Echelon Capital Corporation
TSX VENTURE : EHN.H

July 23, 2012 17:07 ET

Echelon Capital Corporation Enters Into Definitive Agreement With Tierra Nuevo Mining Ltd in Respect of a Proposed Qualifying Transaction

TORONTO, ONTARIO--(Marketwire - July 23, 2012) -

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Echelon Capital Corporation (TSX VENTURE:EHN.H) ("Echelon") is pleased to announce that it has signed a definitive agreement (the "Agreement") with Tierra Nuevo Mining Ltd ("Tierra Nuevo"), a corporation existing under the laws of the British Virgin Islands, which outlines the terms and conditions pursuant to which Echelon and Tierra Nuevo will complete a transaction that will result in a reverse take-over of Echelon by the shareholders of Tierra Nuevo (the "Transaction"). The Agreement was negotiated at arm's length and is effective as of July 23, 2012.

The Transaction is subject to requisite regulatory approval, including the approval of the TSX Venture Exchange (the "TSXV") and standard closing conditions, including the approval of the directors of each of Echelon and Tierra Nuevo and completion of due diligence investigations to the satisfaction of each of Echelon and Tierra Nuevo, as well as the conditions described below.

Echelon is incorporated under the provisions of the Business Corporations Act (Ontario) with its registered and head office in Toronto, Ontario. It is a capital pool company and intends for the Transaction to constitute its "Qualifying Transaction" as such term is defined in the policies of the TSXV. Echelon is a "reporting issuer" in the provinces of Ontario, British Columbia and Alberta.

Since the Transaction is not a non-arm's length transaction, Echelon is not required to obtain shareholder approval for the Transaction.

Trading in the common shares of Echelon has been halted. It is unlikely that the common shares of Echelon will resume trading until the Transaction is completed and approved by the TSXV.

The Proposed Transaction

Pre-Closing Capitalization of Echelon

As of the date hereof, Echelon has 1,780,000 common shares ("Echelon Shares") outstanding and stock options exercisable for 188,800 Echelon Shares.

Echelon Consolidation and Echelon Private Placement

As soon as practicable, Echelon will effect a consolidation on the basis of 2 pre-consolidated Echelon Shares for 1 post-consolidated Echelon Share (the "Echelon Consolidation"). Immediately after completing the Echelon Consolidation, Echelon intends to close a non-brokered private placement of up to 10,000,000 consolidated Echelon Shares at $0.05 per share for total proceeds of up to $500,000 (the "Echelon Private Placement"). The Echelon Consolidation and Echelon Private Placement were approved by the shareholders of Echelon at their last meeting of shareholders held on October 7, 2011.

RTO Consolidation

Immediately prior to completing the Transaction, Echelon plans to effect a further consolidation of Echelon Shares on the basis of 1.30331987526 pre-consolidated Echelon Shares for 1 post-consolidated Echelon Share (the "RTO Consolidation") such that there will be 8,355,585 Echelon Shares issued and outstanding after the RTO Consolidation has been completed. Echelon plans to seek shareholder approval for the RTO Consolidation at its upcoming shareholders meeting to be held prior to the completion of the Transaction.

Terms of the Transaction

Echelon proposes to acquire all of the common shares of Tierra Nuevo ("Tierra Nuevo Shares") pursuant to the terms of the Agreement. It is expected that 15,522,499 Tierra Nuevo Shares (representing 100% of the Tierra Nuevo Shares inclusive of the Tierra Nuevo Shares issued pursuant to the Private Placement as described below) will be exchanged for an aggregate of 85,466,880 newly issued common shares of the resulting entity (the "Resulting Issuer") at a deemed price of $0.25 per share based on an exchange ratio of 0.18162004977 Tierra Nuevo Shares for each common share of the Resulting Issuer. Upon the completion of the Transaction, it is expected that the shareholders of Echelon will hold approximately 8.91% of the common shares of the Resulting Issuer and the former shareholders of Tierra Nuevo will hold approximately 91.09% of the common shares of the Resulting Issuer.

Further, Echelon proposes to acquire all of the Tierra Nuevo Warrants (as defined below) pursuant to the terms of the Agreement. It is expected that 2,070,469 Tierra Nuevo Warrants will be exchanged for an aggregate of 11,400,002 newly issued warrants of the Resulting Issuer containing substantially the same terms as the Tierra Nuevo Warrants.

The total number of common shares and warrants of the Resulting Issuer to be issued in exchange for Tierra Nuevo Shares and Tierra Nuevo Warrants, respectively, may be adjusted in the event that the terms of the Private Placement (as defined below) are amended.

Private Placement of Subscription Receipts

Prior to closing the Transaction, Tierra Nuevo intends to complete a brokered private placement of subscription receipts at a price of $1.3765 per subscription receipt for aggregate gross proceeds of approximately $5,700,000 (the "Private Placement"). Immediately upon the satisfaction or waiver of the mutual conditions set out in the Agreement, the Subscription Receipts will be automatically converted into units of Tierra Nuevo ("Tierra Nuevo Units") and the proceeds to the Private Placement will be released to the Resulting Issuer. Each Tierra Nuevo Unit shall be comprised of one Tierra Nuevo Share and one half (1/2) of a common share purchase warrant ("Tierra Nuevo Warrant"), each whole Tierra Nuevo Warrant shall be exercisable for one Tierra Nuevo Share for a period of 24 months from the closing of the Transaction at an exercise price of $1.72 per share. Immediately upon the automatic conversion of Subscription Receipts for Tierra Nuevo Units, the Tierra Nuevo Shares and Tierra Nuevo Warrants will be exchanged for substantially the same securities in the Resulting Issuer in accordance with the Agreement.

Conditions to the Transaction

In addition to customary conditions for a transaction of this nature, prior to completion of the Transaction (and as conditions of closing):

  • Echelon must complete the Echelon Consolidation and Echelon Private Placement.
  • Echelon must complete the RTO Consolidation.
  • Tierra Nuevo must complete the Private Placement.
  • Shareholders and warrantholders of Tierra Nuevo holding 100% of the Tierra Nuevo Shares issued and outstanding and 100% of the Tierra Nuevo Warrants have agreed to participate in the Transaction.
  • The parties will prepare a filing statement in accordance with the rules of the TSXV, outlining the terms of the Transaction.
  • All requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained.

About of Tierra Nuevo

Tierra Nuevo was incorporated on December 16, 2008 under the laws of the British Virgin Islands. Tierra Nuevo through its wholly owned Mexican subsidiary, Tierra Nueva Mineria S.A. de C.V, owns or holds the right to acquire five precious metal properties in Mexico. Tierra Nuevo's principal property, the Noche Buena property, comprises of two mining concessions: the Unificación Noche Buena concession with a size of 265.75 ha and the Beatriz concession with a size of 4 has which are located approximately 100 km southwest of Ciudad Saltillo. These 2 (non-contiguous) mining concessions comprising the Noche Buena property, which has been optioned by Tierra Nuevo, are held by Cia Minera Noche Buena y Anexas, Sociedad Anonimo. Tierra Nuevo also holds the right to re-process the tailings on the Noche Buena property which lie adjacent to the concessions. The work that has been conducted by Tierra Nuevo on the Noche Buena property to date, being mapping and rock chip sampling, has been designed to explore for gold, silver, lead, zinc and copper mineralization and to assist in the development of drill targets which may lead to the production of a potential mineral resource.

Mr. Alex Van Hoeken, resident of Breda, Netherlands, currently has control or direction over approximately 29% of the issued and outstanding Tierra Nuevo Shares. Mr. Miguel Angel Barahona Gutierrez, resident of Saltillo, Coahuila, Mexico, currently has control or direction over approximately 29% of the issued and outstanding Tierra Nuevo Shares. Mr. Jim Williams, resident of London, United Kingdom, currently has control or direction over approximately 29% of the issued and outstanding Tierra Nuevo Shares.

Financial Information Concerning Tierra Nuevo

The table below sets out certain selected financial information regarding Tierra Nuevo as at and for the year ended December 31, 2011 (unaudited). The selected information was prepared in accordance with International Financial Reporting Standards (IFRS).

As at December 31, 2011
US($)
(unaudited)
Current Assets 360,086
Non-Current Assets 254,185
Total Assets 614,271
Current liabilities 168,758
Non-Current Liabilities Nil
Total Liabilities 168,758
Shareholders' equity 445,513
Total liabilities and equity 614,271

Insiders, Officers and Board of Directors of the Resulting Issuer

Upon completion of the Transaction, it is anticipated that the board of directors of the Resulting Issuer shall be reconstituted to consist of 5 directors. It is currently intended that the board will be comprised of: Miguel Angel Barahona Gutierrez, Loudon Owen, Michael Nahon, Alex Van Hoeken and Thomas Pladsen. Additionally, it is currently intended that Miguel Angel Barahona Gutierrez will act as President and Chief Executive Officer, Loudon Owen will act as Chairman and Michael Nahon will act as Vice President of the Resulting Issuer. Prior to the completion of the Transaction, it is intended that Echelon's current Chief Financial Officer will resign and that a new Chief Financial Officer will be appointed.

Following completion of the Transaction and the Private Placement, it is anticipated that Mr. Alex Van Hoeken, Mr. Miguel Angel Barahona Gutierrez and Mr. Jim Williams will exercise direction or control over more than 10% of the issued and outstanding shares of the Resulting Issuer.

The following sets outs the names and backgrounds of all persons who are expected to be the directors and officers of the Resulting Issuer.

Miguel Angel Barahona Gutierrez, President, Chief Executive Officer and Director

Mr. Barahona has over 25 years of experience in the mining industry. He started his professional career on a small underground mine in Guanacevi, Durango, Mexico, as Project Manager and was involved in the design of narrow vein mining production from 1986 to 1987. He joined Luismin group in 1987 and held several positions such as Supervisor, Foreman, Superintendent and Manager Assistant in Tayoltita, Durango Mexico relating to narrow vein and underground mining operations until 1989. From 1990-1992 he was Chief Engineer, General Assistant Director, General Manager and Operations Director, responsible for the underground mining operations for Minera Tayahua. In 1994 he formed IET de Mexico, a company aimed at developing mining and processing technologies and innovations. From 1995-2000 he worked as a consultant and General Manager, involved in mine processing, plant design, reserves evaluation, feasibility study and business development for Corriente Resources in Vancouver with projects in Bolivia, Argentina and Peru. From 2000-2002 he provided mine engineering services for Thiess PTY Ltd relating to several international projects located in Peru, Chile, Australia and Indonesia. In 2002 he formed an exploration company and acquired several properties with world class deposit potential in Mexico and was involved in certain joint-venture projects with Cardero Resource Corp. and Anglo American in Baja, Mexico. Mr. Barahona is currently serves as a director of Arian Silver de Mexico, S.A. de C.V., Wealth Minerals Mexico, S.A. de C.V. and Tierra Nuevo Mining Ltd. Mr. Barahona obtained a B.Sc in mining engineering from Universidad de Guanajuato, Mexico in 1986 and a M. of Engineering from the Colorado School of Mines in 1993. Mr. Barahona is a member of the Society of Mining Engineers and was nominated in 2012 as Vice President of the International Committee (Mexico) of the Society of Mining Engineers.

Loudon Owen, Chairman and Director

Mr. Owen co-founded and manages McLean Watson Capital Inc., a private Toronto-based venture capital company. Mr. Owen currently serves on the board of directors of Kilo Goldmines Ltd. (TSX), Hanfeng Evergreen Inc. (Chair - TSX), Posera-HDX Limited (Chair - TSX), and Ntegrator International Ltd. (SGX). He is also Chair of Quantec Geosciences Ltd., a leading ground geophysical services company in the mining industry. Mr. Owen Loudon holds a BA from the University of Toronto, a JD from Osgoode Hall Law School, Toronto and an MBA from INSEAD.

Michael Nahon, Vice President and Director

Mr. Nahon co-founded Greenwich Group Limited in 1996, a financial services company previously listed on the Johannesburg Stock Exchange, and served on the board of directors as managing director until 2002. Mr. Nahon also co-founded Red Arrow Capital (Pty) Ltd in 2005, a private Johannesburg based project finance company with a focus in the mining sector and currently serves as a board member. Mr. Nahon is currently the Chief Executive Officer of Miracle Upon Miracle (Pty) Ltd, a South African company focusing on the platinum sector in South Africa. Mr. Nahon previously sat on the board of Rectron (Pty) Ltd, a technology distribution company previously listed on the Johannesburg Stock Exchange. Mr. Nahon currently serves on the board of Tierra Nuevo Mining Ltd. Mr. Nahon holds a B.Comm, LL.B. and a post graduate H.Dip Company Law Qualification from the University of the Witwatersrand and is admitted to practice in the High Court of South Africa.

Alex Van Hoeken, Director

Mr. Van Hoeken is a Dutch citizen and obtained a B.Sc. in Mining Engineering from the Colorado School of Mines in 1991. His early career included positions in the maritime construction industry in Nigeria, Malaysia, Qatar, and several European countries, after which he was involved in the establishment of gold and copper exploration and mining ventures in Indonesia, Mexico, and Oman. He has been active in the mining industry in various management and consulting positions in the Democratic Republic of Congo (DRC) in the gold, diamond, and copper sectors since 1999 and has extensive experience with remote operations. Mr. Van Hoeken has been a director and managing director of several private companies and subsidiaries of listed companies since 1996, and is currently the President & CEO of Kilogoldmines. He has a good command of Spanish, and is a Fellow of the UK Institute of Materials, Minerals, and Mining as well as a UK Chartered Engineer, and a Professional Member of the US Society of Mining Engineers. Mr Van Hoeken has been involved with Tierra Nuevo since inception, which has benefited from his knowledge of Mexico.

Thomas Pladsen, Director

Mr. Pladsen has over 20 years experience in the public junior exploration market. Mr. Pladsen has been the Chief Financial Officer of Atacama Pacific Gold Corporations (TSXV listed gold company) since September 2009; prior to that he was the Chief Financial Officer of Nighthawk Gold Corp. (TSXV listed gold company) from 2008 to 2009 and the Chief Financial Officer of Andina Minerals Inc. (TSXV listed gold company) from 2005 to 2009. Mr. Pladsen holds a BBA from Wilfred Laurier University and obtained a Chartered Accountant designation while practicing with KPMG LLP in Toronto in the 1980s. He is currently a Director of seven TSXV listed companies involved in mineral exploration, investment and development.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Echelon is currently reviewing the requirements for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the TSXV, however, there is no assurance that Echelon will ultimately obtain this exemption. Echelon intends to include any additional information regarding sponsorship in a subsequent press release.

Further Information

All information contained in this news release with respect to Echelon and Tierra Nuevo was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Completion of the transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and, if applicable, pursuant to the requirements of the TSXV, 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 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 Inc. has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Private Placement; future exploration and testing; use of funds; and the business and operations of the Resulting Issuer after the proposed transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; and the results of current exploration and testing. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Echelon and Tierra Nuevo disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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

  • Echelon Capital Corporation
    Loudon Owen
    Director
    (416) 363-2010 (FAX)

    Tierra Nuevo Mining Ltd
    Michael Nahon
    Director
    +27 86 682 4995 (FAX)