Amalfi Capital Corporation
TSX VENTURE : ALI.P

June 09, 2009 18:02 ET

Amalfi Capital Corporation Announces Proposed Qualification Transaction

CALGARY, ALBERTA--(Marketwire - June 9, 2009) -

THIS RELEASE DOES NOT CONSTITUTE AN OFFER FOR SALE OF SECURITIES IN THE UNITED STATES.

Amalfi Capital Corporation ("Amalfi" or the "Corporation") (TSX VENTURE:ALI.P) today announced details concerning its proposed qualifying transaction involving a business combination (the "Business Combination") with CDR Minerals Inc. ("CDR").  CDR is a private company that was formed to participate in exploration and development of coal in the Central Appalachian Basin in the United States.

Amalfi entered into a letter agreement with CDR and the principal shareholders of CDR dated May 8, 2009 (the "Letter Agreement"), pursuant to which Amalfi and CDR intend to amalgamate to form a new company ("Amalco") whereby: (i) each of the current holders of common shares of CDR (the "CDR Common Shares") will receive one common share in the capital of Amalco (the "Amalco Common Shares") with a deemed value of CDN$0.50 per share for each CDR Common Share owned; (ii) each holder of common shares of Amalfi (the "Amalfi Common Shares") will receive one Amalco Common Share and one-half of one share purchase warrant of Amalco exercisable at US$0.50 per share for a period of 2 years from the closing of the Business Combination (the "Amalco Warrants"), for each 3.5 Amalfi Common Shares owned; (iii) each of the current holders of the 2,380,962 existing warrants of CDR ("CDR Warrants"), 133,635 existing broker warrants of CDR (the "CDR Broker Warrants") and 3,975,000 stock options ("CDR Options") of CDR will be replaced with an equal number of replacement share purchase warrants and stock options of Amalco; (iv) the Amalfi agent's options shall be replaced with 257,143 replacement agent's options of Amalco (the "Amalco Replacement Agent's Options"), each entitling the holder to acquire for CDN$0.35 one unit of Amalco (the "Amalco Amalfi Units") consisting of one Amalco Common Share and one-half of one Amalco Warrant; and (v) the outstanding Amalfi stock options shall be replaced with 331,429 replacement stock options of Amalco, each entitling the holder to acquire one Amalco Amalfi Unit for CDN$0.35 per unit (the "Amalco Replacement Stock Options").  The final structure of the Business Combination is subject to receipt of a definitive tax, corporate and securities law advice satisfactory to both Amalfi and CDR. 

The Business Combination, when completed, will constitute the qualifying transaction of the Corporation pursuant to rules and policies (the "Policies") of the TSX Venture Exchange Inc. (the "TSX Venture").  The Business Combination will be negotiated and carried out by parties dealing at arm's length to another and therefore will not be a Non-Arm's Length Qualifying Transaction, as such term is defined under the Policies.

Capitalization

As at the date hereof, CDR has outstanding 43,752,726 CDR Common Shares, 2,380,962 CDR Warrants, 133,635 CDR Broker Warrants and 3,975,000 CDR Options that each entitle the holder to acquire one CDR Common Share at prices ranging from CDN$0.25 to CDN$1.25 per share, and CDN$750,000 principal amount of convertible debentures of CDR which are convertible into CDR Common Shares on the basis of CDN$0.50 per share, subject to adjustment (the "CDR Convertible Debentures").

Private Placement

CDR intends to complete a private placement (the "CDR Private Placement") of up to 22,222,222 units of CDR (the "Units") at a price of US$0.45 per Unit (the "Offering Price"), for gross proceeds of up to US$10,000,000.  Each Unit will consist of one CDR Common Share and one share purchase warrant of CDR (the "CDR Financing Warrants"), with each whole CDR Financing Warrant entitling the holder to acquire one CDR Common Share at a price of US$0.50 per share for a period of two years from the closing date of the CDR Private Placement.  CDR may engage third parties to act as agent (the "Agents") of CDR on a "commercially reasonable efforts" basis in connection with the CDR Private Placement and such Agent's will be paid a cash commission of 7%.  The Agents may also be granted agent's options (the "CDR Agent's Options") to purchase 7% of the number of Units sold under the CDR Private Placement, with each CDR Agent's Option entitling the holder to purchase one CDR Common Share at the Offering Price for a period of 2 years from the closing of the CDR Private Placement.

CDR intends to use the gross proceeds of the CDR Private Placement to fund its current coal projects in the Central Appalachian Basin in the United States, for future acquisitions, and for general working capital purposes.

The securities of CDR issued in connection with the CDR Private Placement will be exchanged for the same number of replacement securities of Amalco with the same terms and conditions.

Following completion of the Business Combination and assuming the CDR Private Placement is fully subscribed, it is expected that 69,489,233 Amalco Common Shares, 23,879,365 Amalco Warrants (including those issued as replacement for the CDR Financing Warrants), 2,380,962 replacement warrants of Amalco, 133,635 replacement broker warrants of Amalco, 1,555,555 Amalco agent's options issued as replacement for the CDR Agent's Options, 257,143 Amalco Replacement Agent's Options, 331,429 Amalco Replacement Stock Options, CDN$750,000 principal amount of replacement convertible debentures of Amalco with the same terms as the CDR Convertible Debentures, and up to an additional 6,617,494 Amalco stock options will be outstanding.  The number of Amalco stock options outstanding assumes the maximum of 10% incentive stock options will have been granted under Amalco's option plan.  Based on the foregoing, shareholders of CDR and investors in the CDR Private Placement will hold 65,974,947 Amalco Common Shares representing approximately 95% of the issued and outstanding Amalco Shares on a non-diluted basis following completion of the Business Combination.

Conditions

Completion of the Business Combination will be subject to certain conditions including, without limitation: (a) receipt of all necessary regulatory approval, including the approval of TSX Venture; (b) no material adverse change to the business and affairs of either Amalfi or CDR; (c) satisfactory completion of due diligence reviews by each of Amalfi and CDR; (d) receipt of all necessary approvals of the board of directors of both Amalfi and CDR; (e) shareholder approval of CDR and Amalfi; (f) CDR and Amalfi entering into a definitive formal amalgamation agreement; (g) CDR completing the CDR Private Placement for proceeds of a minimum of CDN$3,000,000; (h) the directors of Amalco shall consist of one nominee of Amalco and six nominees of CDR; and (i)certain other usual conditions.

Business of CDR

CDR is a private Ontario company formed in August 2007 focused on the exploration and production of coal properties.  CDR is headquartered in Toronto, Ontario, Canada with a regional office in Hazard, Kentucky, USA.  CDR was created in order to capitalize on the growth opportunities that exist in the coal industry.

CDR is concentrating its efforts on developing an asset base in the Central Appalachian ("CAPP") coal producing region of the United States, which includes parts of West Virginia, Virginia, Kentucky, Ohio, and Tennessee. CAPP's history of producing large volumes of coal, along with the under-utilized coal infrastructure already in place, make the area ideal for the implementation of CDR's business model. Coal assets in the area can be acquired and brought into production relatively quickly and cash flow can be generated in the short term without the need to invest large amounts of capital.

A summary of CDR's principal properties, all located in the Hazard, Kentucky vicinity in the CAPP Coal region, is described below.

Sid Mining Project

CDR acquired the sid mining project ("Sid Mining Project") for a purchase price of US$1,700,000 in cash and a 2% override royalty from all sales of all coal mined from the property.

The Sid Mining Project is permitted for mining operations.  While currently idle, the area was previously mined by Minnehan Mining, LLC and contains a pre-existing haul road facilitating access to the project.

Summit Engineering, Inc. ("Summit") of Pikeville, Kentucky, USA prepared a report dated October 2008 regarding the Sid Mining Project (the "Sid Property Report").  The Sid Property Report has been filed with TSX Venture and once accepted, a further detailed press release with respect to the Sid Property Report will be issued.

CDR intends to mine the coal using its own labour force.  Coal produced by CDR from each of its properties can be loaded onto trucks and hauled to one of several nearby rail facilities where it can be loaded onto trains destined for the utility or industrial markets.  Alternatively, the coal can be trucked to the Big Sandy River which borders eastern Kentucky where it could be loaded onto barges and sold into the same markets. 

Cheyenne Property

CDR entered into an option agreement dated March 11, 2009 with Cheyenne Resources Inc., pursuant to which CDR is considering the purchase of the Cheyenne mining project (the "Cheyenne Mining Project"). The Cheyenne Mining Project is located proximate to Hazard, Kentucky, is permitted for initial production, and is currently operating. Cheyenne requires US$8.5 million to complete the proposed acquisition and to increase production. 

Coty Mining Project

CDR also holds a central lease within the Coty mining project area of interest (the "Coty AOI"), also located proximate to Hazard, Kentucky.  It is expected that the wider Coty AOI can be leased for minimal coal lease prepayments and out of pocket expenses. The process of obtaining permits for the Coty AOI is underway.

Financial Information of CDR

Based on unaudited management prepared financial statements of CDR for the 12-month financial period ended December 31, 2008, CDR had current assets of CDN$2,870,210, other assets including principally mineral property interests of CDN$4,624,560, total assets of CDN$8,022,053, current liabilities of CDN$1,209,587 and shareholders' equity of CDN$6,812,466.

Directors, Officers and Principal Shareholders

The principal shareholder of CDR is Juno Special Situations Corporation ("Juno"), which owns over 18% of the outstanding CDR Common Shares.  Juno is a private company with several shareholders, none of whom owns over 10% of the shares of Juno. 

Upon completion of the Business Combination, the board of directors of Amalco will consist of seven (7) directors, being six (6) nominees of CDR, namely A. Thomas Griffis, Elia Crespo, Michael J. Campbell, James A. Flores and two independent directors to be determined, as well as one nominee of Amalfi, Michael Rousseau. After the closing of the Business Combination, the officers of Amalco will be appointed by the board of directors of Amalco and will include Michael J. Campbell as Chief Executive Officer, Peter K. Moran as Chief Operating Officer, James Hannah as President, and James A. Flores as Chief Financial Officer.

Mr. A. Thomas Griffis is co-founder, Co-Chairman and Chief Executive Officer of Juno since March 2007, President of Griffis International Limited ("GIL") since 1986, Chairman of Royal Nickel Corporation since 2006 and the Chairman of CDR since May 2009.  Mr. Griffis founded GIL, a private investment and corporate management firm based in Toronto, Ontario. GIL has focused the majority of its activities on emerging companies requiring early to mid stage financing and corporate management.  Mr. Griffis has been the founder of several gold, precious and base metal companies and served on the Board of Directors of several resource companies.  Mr. Griffis is a retired Lieutenant Colonel in the Canadian Air Force and was a member and team leader of the Snowbirds aerobatic squadron.

Mr. Michael J. Campbell, age 40, is a co-founder of Juno, which was incorporated in March 2007 and establishes and invests in early stage resource equities, including financing and recruiting technical and financial management.  Mr. Campbell has been the Chief Executive Officer of CDR since September 2008.  Prior to co-founding Juno, Mr. Campbell was a partner with the law firm McMillan Binch LLP, focused on public and private corporate finance and mergers and acquisitions and natural resources, from February 2002 to February 2007. Prior to rejoining the firm in February 2002, Mr. Campbell was part of an entrepreneurial management team at GT Group Telecom Inc., Canada's largest independent national telecommunications company from March 2000 to February 2002.

Mr. Peter K. Moran, age 64, built the Princess Beverly Coal Company organically from a start-up operation in 1978 into a 2.5 million ton per year producer of high quality coal when it was sold to a major national coal company in 1999. Since selling the Princess Beverly Coal Company, Mr. Moran has served as an independent consultant to some of the largest coal companies in America, including AEI Resources and Chris Cline Coal.  Mr. Moran has been the Chief Operating Officer of CDR since August 2008.

Mr. James A. Flores, age 55, was the Managing Director of Prospect Capital Corp., a public investment firm that managed a coal production business in Kentucky from June 2004 to October 2007. Mr. Flores was also a senior executive with Mellon Bank from June 1981 to May 1994, as well as the Chief Financial Officer for Norwest Corporation, a mining technical consulting firm, from September 2003 to March 2004. He was the Vice-President, Project Finance of MidAmerican Energy Holdings Company Inc., a subsidiary of Berkshire Hathaway, from June 1997 to June 2002 and manager at the same company from May 1994 until June 1997.  Mr. Flores has been Chief Executive Officer of CDR since August 2008.

Mr. James Hannah, age 48, has been President of CDR since June 2008. Prior to that, Mr. Hannah has had an extensive marketing and sales background over the last 25 years. From November 1995 to December 1999 he was a Marketing Director with PREA, a division of Prudential Insurance, where his focus was on mergers and acquisitions. He has experience in investor relations holding the position of Managing Director at Hurricane Capital, an investor relations firm, from February 2000 to October 2003. He also worked with Walton International Group, a land syndication company, from November 2003 to July 2006.  From November 2006 to May 2008, Mr. Hannah was a consultant to EquiGenesis Corporation working with their structured asset investments.

Ms. Elia Crespo is a co-founder and a director of Juno since March 2007, and a Vice-President of GIL.  Ms. Crespo has been a business partner of GIL for the past 23 years.  Ms. Crespo has held the title of Corporate Secretary and Chief Financial Officer of most of the private and public companies that GIL has been involved in over the past 23 years, and has participated in several initial public offerings and numerous M&A transactions. Ms. Crespo brings her legal, financing and international expertise to Juno.  Ms. Crespo has a law degree from Complutense University, Madrid, Spain.

Mr. Michael Rousseau is currently a Director of Amalfi.  A complete biography for Mr. Rousseau is contained in the Prospectus of Amalfi dated March 17, 2008 and filed on SEDAR at www.sedar.com.

Other Matters

A finder's fee will be payable to G. Scott Paterson, who is arm's length to Amalfi and CDR, in connection with the Business Combination by the issuance of 200,000 Amalco Common Shares with a deemed value of $0.50 per share at the closing of the Business Combination.

Amalfi also announces it has reserved a price of CDN$0.50 per Amalco Common Shares ($0.143 per Amalfi Common Share) for the grant of stock options to acquire up to 10% of the number of issued and outstanding Amalco Common Shares (the "Stock Options") in the event the Business Combination and the CDR Private Placement are completed. The grant of the Stock Options is subject to regulatory approval.  The Stock Options will be granted to directors, officers, employees and consultants of Amalfi, as determined by the board of directors of Amalfi immediately following the completion of the Business Combination.

The Corporation has made an application to TSX Venture for an exemption from the Sponsorship requirements of TSX Venture, but there is no assurance that such a waiver will be granted.

Trading of the Amalfi Common Shares will not resume until TSX Venture has:  (i) accepted the sponsorship exemption or a sponsor has been engaged; (ii) reviewed the Sid Property Report; and (iii) all other documents required by TSX Venture have been filed.  Amalfi will issue a further news release when TSX Venture has reviewed and signed off on the Sid Property Report, and the other necessary documentation has been filed with TSX Venture, and trading of the Amalfi Common Shares is to resume.

This news release has been reviewed and approved by Phil Lucas, Senior Engineer of Summit, a "Qualified Person" under National Instrument 43-101.

Completion of the Business Combination is subject to a number of conditions, including but not limited to, TSX Venture acceptance and shareholder approval.  The Business Combination cannot close until the required shareholder approval is obtained.  There can be no assurance that the Business Combination will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Information Circular of the Corporation to be prepared in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon.  Trading in the securities of the Corporation should be considered highly speculative.

Except for historical information contained herein, this news release contains forward-looking statements that involve risks and uncertainties.  Actual results may differ materially.  Neither CDR nor Amalfi will update these forward-looking statements to reflect events or circumstances after the date hereof.  More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by Amalfi and CDR.

The securities of Amalfi being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements.

The TSX Venture 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

  • Amalfi Capital Corporation
    Raymond Ludwig
    President
    (403) 585-0450

    or

    CDR Minerals Inc.
    James Hannah
    President
    (416) 861-8775