VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 19, 2012) - Mosquito Consolidated Gold Mines Limited (TSX VENTURE:MSQ) ("Mosquito" or the "Company") announces that new management has begun the exhaustive process of understanding the current state of the Company and its financial affairs. Previous management failed to disclose to the shareholders that a writ had been filed on Friday October 12, 2012 in the Supreme Court of British Columbia by Sacre-Davey Engineering Inc., an engineering firm, in regards to $82,643.13 of unpaid invoices. We are in the process of investigating this claim.
International Energy & Mineral Resources Investment (Hong Kong) Company Limited ("HK CO") has graciously stepped in to finance the ongoing development of the CuMo project and the new board announces that it has accepted an offer by HK CO, subject to regulatory approval, to borrow the principal amount of Cdn$1,500,000 and US$1,500,000 from, and issue a secured convertible note (the "Note") in respect of such indebtedness to, HK CO (the "Financing"). The Note shall accrue interest at a rate of 6.5% per annum and shall be repayable on or before 5 years from the date of issue (the "Maturity Date"). At the option of HK CO the Note shall be convertible at any time prior to the Maturity Date, in whole or in part, into common shares of the Company at a price of $0.28 per common share provided that HK CO shall only be permitted to exercise such conversion right to the extent that it results in HK CO holding no greater than 19.9% of the issued and outstanding common shares of Mosquito. The principal amount of the Note will be used to advance the CuMo project forward and for general working capital of the Company. The Note is subject to a four month hold period in accordance with applicable Canadian securities laws.
HK CO is a "Related Party" of the Company pursuant to the policies of the TSX Venture Exchange, as HK CO holds approximately 16.12% of the issued and outstanding common shares of Mosquito. As such, the Financing constitutes a "Related Party Transaction" under the policies of the TSX Venture Exchange. The Company is relying on exemptions from the formal valuation and minority approval requirements which are available to the Company.
The Financing was unanimously approved by the Board of Directors of the Company, other than Hongxue Fu, who declared his interest in the Financing and abstained from voting with respect to the Financing as he holds a controlling interest in HK CO. The directors eligible to vote with respect to the Financing believe that the terms of the Financing are in the best interests of the Company and the interest rate of the Note is consistent with rates generally accepted within the industry. If the principal amount of the Note is converted to the full extent possible, HK CO will increase its shareholdings in the Company from 13,256,666 common shares (approximately 16.12% of the issued and outstanding common shares) to 16,370,226 common shares (which would represent approximately 19.9% of the issued and outstanding common shares), assuming that no additional common shares of Mosquito are issued prior to such conversion.
In other news, new management continues to work establishing the status of the Company left by previous management and has already begun the process of advancing the CuMo project forward. CuMo is the main priority and efforts are being concentrated on restoring the credibility and professionalism of the CuMo project with stakeholders and other interested groups. Progress will be reported as it occurs.
Work is proceeding on several fronts especially at the project site, where we have taken steps to address our concerns about the possibility of Company assets being relocated to Mexico and are proceeding with a full audit of all of the previous transactions, equipment and ensuring everything is still present and accounted for.
More information will be released as we move forward on this exciting project.
The Board sincerely thanks Mosquito shareholders for their tremendous support and patience in effecting needed change at Mosquito.
On behalf of the Board of Directors of MOSQUITO CONSOLIDATED GOLD MINES LIMITED
Shaun Dykes, Chief Executive Officer
Neither the TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this new release.