MagIndustries Corp.

MagIndustries Corp.

December 21, 2010 13:59 ET

MagIndustries Announces Proposed Investment and the Issue of Warrants

TORONTO, ONTARIO--(Marketwire - Dec. 21, 2010) - MagIndustries Corp. ("MagIndustries" or the "Company") (TSX:MAA) reports that the Company has entered into a letter of intent with TSC Capital Ltd. ("TSC") in respect of a proposed investment by TSC in MagIndustries.

Pursuant to the letter of intent, the Company has agreed to permit TSC to conduct due diligence in respect of MagIndustries until March 1, 2011. Following completion of this due diligence period and provided that TSC is satisfied, in its sole discretion, with the results of such due diligence, TSC and the Company expect to enter into a subscription agreement pursuant to which TSC (or its nominee) will, subject to receipt of customary regulatory and other approvals as described in more detail below, agree to purchase, on an exempt private placement basis, 222.4 million units ("Units") issued by the Company at a price of Cdn$0.335 per Unit (the "Offering"). Each Unit will be comprised of one common share in the capital of the Company and one common share purchase warrant (a "Unit Warrant"). Each Unit Warrant will entitle the holder thereof to acquire one common share in the capital of the Company at an exercise price of Cdn$0.335 at any time until the first anniversary of the date of issue of the Unit Warrants (the "Unit Warrant Exercise Period"). MagIndustries has granted to TSC an exclusivity right which requires that MagIndustries suspend all discussions with third parties relating to any transaction similar to the Offering and that MagIndustries obtain TSC's consent prior to entering into any alternative transaction, including any transaction similar to the Offering.

As consideration for entering into the letter of intent, the Company has agreed to issue to TSC 113,481,000 common share purchase warrants (the "Warrants"). Such issuance will be completed in conjunction with the issuance of one common share in the capital of the Company at a price of Cdn$0.32. Each Warrant entitles TSC to acquire one common share in the capital of the Company at an exercise price of Cdn$0.32 per common share at any time until the first anniversary of the date of granting of the Warrant. If exercised, the common shares issuable to TSC would bring TSC's ownership of MagIndustries to approximately 19.9% of the issued and outstanding shares.

Provided that TSC is satisfied with its due diligence and that it signs definitive documentation to subscribe for the Units, if all of such Units are issued, and all of the Warrants and the Unit Warrants are exercised, the total gross proceeds to MagIndustries would be approximately Cdn$185 million and would leave TSC with an ownership interest of approximately 55% of MagIndustries' issued and outstanding shares. Provided that the Offering is completed and all of the underlying securities are issued, the equity provided by this transaction is expected to be sufficient to meet a targeted debt/equity ratio of 70:30 for the financing of construction of the Company's Mengo potash project, while retaining the Company's full 90% interest in the project, with the remaining 10% being held by the Republic of Congo.

From TSC's Johannesburg office, Partner Rick Menell said, "TSC is looking forward to commencing its due diligence on MagIndustries' assets and is very excited by the opportunity to engage with MagIndustries, as we believe the Mengo potash project has high potential value. Our extensive experience in Central Africa will be able to support the Company's current efforts. TSC's resources will complement MagIndustries' management as they bring this major project to fruition."

Rich Morrow, CEO of the Company, said, "While we have not been able to accelerate our process with Chinese investors or to determine a definitive timetable for a transaction with them, we are pleased that our continued search for strategic alternatives has led the Company to join forces with TSC. The Warrant aligns TSC interests with the interests of our shareholders and motivates action on a defined timeframe with a partner which has a proven track record of accomplishments in Africa and the capability of adding value for our shareholders."

The completion of the Offering will be subject to receipt of all necessary regulatory approvals and the approval of the Company's shareholders to be obtained at a special meeting of the shareholders which the Company anticipates calling in the first quarter of 2011. On the earlier of the failure by shareholders of MagIndustries to approve the Offering by the requisite majority and the exercise of at least 50% of the Warrants, MagIndustries will pay to TSC an amount of Cdn.$2,600,000 as a due diligence fee.

In addition to the foregoing, the letter of intent provides that TSC will be provided with anti-dilution rights to ensure that, in the event that the Company issues securities prior to the expiry of the Unit Warrant Exercise Period, that it is able to retain an ownership interest in the Company that is equivalent to that which it currently holds or is entitled to acquire.

It is also anticipated that TSC will be provided with certain rights with respect to board representation, the full details of which will be set forth in the information circular to be provided to shareholders in connection with the above referenced special meeting.

About TSC Capital Ltd.

TSC is a private investment partnership focused on the mining and natural resources sector. TSC and its partners have extensive investment and mining experience in Africa, Asia, and Europe, including leading roles in the development and operation of large scale mining projects. The firm invests in natural resource companies at all stages of development, bringing a broad range of operational and management competencies in addition to financial capital. TSC has particular expertise in Sub-Saharan Africa, the firm's area of historic focus.

About MagIndustries Corp.

MagIndustries is a Canadian company whose common shares are listed on the TSX and trades in Canadian currency under the symbol "MAA". The Company has 456,772,462 shares outstanding on an undiluted basis. MagIndustries is focused on the development of its potash assets in the Republic of Congo. More information on the Company is available on its website,

Except for historical information, this press release contains forward-looking statements, which reflect the Company's current expectation regarding future events. These forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from those statements. Those risks and uncertainties include, but are not limited to, changing market conditions, and other risks detailed from time-to-time in the Company's ongoing filings. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events in this press release might not occur.

Cusip: 55917T 102

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