First Metals Inc.

First Metals Inc.

July 10, 2009 17:55 ET

First Metals Inc. Obtains TSX Exemption for Share Issuance

TORONTO, ONTARIO--(Marketwire - July 10, 2009) - First Metals Inc. ("First Metals" or the "Company") (TSX:FMA) announced today that the Toronto Stock Exchange ("TSX") has confirmed that the Company is eligible for the financial hardship exemption contained in section 604(e) of the TSX Company Manual (the "Manual") in connection with the previously announced issuance of securities pursuant to its proposal (the "Proposal") under the Bankruptcy and Insolvency Act. The Proposal was approved by the creditors of First Metals on May 6, 2009 and by the Ontario Superior Court of Justice on June 17, 2009.

Under the terms of the Proposal, each person holding a proven secured claim will receive 75 common shares in the capital of the Company (each a "Common Share") and 8 warrants in the capital of the Company (each a "Warrant") for each $1 of proven secured claim; $2,618,000 of secured promissory notes (each a "Note") will be issued on a pro rata basis to persons holding a proven secured claim; and the Company will distribute $882,000 pro rata to secured claim holders. Proven secured claim holders will also receive any future proceeds from the sale of any equipment by the Company over $1,000, which will be applied to reduce the amount owing pursuant to the Notes.. Each person holding a proven unsecured claim shall receive 2 Common Shares for each $1 of proven unsecured claims held or may instead, elect to receive a cash payment equal to ten per cent of that person's proven unsecured claim up to a maximum of $500.

The above terms will result in the issuance by the Company of an estimated 287,396,705 Common Shares and 26,159,176 Warrants. Each Warrant will be exercisable for a period of 18 months and will entitle the holder thereof to acquire one further Common Share at an exercise price of $0.03 per Common Share for the first 12 months following the date of issue and $0.05 for the remaining six months. The additional shares being issued pursuant to the Proposal represent 6.7 times the number of common shares presently outstanding.

The total number of issued and outstanding Common Shares, following completion of the Proposal, assuming all Warrants are exercised, would be 356,407,079. The 313,555,881 Common Shares issuable under the Proposal, together with the currently issued and outstanding shares, represent an 832 % dilution to the currently issued and outstanding Common Shares and would result in the current shareholders holding approximately 12% of the Company's Common Shares following completion of the Proposal and full exercise of the Warrants. The exercise of the Warrants would result in cash proceeds to the Company of approximately $785,000 to $1,300,000.

The Company is not aware of any change of control that would result from the issuance of the Common Shares pursuant to the terms of the Proposal. No insiders of the Company are receiving Common shares or otherwise participating in the Proposal. The TSX requires shareholder approval, unless an exemption is applicable, as a condition of acceptance of the Common Shares and Warrants issued pursuant to the Proposal since the number of Common Shares issuable would represent greater than 25% of the outstanding common shares of Company. however as a result of the financial position of the Company and the Proposal, the Company applied for an exemption from such approval contained in section 604(e) of the Manual.

Following completion of the Proposal, the Company will be required to meet the original listing requirements of the TSX. The TSX has advised the Company that if it cannot demonstrate that it meets these requirements, the TSX will initiate an expedited delisting review. Based on the information available to the TSX as at the date of this press release, following completion of the Proposal the Company would not satisfy the TSX's original listing requirements.

The Company further reports that on June 29, 2009, it filed its quarterly financial statements and related management discussion and analysis for the period ended March 31, 2009. Copies of these filings can be found on and on the Company's web site at The Company is now current with its regulatory financial filings. As a result of the filing which remedied the defaults, the Management Cease Trade Order dated May 25, 2009 has lapsed effective as of July 3, 2009.

First Metal's CEO Richard Williams commented that with the reorganisation substantially behind us, we look forward to the challenges of mine development and growth.

First Metals Inc. presently has approximately 42.8 million shares issued and outstanding.

The statements made in this news release may contain certain forward-looking statements. Actual events or results may differ from the Company's expectations. Certain risk factors may also affect the actual results achieved by Company.

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