Black Sparrow Capital Corp.

TSX VENTURE : BLC.P


December 19, 2013 18:09 ET

Black Sparrow Capital Corp. Announces Letter of Intent to Enter into an Option Agreement for Qualifying Transaction

CALGARY, ALBERTA--(Marketwired - Dec. 19, 2013) -

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

Black Sparrow Capital Corp. ("Black Sparrow" or the "Corporation") (TSX VENTURE:BLC.P) is pleased to announce that it has entered into a letter of intent (the "Letter of Intent") dated December 4, 2013 with Messrs. Darrin and David Hicks (the "Vendors") of Newfoundland, whereunder Black Sparrow shall enter into an option agreement ("Option Agreement") with the Vendors to acquire a 100% undivided interest (the "Option") in and to the 'Little River Property' in the Coast of Bays area of Newfoundland.

Black Sparrow is a capital pool company and intends for the Little River Property to serve as its 'Qualifying Property' for purposes of its 'Qualifying Transaction' as such terms are defined in the policies of the TSX Venture Exchange (the "Exchange"). The proposed Qualifying Transaction is an arm's length transaction not subject to shareholder approval, and upon completion thereof it is expected that the Corporation will be a Tier 2 mining issuer.

The Option

Pursuant to the terms of the Letter of Intent and subject to completion of satisfactory due diligence, a definitive option agreement, satisfaction of certain other conditions customary to transactions of the nature of the Option and receipt of applicable regulatory approvals, Black Sparrow intends to acquire from the Vendors the right and option to acquire a 100% undivided interest in and to the Little River Property. Black Sparrow may exercise the proposed Option pursuant to the terms and conditions of the Option Agreement to be entered into by it and the Vendors by:

  1. upon entering the Option Agreement, payment to the Vendors of $10,000 and the issuance of 250,000 common shares of the Corporation ("Common Shares");
  2. on the first anniversary of the Option Agreement, payment to the Vendors of $20,000 subject to the Corporation completing a Financing (as defined below) by such date and the issuance of 250,000 Common Shares;
  3. on the second anniversary of the Option Agreement, payment to the Vendors of $40,000 subject to the Corporation completing a Financing by such date and the issuance of 250,000 Common Shares;
  4. on the third anniversary (the "Option Deadline") of the Option Agreement, payment to the Vendors of $80,000 and the issuance of 250,000 Common Shares; and
  5. incurring expenditures on the Little River Property (the "Expenditures") during the term of the Option in the amounts and on or before the dates set forth by Mines and Energy, Department of Natural Resources, Government of Newfoundland and Labrador, in order to maintain the Little River Property in good standing.

(collectively, the "Conditions of Exercise").

The Expenditures through to 2017 are as follows:

Anniversary Year of License Min expenditures by September 7th Other Fees (license renewal)
2014 $0.00 $0.00
2015 $0.00 $0.00
2016 $16,009.56 $1,500.00
2017 $27,000.00 $0.00

The term "Financing" means an equity financing of the Corporation, whereby ten percent (10%) of the net proceeds raised therefrom shall be allocated by the Corporation toward the first and second anniversary cash payments to the Vendors set forth above up to and including such amounts (being $20,000 and $40,000 respectively). Should the Corporation not complete a Financing by the first and/or second anniversary of the Option Agreement or complete a Financing by such time whereby 10% of the net proceeds raised is less than the cash consideration due on such dates, the Corporation shall issue Common Shares in the amount of the shortfall in the cash consideration due to the Vendors on the first and/or second anniversary of the Option Agreement, based on a ten (10) day volume weighted average trading price subject to a maximum issuance of 200,000 Common Shares on the first anniversary and 400,000 Common Shares on the second anniversary.

The Vendors shall also reserve a two percent (2%) net smelter royalty ("NSR") as to be defined in the Option Agreement with the Corporation retaining a buyback right of half or 1% for $1,500,000. Subject to the foregoing, in the event that any of the Conditions of Exercise in respect of the Option are not satisfied by the Option Deadline then the Option shall terminate. Nothing in the Option Agreement shall obligate the Corporation to exercise the Option or incur the Expenditures.

The area covered by the Claims shall include an area of influence surrounding the existing exterior boundaries of the Claims to a maximum of two (2) km (the "Area of Influence") and all mineral claims, interests or rights acquired, directly or indirectly, within the Area of Influence within the term of the Option Agreement by either of the Vendors or the Corporation shall become subject to the terms of the Option Agreement including the 2% NSR described above.

The Option Agreement shall terminate at any time prior to the Option Deadline by the Corporation giving notice of termination to the Vendors. Notwithstanding any other provision to be contained in the Option Agreement, if at any time during the term of the Option, the Corporation fails to advance to the Vendors any payment or issuance of Common Shares or fails to incur any of the Expenditures provided for above, or is in breach of any representation or warranty made pursuant to the Option Agreement, or other certain terms of the Option Agreement, the Vendors may terminate the Option Agreement, but only if: (a) it shall have first given to the Corporation a notice of default containing particulars of the payment not advanced, the Expenditures not incurred, or the representation, warranty or other term breached; and (b) the Corporation has not, within thirty (30) days following delivery of such notice of default, cured such default. Should the Corporation fail to cure such default in accordance within (b) herein, the Vendors may thereafter terminate the Option Agreement.

Should the Corporation sell or in any way transfer its interest in the Little River Property, it is proposed that the Vendors will receive 10% of the gross consideration. If the Corporation should sell or transfer less than a 100% interest in the Little River Property, then it is proposed that the aforementioned bonus payment shall be rateably reduced by multiplying the bonus payment by the percentage of interest subject to the transfer transaction. The sale or transfer of the remainder of the interest in the Little River Property held by the Corporation will continue to be subject to the aforementioned bonus payment.

Little River Property

The Little River Property consists of one (1) mineral licence comprising 750 hectares in the Coast of Bays area in Newfoundland. During 2010, Gwynva Resources Management Inc. was commissioned to review the geology, mineralization and results of previous exploration and to complete a geological mapping, rock chip sampling and geophysical program. Based on the results of the 2010 program, a continued exploration program consisting of diamond drill sampling and additional geophysical studies was recommended at a cost of $270,000.

Black Sparrow is currently commissioning an updated technical report on the Little River Property - further disclosure will be included in the Corporation's filing statement that is being prepared in connection with the proposed Qualifying Transaction.

Financing

Concurrent with the completion of the Qualifying Transaction and subject to regulatory approval, the Corporation intends to offer, pursuant to a non-brokered private placement, between $350,000 and $400,000 in Common Shares at a price of $0.05 per share or in subscription receipts of the Corporation ("Subscription Receipts") at a price of $0.05 per Subscription Receipt whereby each whole Subscription Receipt shall be convertible into one Common Share in connection with the completion of the Qualifying Transaction ("Private Placement") (minimum 7,000,000 / maximum 8,000,000 Common Shares). In connection with the Private Placement, the Corporation anticipates paying cash finder fees equal to 10% of the respective proceeds raised in connection with such finder(s), and issuing that number of finder warrants ("Finder Warrants") to purchase Common Shares equal to 8% of the number of Common Shares or Subscription Receipts (as the case may be) sold pursuant to the Private Placement in connection with such finder(s). Each Finder Warrant will entitle the holder thereof to purchase one Common Share at a price of $0.05 for a period of 24 months. The Corporation anticipates allocating proceeds of the Private Placement toward meeting initial listing requirements of the Exchange, costs associated with the Qualifying Transaction and finder fees in respect of the Private Placement.

Management and Board of Directors of the Resulting Issuer

Subject to and following the completion of the Qualifying Transaction and all necessary approvals, the following individuals are expected to constitute the directors and officers of the resulting issuer:

Michael Galloro, Chief Executive Officer and Director

Mr. Galloro is a Chartered Accountant with over 18 years of experience, having earned his designation while working for KPMG LLP. While engaged as Vice-President of Finance for a public company listed on the Toronto Stock Exchange, Mr. Galloro gained significant experience in finance and capital markets, corporate governance, human resources, and administration. Mr. Galloro pursued a consulting career working on various projects in compliance, valuations, mergers and acquisitions and initial public offerings. His experience stems internationally having been exposed to various global markets. Michael currently acts as a Chief Financial Officer and Director for private and publicly listed companies operating abroad.

Mike Dai, CPA, CA, CFA, Proposed Chief Financial Officer

Mike Dai is a Chartered Public Accountant and Chartered Financial Analyst with over 7 years of experience working in a variety of audit, advisory, M&A and valuation engagements. Mr. Dai has been involved in a number of public and private market transactions, including business acquisitions and reverse takeovers, for both domestic and internationally. Mr. Dai is an alumnus of Grant Thornton LLP and obtained his Master of Accounting from the University of Waterloo.

Andy DeFrancesco, Proposed Director

Andrew DeFrancesco, a graduate of University of Western Ontario, is the Co-Founder, Chairman & Chief Executive Officer of Delavaco. His capital raising experience includes having funded, jointly funded, or arranged funding in excess of $1.1 billion. He carries over 18 years of capital markets experience through various roles, including as head equity trader at C.M. Oliver Inc., an independent investment bank and resident of Apollo Capital, a private fund specializing in hedge fund and private equity investments. Mr. DeFrancesco carries a breadth of corporate experience, having been an executive for numerous companies. He is the Chairman and Chief Executive Officer of the Delavaco Group, a private equity firm with a focus on real estate, retail and certain natural resource investments. Mr DeFrancesco was the founder, Chairman and Chief Executive Officer of Delavaco Energy Inc., a Canadian Oil and Gas company that sold for $102 million which is now part of Pacific Rubiales. He was also founder and Chief Executive Officer of Dalradian Resources Inc., an Irish mineral exploration company that trades on the TSX. Mr. DeFrancesco was Co-Founder and former Chairman of APO Energy and P1 Energy Corp - two oil and gas companies that merged for $447 million. In 2011, Mr. DeFrancesco sold Colcan Energy, a company he founded and acted as Chairman to Sintana Energy, a publicly traded oil and gas company with operations in Colombia in partnership with Exxon Mobile. Mr. DeFrancesco sits on the boards of Santa Maria Petroleum, Tolima Gold and North America's Favorite Brands. Along with being a strategic investor, Mr. DeFrancesco has spearheaded, with fellow trustee Michael Serruya, the funding and turnaround of a number of companies in the retail and consumer product sectors including Jamba Juice, American Apparel, Swisher Hygiene and most recently Crumbs Bake Shops, all of which are companies listed on the NASDAQ stock market. Mr. DeFrancesco is active in a number of charities including Sunnybrook Hospitals' Natal Unit.

William C. Guinan, Director

Mr. Guinan is a partner at the law firm of Borden Ladner Gervais LLP, Calgary, Alberta. Mr. Guinan focuses his practice on securities and corporate finance, mergers & acquisitions, corporate governance, continuous disclosure matters and stock exchange requirements, as well as on oil & gas and banking matters. He represents public oil & gas issuers, and other industrial issuers, listed on both the Toronto Stock Exchange and on the TSX Venture Exchange, as well as private equity issuers, in equity and debt financing transactions, mergers & acquisitions, corporate governance matters and in various facets of oil & gas and corporate and commercial law. Mr. Guinan has served as a director and officer of a number of private and public companies, including Emerge Oil & Gas Inc. and Celtic Exploration Ltd. Mr. Guinan is currently a director of Amarok Energy Inc. and Kelt Exploration Ltd., both oil and gas exploration and production companies and CERF Incorporated, an equipment rental and waste management company. Mr. Guinan received a Bachelor of Business Administration degree from Acadia University in 1977 and a Master of Business Administration and Bachelor of Laws degrees from Dalhousie University in 1982.

Wally Rudensky, Director

Mr. Rudensky has been a Chartered Accountant since 1982 and is a Partner at MNP LLP, Chartered Accountants. His professional background has been in the taxation and corporate finance areas. Mr. Rudensky acts as CFO and director for a number of private and publicly traded companies in the energy sector, utilizing his skills in finance, tax and administration. He graduated from Ryerson University, has lectured on taxation at the Canadian Institute of Chartered Accountants and various universities, and has made presentations at numerous business seminars and conferences.

Anthony Vella, Director

Mr. Vella, a graduate of an International MBA program, commenced his career in an assurance and advisory practice for a diverse clientele base which included real estate, multinational manufacturing businesses and owner manager enterprises. Mr. Vella developed his international business acumen working abroad in various industries and for government ministries. His foundation in global business is supported by his multilingual fluency in English, Italian and French languages. Currently, Mr. Vella provides transactional advisory services for private and publicly traded companies operating internationally.

Outstanding Securities following Qualifying Transaction

Currently there are outstanding 6,000,000 Common Shares (2,000,000 of which are subject to escrow), 400,000 broker warrants (expiring December 20, 2013 and exercisable at a price of $0.10 per Common Share) and 600,000 stock options (expiring December 20, 2016 and exercisable at a price of $0.10 per Common Share).

Following completion of the Private Placement and the initial consideration payment under the proposed Option, it is anticipated that the Corporation will have outstanding up to 14,250,000 Common Shares (1,800,000 of which will be subject to escrow) and up to 640,000 finder warrants. Stock options in addition to the 600,000 stock options currently outstanding may be issued in connection with the completion of the Qualifying Transaction and will be further described in the filing statement being prepared by the Corporation in connection with the Qualifying Transaction.

Upon completion of the Qualifying Transaction and the Private Placement, it is expected that no one shareholder of the Corporation will own 10% or more of the issued and outstanding Common Shares on a fully diluted basis. The current shareholders will own approximately 42% of the issued and outstanding Common Shares of the Resulting Issuer upon completion of the Qualifying Transaction.

Sponsorship of Qualifying Transaction

Sponsorship of a Qualifying Transaction of a capital pool company is required by the Exchange unless an exemption from this requirement can be obtained in accordance with the policies of the Exchange. The Corporation is currently reviewing the Exchange requirements for a sponsorship and intends to comply with the policies of the Exchange after discussions with the Exchange regarding sponsorship, although, it is anticipated that the Corporation will seek exemptions related to sponsorship as may be applicable. There is no assurance that such exemption will be granted.

Other Information and Updates

Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Qualifying Transaction, any information releases or received with respect to the Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in securities of a capital pool company should be considered highly speculative.

The Corporation's shares are currently listed for trading on the Exchange. In accordance with Exchange policy, however, the Corporation's shares are currently halted from trading and will remain halted until such time as determined by the Exchange, which, depending on the policies of the Exchange, may not occur until the completion of the Qualifying Transaction and anticipated concurrent Private Placement. The Corporation will provide further details in respect of the Qualifying Transaction, in due course by way of press release.

Cautionary Statements

Certain statements contained in this press release constitute forward-looking information. These statements relate to future events or future performance. The use of any of the words "could", "intend", "expect", "believe", "will", "projected", "estimated" and similar expressions and statements relating to matters that are not historical facts are intended to identify forward-looking information and are based on the Corporation's current belief or assumptions as to the outcome and timing of such future events. Actual future results may differ materially. In particular, this release contains forward-looking information relating to the intention of the parties to enter into the Option Agreement, the terms and conditions of the Option, completion of the Private Placement and the completion of the technical report. Various assumptions or factors are typically applied in drawing conclusions or making the forecasts or projections set out in forward-looking information. Those assumptions and factors are based on information currently available to the Corporation. The material factors and assumptions include the parties to the Option being able to obtain the necessary director and regulatory approvals; Exchange policies not changing; completion of satisfactory due diligence; the structure of the Option being the most tax efficient way of completing the Option; and no unforeseen circumstances with respect to the technical report that would cause delay. Risk Factors that could cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking information include, among other things: conditions imposed by the Exchange, the failure to obtain the required directors' approval to the Option; changes in tax laws, general economic and business conditions; and changes in the regulatory regulation. The Corporation cautions the reader that the above list of risk factors is not exhaustive. The forward-looking information contained in this release is made as of the date hereof and the Corporation is not obligated to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by applicable securities laws. Because of the risks, uncertainties and assumptions contained herein, investors should not place undue reliance on forward-looking information. The foregoing statements expressly qualify any forward-looking information contained herein.

Completion of the transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction 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 Option, any information released or received with respect to the Option 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, Inc. has in no way passed upon the merits of the proposed Option and associated transactions and has neither approved nor disapproved of the contents of this press release.

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

Contact Information

  • Black Sparrow Capital Corp.
    MICHAEL GALLORO
    President, Chief Executive Officer
    Chief Financial Officer and Director
    (416) 907.5644 ext. 105