Element 79 Capital Inc.
TSX VENTURE : EMS.P

February 25, 2015 12:39 ET

Element 79 Capital Inc. Provides Update Regarding its Qualifying Transaction

MONTREAL, QUEBEC--(Marketwired - Feb. 25, 2015) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES.

Element 79 Capital Inc. (TSX VENTURE:EMS.P) ("Element 79" or the "Company"), a capital pool company listed on the TSX Venture Exchange (the "TSXV"), is pleased to provide an update regarding its proposed "Qualifying Transaction", within the meaning of such term as defined under Exchange Policy 2.4 - Capital Pool Companies.

As previously disclosed in its news releases dated December 31, 2013 and July 25, 2014, the Company had entered into a non-binding letter of intent with Canadian Gold Resources Ltd. ("Canadian Gold"), which outlined the general terms and conditions pursuant to which the Company and Canadian Gold would be willing to complete a transaction that would result in a reverse take-over of the Company by the shareholders of Canadian Gold (the "Canadian Gold Transaction"). The Canadian Gold Transaction remained subject to, among other conditions, completion of due diligence investigations to the satisfaction of each of the Company and Canadian Gold and receipt of requisite regulatory approval, including the approval of the TSXV.

Due to the delay that is expected to be necessary to resolve certain title registration issues with the Mexican General Bureau of Mining involving Canadian Gold's material mining property, the Company has decided not to proceed with the Canadian Gold Transaction.

New Qualifying Transaction with Benton Resources Inc.

On February 23, 2015, the Company signed a letter of intent (the "LOI") with Benton Resources Inc. (TSX VENTURE:BEX) ("Benton") to acquire a right to earn a 100% interest in Benton's right, title, and interest in and to the nine contiguous, non-surveyed, unpatented mining claims totaling 67 units comprising Benton's Abernethy gold project (the "Property") situated approximately 10 km WSW of Kenora, Ontario (the "Transaction"). The LOI was negotiated at arm's length and the Company intends the Transaction to constitute its Qualifying Transaction under the policies of the TSXV.

Since the Transaction is not a non-arm's length transaction, Element 79 is not required to obtain shareholder approval for the Transaction.

The Transaction is subject to receipt of requisite regulatory approval, including the approval of the TSXV and standard closing conditions, the approval of the directors of each of the Company and Benton of a definitive option agreement in respect of the Property (the "Option Agreement"), and completion of due diligence investigations to the satisfaction of each of the Company and Benton, as well as the conditions described below.

Trading in the common shares of Element 79 is halted at present. It is unlikely that the common shares of Element 79 will resume trading until the Transaction is completed and approved by the TSXV.

Conditions to the Transaction

Prior to completion of the Transaction (and as conditions of closing):

  • the parties will prepare a filing statement in accordance with the rules of the TSXV, outlining the terms of the Transaction;
  • Benton and the Company will enter into the Option Agreement in respect of the Transaction on or before April 24, 2015;
  • all requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained; and
  • the Company will complete a concurrent financing (described below) for minimum gross proceeds of $1,000,000.

The Proposed Transaction

As of the date hereof, the Company has 6,012,066 common shares ("Element 79 Shares") issued and outstanding, and securities exercisable or exchangeable for, or convertible into, or other rights to acquire, an aggregate of 802,413 Element 79 Shares at an exercise price of $0.15 per Element 79 Share.

The Company proposes to acquire an initial fifty-one percent (51%) interest in the Property by:

  1. issuing 400,000 Element 79 Shares, a deemed value of a minimum of $0.17 per Element 79 Share, to Benton upon closing of the Transaction (the "Closing"); and
  1. incurring a minimum of $500,000 in exploration expenditures on the Property within twelve (12) months of Closing.

In addition, the Option Agreement shall stipulate that Element 79 will have the right to acquire an additional:

  1. nineteen percent (19%) interest in the Property by (A) issuing an additional 600,000 Element 79 Shares to Benton at the market price of the Element 79 shares on the TSXV at the time that the right is exercised and (B) incurring a minimum of $500,000 in additional exploration expenditures on the Property within eighteen (18) months of Closing; and
  1. thirty percent (30%) interest in the Property by paying Benton $750,000, which payment may be made in cash or, subject to applicable regulatory approvals, in Element 79 Shares, at the sole discretion of Element 79 (together, the Element 79 Shares that may be issued as consideration to Benton in addition to the initial 400,000 Element 79 Shares, collectively referred to as the "Additional Shares"), within 180 days following the date upon which Element 79 acquires an aggregate seventy percent (70%) interest in the Property, failing which Element 79 and Benton will remain 70%/30% joint venture partners in respect of the Property.

Should Element 79 acquire a one hundred percent (100%) interest in the Property, Benton shall be granted a three percent (3%) net smelter return royalty (NSR), half of which may be repurchased by Element 79 by paying Benton $1,000,000.

The Company will not assume any of the liabilities or obligations of Benton of any nature or kind whatsoever, contingent or otherwise, relating to the Property.

The current shareholders of Element 79 are expected to hold 93.76% of the common shares of Element 79 upon completion of the Transaction (the "Resulting Issuer") and the shareholders of Benton are expected to hold 6.23% of the common shares of the Resulting Issuer (immediately prior to giving effect to the Private Placement, as defined below, and any Additional Shares that may be issued).

It is expected that the Resulting Issuer will be classified as a Tier 2 Mining Issuer.

Concurrent Private Placement

Element 79 has engaged Jones, Gable & Company Ltd. (the "Agent") to act as agent, on a best efforts basis, in connection with a brokered private placement (the "Private Placement") of securities of Element 79 that will close concurrently with, and as a condition of, the Transaction. Pursuant to the Private Placement, Element 79 intends to issue a minimum of 5,882,353 Element 79 Shares and a maximum of 8,823,530 Element 79 Shares a at a price of $0.17 per Element 79 Share for minimum gross proceeds of $1,000,000 and maximum gross proceeds of $1,500,000.

In connection with the Private Placement, the Agent will receive (i) a cash commission of 10% of the total proceeds of the Private Placement, and (ii) compensation options (the "Agent's Options") to acquire such number of Element 79 Shares which is equal to 10% of the aggregate number of Element 79 Shares issued and sold pursuant to the Private Placement. Each Agent's Option shall entitle the Agent to acquire one additional Element 79 Share at an exercise price of $0.17 per Element 79 Share for a period of two years from the completion of the Transaction.

About Benton Resources Inc. and the Property

Benton (formerly 0924698 B.C. Ltd.) was incorporated under laws of the province of British Columbia on November 8, 2011.

Benton is a well funded Canadian based junior mineral exploration company listed on the TSXV under the symbol BEX. It is a party to multiple joint venture projects and holds a diversified property portfolio in Gold-Silver, Nickel, Copper, and Platinum group elements.

The Property is located 10 km southwest of Kenora, Ontario. Acquired by staking, Benton has 100% ownership in the Property which consists of 9 claims totaling 67 units. The Property covers several historically defined electromagnetic responses associated with gold-in-soils geochemistry.

In connection with the Transaction, Benton will complete and file an updated National Instrument 43-101 technical report and such other documentation in respect of the Property as may be required by the TSXV.

Next Steps and Proposed Insiders, Officers, and Board of Directors of the Resulting Issuer

Element 79 and Benton are working to settle the terms of the definitive Option Agreement and to prepare a new filing statement in respect of the Transaction (the "Filing Statement") that will be filed with the regulatory authorities, including the TSXV as promptly as practicable.

Following completion of the Transaction and the Private Placement (assuming gross proceeds of $1,000,000), but excluding the issuance of any Additional Shares, it is anticipated that no one shareholder will exercise control or direction over more than 10% of the issued and outstanding shares of the Resulting Issuer.

Upon completion of the Transaction, it is anticipated that the following current officers and directors of Element 79 will continue to hold the same positions with the Resulting Issuer:

Edward Ierfino - President, CEO and Director: Mr. Edward Ierfino has a Bachelor of Commerce majoring in finance from Concordia University in Montreal, Québec. Since 2003, he has been President of EGI Holdings Corporation (formerly Canadian Electronic Deposit Centre Inc.), a consultancy firm providing advice to executive management and directors of public companies in the areas of financing, investor relations, regulatory compliance and strategic development; and specific experience in the natural resources, financial transaction services and technology industries. Most recently, Mr. Ierfino was the manager, investor relations at Argex Titanium Inc. from July 2011 until June 2012. He also has served on the board of directors of two issuers listed on the TSXV.

André Laferrière - Director: Mr. Laferrière is Vice President, Mining and Geology for Argex Titanium Inc. He has over 15 years of experience in mineral exploration and mining development projects for precious metals (gold, silver, PGE), base metals (nickel, copper, zinc, lead, iron), and technology metals (lithium, rare earths). As a registered professional geologist (OGQ) and NI 43-101 Qualified Person, his expertise includes project evaluation, mineral resource estimation, NI 43-101 technical reporting, and exploration projects design, implementation and management. He holds M.Sc. and B.Sc. degrees in Geology of the University of Montreal.

Kosta Kostic - Corporate Secretary and Director: Mr. Kosta Kostic is a member of the Barreau du Québec and a partner with the law firm of McMillan LLP where he specializes in the field of corporate finance and securities law. Prior to joining McMillan LLP, in February 2014, Mr. Kostic was a partner at another Canadian national law firm. Mr. Kostic regularly advises both private and public companies active in a wide range of sectors, including mining, oil and gas, renewable energy, technology, manufacturing, retail, transportation and biotechnology. Mr. Kostic has participated in several conferences on securities, corporate finance and corporate governance, and has completed an executive training program on financial information at the McGill International Executive Institute. Mr. Kostic earned a Bachelor of Arts in Communication Studies from Concordia University in Montreal, Québec and a Bachelor of Civil Law and a Bachelor of Common Law from McGill University in Montreal, Québec. In 2013, Mr. Kostic earned a Certificate in Mining Law from Osgoode Law School, York University. In 2004, Mr. Kostic was seconded to the Exchange as a Manager, Listed Issuer Services where he gained extensive experience with the Capital Pool Company program.

William Waks - CFO: Mr. William Waks, CPA, CA serves as the Chief Financial Officer of the Company and Ovid Capital Ventures Inc. Mr. Waks has been Chief Financial Officer and Vice President of Finance at Osta Biotechnologies Inc. since June 2010. Mr. Waks served as Consulting Chief Financial Officer of Osta Biotechnologies Inc. since June 20, 2007. Mr. Waks has approximately 10 years of experience. He continues to practice in public accounting, catering to small and medium sized businesses providing assurance and other accounting services as well as business consulting services to clients in various industries. Mr. Waks served as Chief Financial Officer of Copitrak Inc. (also known as Promatek Industries Ltd) from 2003 to 2007. He is a member of the Ordre des Comptable Agréés du Québec (1985) and the Ontario Institute of Chartered Accountants (1996). He obtained his designation after graduating from Concordia University (Bachelor of Commerce, 1982) and a diploma of public accountancy from McGill University's Faculty of Graduate Studies and Research (1984).

Sponsorship

Sponsorship of a Qualifying Transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Element 79 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 Element 79 will ultimately obtain this exemption. Element 79 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 Element 79 and Benton 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, Exchange acceptance and, if applicable, pursuant to the requirements of the Exchange, 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.

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.

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; 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 ability of the Resulting Issuer to execute and achieve its business objectives. 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. Element 79 and Benton 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.

Contact Information

  • For additional information regarding the Transaction,
    please contact:
    Element 79 Capital Inc.
    Edward Ierfino
    President and Chief Executive Officer
    (514) 562-1374

    Benton Resources Inc.
    Stephen Stares
    President
    (807) 475-7474