non-diluted basis, assuming completion of the minimum Financing (as defined below). Furthermore, of the five member board of directors of the Resulting Issuer, two members will be designees of Lancaster. In addition, a further two board members shall be joint nominees of Lancaster and Alloy.

The Acquisition is not a Non-Arm's Length Qualifying Transaction (as such term is defined in the Corporate Finance Manual of the Exchange) and as such will not require Shareholder approval.

Financing

In conjunction with the Acquisition, Alloy will be conducting a brokered private placement financing (the "Financing") through Bryon Securities Limited (the "Agent") for the sale of a minimum of 10,000,000 units in the capital of Alloy ("Units") up to a maximum of 15,000,000 Units at a minimum price of $0.50 per Unit, for gross proceeds of a minimum of $5,000,000 and a maximum of $7,500,000.

Each Unit will consist of one Common Share and one-half of one common share purchase warrant of Alloy (a "Warrant"). Each whole Warrant will entitle the holder to acquire one Common Share at a price of $0.75 per share, assuming the Financing is completed at the minimum price of $0.50 per Unit, for a period of 24 months from issuance. The securities issued pursuant to the Financing will be subject to a statutory and Exchange imposed restriction on resale for a period of four months from the date of issuance of such Units. Upon completion of the Acquisition, the Warrants will become warrants of the Resulting Issuer.

The Agent, Lancaster and Alloy are in the process of negotiating the definitive agency agreement with respect to the Financing and the Agent is completing its due diligence. The compensation of the Agent pursuant to the Financing is as announced in the press release dated August 26, 2010.

The net proceeds from the Financing will be used to fund exploration and development activities on Lancaster's Songwe Hill project and for general corporate purposes.

Lancaster

Lancaster was incorporated on August 3, 2007 under the name "Lancaster Exploration Limited" by Memorandum and Articles of Association issued pursuant to the provisions of the BVI Business Companies Act (No. 1 of 2004). Lancaster's registered office is located at 56 Administration Drive, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands.

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 licence 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 managed by Lancaster. Since its incorporation in the fall of 2007, Lancaster has spent a total of US$271,257 on exploration expenses. Further information is provided below with respect to Lancaster's financial condition, as derived from its financial statements.

Lancaster's current exploration programme involves further geological investigation, including the collection of samples for metallurgical work, and the implementation of a Phase 1 drilling program with a view to further defining the mineralization at the Songwe Hill deposit. This phase of the exploration programme is budgeted at approximately US$2.9 million.

Lancaster was granted an additional exploration licence by the Malawi Minister of Natural Resources, Energy and Environment on September 10, 2010 in respect of an area of 468 km² in Thambani, Mwanza District, Malawi. Lancaster has not undertaken any activity on this licence area to date.

For further details on the Songwe Hill project, please refer to the geological report entitled "Technical Report on the Songwe REE Project, Republic of Malawi" prepared by Saint Barbara LLP, with an effective date of September 30, 2010 (the "Geological Report"), a copy of which has been filed on November 5, 2010 under Alloy's SEDAR profile at www.sedar.com. Neil Scott and Andrew Wells, the authors of the Geological Report, are independent of Alloy and Lancaster.

Insiders of the Resulting Issuer

The following is a brief description of the proposed insiders (directors, officers and principal shareholders) of the Resulting Issuer:

William Dawes, B.Sc., M.Sc., CFA (Chief Executive Officer and Director)

Mr. Dawes 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, where he held the position of Vice-President. Mr. Dawes has been a director of Leo Mining and Exploration since September 2007. He is a Member of the Institute of Materials, Minerals and Mining and holds the Chartered Financial Analyst designation.

Alexander Lemon, B.Sc., M.Sc. (President and Director)

Mr. 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., 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. Mr. Lemon has been a director of Leo Mining and Exploration since September 2007. He is a Member of the Canadian Institute of Mining, Metallurgy and Petroleum and is an Associate Member of the Institute of Materials, Minerals and Mining.

David Berg, (Chief Financial Officer, Corporate Secretary and Director)

Mr. Berg spent 28 years of consecutive service with Loblaw Companies Limited. His corporate experience encompassed retail, financial services and petroleum businesses. Mr. Berg's most recent responsibility, from June 2003 to June 2007, was serving in the capacity of Divisional Vice President for a business unit in Western Canada representing $1.5 billion in annual revenue with a total of 8,500 employees. Currently, he operates a private consulting company based in Calgary, Alberta specializing in the provision of management services, development of business models and structuring, financing and managing of public and private projects.

Mr. Berg has been a director of Potash One Inc., a Canadian potash company listed on the TSX, since November 2007.

Arthur Wong, B.Sc., P.Eng., (Director)

Mr. Wong is currently an independent businessman and Managing Director and Chief Executive Officer of Optimus U.S. Real Estate Partners Ltd. He was a founder, Vice-President, Chief Operating Officer and Director of Genesis Land Development Corp. ("Genesis") from December 1997 to April 2008. Genesis is a publicly traded real estate development company listed on the TSX. From March 1992 to January 2002, Mr. Wong was the Chief Executive Officer of Genesis Land Developers Ltd., a private land development company and a wholly owned subsidiary of Genesis until it amalgamated with Genesis effective January 1, 2002.

Mr. Wong is a Professional Engineer and holds a Bachelor of Science degree (Mechanical Engineering - Cooperative Program) from the University of Alberta.

Eugene Chen, B.Sc, LLB (Director)

Mr. Chen is currently a Partner in the securities, corporate finance and mergers and acquisitions group with Gowling Lafleur Henderson LLP. He was an associate and then Partner practising corporate finance and securities law with Fraser Milner Casgrain LLP from July 2005 to March 2010. From March 1996 to June 2005, he practised corporate finance, securities and corporate/commercial law with McLeod & Company LLP. Mr. Chen has been a director and/or officer of numerous public and private companies.

Mr. Chen holds a Bachelor of Science from the University of Alberta, a Bachelor of Laws from the University of British Columbia and is a member of the Law Society of Alberta.

Leo Mining and Exploration Limited

Lancaster is a wholly owned subsidiary of Leominex. Leominex was incorporated on September 24, 2007 under the name "Leo Mining and Exploration Limited" by Memorandum and Articles of Association issued pursuant to the provisions of the BVI Business Companies Act (No. 1 of 2004). Leominex's registered office is located at 56 Administration Drive, Wickhams Cay 1, Road Town, Tortola, British Virgin Islands. Leominex is a private international mining company.

Messrs. Dawes and Lemon, residents of the United Kingdom, are directors, officers and the principal and controlling shareholders of Leominex.

Selected Financial Statement Information

The following table presents selected financial statement information on the financial condition and results of operations for Alloy and Lancaster. Such information is derived from the unaudited financial statements and audited financial statements of each company for the periods ended June 30, 2010 and December 31, 2009, respectively. The information provided herein should be read in conjunction with such financial statements, which have been prepared in accordance with Canadian GAAP. With respect to Lancaster, its financial statements will be filed on SEDAR when Alloy files its filing statement with respect to the proposed Qualifying Transaction. Alloy's financial statements have been filed on SEDAR.

Alloy's financial statements are stated in Canadian dollars whereas Lancaster's statements are stated in American dollars.

  Alloy
Capital
Corp.
June 30,
2010
(unaudited)
Alloy
Capital
Corp.
December 31,
2009
(audited)
Lancaster
Exploration
Limited
June 30,
2010
(unaudited)
Lancaster
Exploration
Limited
December 31,
2009
(audited)
Balance Sheet
Current Assets        
         
Cash and cash equivalents $326,032 $345,987 - -
         
GST receivable $7,811 $6,783 - -
         
Resource interests - - $1,045(1) -
Total Assets $333,843 $352,770 $1,045(1) -
Current Liabilities        
         
Accounts payable and accrued liabilities $9,294 $11,273 $20,000 -
         
Due to related parties - - $333,670 $225,234
Total Liabilities $9,294 $11,273 $353,670 $225,234
Share Capital $437,367 $437,367 $1,000 $1,000
Contributed Surplus $138,785 $138,785 - -
Deficit ($251,603) ($234,655) ($353,625) ($226,234)
Shareholders' Equity $324,549 $341,497 ($352,625) ($225,234)
Statement of Loss, Comprehensive Loss and Deficit
Expenses        
Exploration expenses - - $107,030 $5,000
         
General and administration expenses $17,018 $34,142 $20,000 $2,021
         
Interest and bank charges - - $361 $27
Loss and comprehensive loss from operations ($16,948)(2) ($32,143)(3) $127,391 $7,048
Deficit, beginning of the period ($234,655) ($202,512) ($226,234) ($219,186)
Deficit, end of the period ($251,603) ($234,655) ($353,625) ($226,234)
Loss per share ($0.003) ($0.006) ($127.39) ($7.05)
Notes:
(1) Included in such amount is US$1,045 in licensing costs related to Lancaster's projects in Malawi.
(2) Includes interest revenue of $70.
(3) Includes interest revenue of $1,999.

Alloy will be making an application for an exemption from sponsorship requirements in connection with Alloy's Qualifying Transaction. There is no assurance that such application will be granted by the Exchange.

In accordance with the policies of the Exchange, the Common Shares are currently suspended from trading. It is expected that the Common Shares will be reinstated for trading on the Exchange, after all requirements of the Exchange have been satisfied, following completion of the Acquisition.

Messrs. Neil Scott and Andrew Well, each a Qualified Person under Canadian Securities Administrators National Instrument 43-101, have reviewed and are responsible for the scientific and technical contents of this news release.

Unless otherwise stated, $ refers to Canadian dollars in this press release.

Forward-Looking Information Cautionary Statement

This news release contains forward-looking statements relating to the Acquisition and the Financing, including the receipt of all necessary regulatory approvals, satisfaction of all other closing conditions in connection with both such transactions, the resumption of the trading in the Common Shares 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 Financing will not be completed if a formal agency agreement is not reached or that the broker is not satisfied with its due diligence of Alloy and Lancaster; the risk that necessary exemptions are not obtained or some other condition to the closing of either the Acquisition or the Financing is not satisfied or waived within the requisite timelines; the risk that the Offering is not completed for minimum gross proceeds of $5,000,000; and risks relating to the state of the economy in general and capital markets in particular, as well as 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.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance, satisfactory due diligence reviews, negotiation and execution of a definitive agency agreement for the Financing, approval by both boards of directors, and the availability of prospectus and registration exemptions. There can be no assurance that the Acquisition and Financing will be completed as proposed or at all.

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 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.

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. 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

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