Quartet Resources Limited
TSX VENTURE : QRL.H
NEX BOARD : QRL.H

Quartet Resources Limited

July 27, 2015 11:47 ET

Quartet Resources Limited Enters Into Share Exchange Agreement and Files Preliminary Prospectus for Concurrent Financing

CALGARY, ALBERTA--(Marketwired - July 27, 2015) - Quartet Resources Limited (NEX:QRL.H) ("Quartet" or the "Company") is pleased to announce, that it has filed a preliminary prospectus with certain securities regulatory authorities for the offering of a minimum of 3,750,000 units (each a "Unit") up to a maximum 10,000,000 of Units of the Company for minimum gross proceeds of $750,000 and up to maximum gross proceeds of $2,000,000, as more fully set out below, and that further to Quartet's prior news release dated May 6, 2015, it has entered into a share exchange agreement with Goldfield Empires Holdings Limited ("Goldfield"), dated July 24, 2015 (the "Share Exchange Agreement") whereby Quartet will acquire all of the issued and outstanding shares of Goldbelt International Limited ("Goldbelt") in exchange for 7,500,000 shares in the capital of Quartet (the "Transaction"). The Transaction is expected to serve as the Company's "Qualifying Transaction", as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange") and is subject to the approval of the Exchange. Following completion of the Transaction, Goldbelt will be a wholly-owned subsidiary of the Company, and the Company is expected to change its name to "Goldbelt Empires Limited" (or such other name as is acceptable to the Company, Goldbelt and the Exchange) and will carry on the current business of Goldbelt as the resulting issuer (the "Resulting Issuer").

Quartet is a public company incorporated under the laws of Hong Kong and is a "capital pool company" under the policies of the Exchange, which gives it access to Asian markets among capital pool companies. Quartet has a head office in Hong Kong's Wan Chai district.

Goldbelt is a private company incorporated under the laws of Hong Kong, focused on gold exploration in West Africa. Goldbelt's business is the acquisition, exploration and development of mineral resources in West Africa. Goldbelt currently has two subsidiaries: (i) Mali Goldfields Limited ("MG Limited") of which Goldbelt owns 100% of the issued and outstanding ordinary shares and (ii) Mali Goldfield SARL ("MG SARL"), of which MG Limited owns 100% of all of the issued and outstanding shares. Goldbelt's subsidiary MG SARL owns 100% of an exploration permit for exploration of gold and base metals on the South Morila (Kola) Concession located in the Sikasso Region of southern Mali which covers an area of 150 km2 in size (the "South Morila Property").

Pursuant to a Mineral Asset Development Agreement, dated June 18, 2015 between Tanex Corporation ("Tanexco") and Goldfield, Tanexco has agreed to use best efforts to identify mining opportunities in Mali in order to develop Goldbelt's asset portfolio and has thereby granted Goldfield a right of first refusal over concessions under their control for a three-year period, commencing June 18, 2015 (the "Mali ROFR"). Pursuant to a Deed of Assignment, dated June 18, 2015 between Goldfield and Goldbelt, Goldfield has assigned the Mali ROFR to Goldbelt. In addition to potential future participation in respect of the Mali ROFR, Goldbelt may also pursue other metal and mineral exploration, development and exploitation opportunities that it believes would enhance shareholder value.

On 22 October 2014, a Malian subsidiary of Tanexco signed instruments of transfer conveying title to the exploration permit in respect of the South Morila Property to MG SARL. The consideration payable in respect of the aforementioned title transfer has been paid in full.

Goldbelt Technical Report

Goldbelt has commissioned the preparation of a National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") compliant report in connection with the South Morila Property (the "Technical Report"). The Technical Report has a report date of December 14, 2014 and a valuation and effective date of May 17, 2015 and is available on Quartet's SEDAR profile at www.SEDAR.com.

Readers are referred to the Technical Report for additional information in respect of the South Morila Property.

The Transaction

In consideration for the sale and transfer of all of the issued and outstanding shares in the capital of Goldbelt by Goldfield to the Company, the Company has agreed to issue 7,500,000 Ordinary Shares (the "Payment Shares") to Goldfield, at deemed issue price of $0.20 per Payment Share. Pursuant to the Share Exchange Agreement, Goldfield has directed the Company to issue the Payment Shares to those persons and in such numbers as listed in the table below: the below listed persons in the below listed amounts; or in such other manner as Goldfield shall direct the Company prior to the filing of a final prospectus in connection with the Offering (as defined below).

Designee % of Payment Shares Number of Payment Shares
James Varanese(1) 21.21% 1,590,763
Jonathan Challis(1) 21.21% 1,590,763
Tanex Corporation 20.00% 1,500,000
Power East Limited(1)(2) 9.52% 713,826
Marc Bamber 8.54% 640,164
Andrew Dacey 5.96% 447,238
1167809 Alberta Ltd. 5.85% 438,468
Lord Simon Reading 2.57% 192,926
Jason Rosychuk 2.57% 192,926
Thomas Beattie 2.57% 192,926
Total 100.00% 7,500,000

Notes:

(1) It is a condition to the Share Exchange Agreement that this recipient of Payment Shares grant a share pledge and power of attorney to Goldfield, pursuant to which such recipient shall: (i) assign, transfer and pledge to and in favour of Goldfield, such recipient's Payment Shares and any securities, instruments or other property issued in replacement of such Payment Shares, as collateral for the payment and performance of Goldfield of its obligations under the Share Exchange Agreement; and (ii) appoint Goldfield as irrevocable attorney of such recipient of Payment Shares, with full power of substitution, for and in the name of such recipient of Payment Shares to sign and seal all documents and to fill in all blanks in signed powers of attorney and transfers necessary in order to complete the transfer of such collateral to the Company.

(2) Power East Ltd. is controlled by Philipp Koether, the sole director of Goldbelt.

The 7,500,000 Payment Shares and the Ordinary Shares issued upon the exercise of Resulting Issuer Options as defined below) will be deposited with Computershare Trust Company of Canada as escrow agent under an escrow agreement, expected to be entered into on or prior to the filing of a final prospectus by the Company, which may be a Value Security Agreement (as defined by Exchange policies) or a Surplus Security Escrow Agreement (as defined by Exchange policies). Further, certain recipients of Payment Shares are expected to enter into a pooling agreement (the "Pooling Agreement"), which is expected to contain a release mechanism whereby no pooled securities subject to the Pooling Agreement shall be released until the earlier of 18 months following the date of a Final Exchange Bulletin issued (in respect of the Exchange's approval of the Transactions and the listing of the Quartet Shares on the Exchange) and the Issuer's announcement of completion of the Issuer's work program, which is included in the Technical Report.

Pursuant to the Share Exchange Agreement, the Company has also agreed to issue the options to purchase ordinary shares to the below listed persons up to the below listed amounts (the "Resulting Issuer Options") upon closing of the Qualifying Transaction, pursuant to the Resulting Issuer's option plan and subject to the policies of the Exchange. The Resulting Issuer Options will be exercisable for a period of ten years from the completion of the Qualifying Transaction at a price of $0.20 per Ordinary Share. In the event that there are insufficient options available pursuant to the Resulting Issuer Option plan after giving effect to the Offering, the amount of Resulting Issuer Options issuable in connection with the Transaction shall be adjusted accordingly. If such an adjustment is made the Company will issue a further news release.

Name Resulting Issuer Options
Jonathan Challis 150,000
Victor Dusik 150,000
Robb McNaughton 100,000
Marc Bamber 100,000
Hermanus Ackerman 100,000
Andrew Dacey 100,000
Philipp Koether 100,000
Total 800,000

Completion of the Transaction is subject to a number of conditions including, but not limited to, satisfactory due diligence by each of the Company and Goldfield, closing conditions customary to transactions of the nature of the Transaction, Exchange acceptance, and majority of the minority shareholder approval of the Transaction. The Transaction cannot close until the required shareholder approvals are obtained and there can be no assurance that the Transaction will be completed as set out in the Share Exchange Agreement or at all.

The Transaction will be considered to be a "Non-Arm's Length Qualifying Transaction", as such term is defined under the policies of the Exchange. As a result, a meeting (the "Quartet Meeting") of the shareholders of the Company (the "Quartet Shareholders") is required by Exchange policies and Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transaction ("MI 61-101") to approve the Qualifying Transaction by majority of the minority approval. Direction and control over 3,250,000 of the ordinary shares of Quartet ("Quartet Shares") are held by "Non-Arm's Length Parties to the Qualifying Transaction" (as defined under Exchange policies) or persons who must be excluded from voting on the Qualifying Transaction pursuant to MI 61-101, representing approximately 39.9% of the issued Quartet Shares. All of the directors of the Company, with the exception of Messrs. Lush and Kahn, or associates thereof, are expected to receive a collateral benefit in connection with the Transaction and the Offering within the meaning of securities laws. Further, Messrs. Varanese and Challis, both of whom are directors of Quartet, each own or control in excess of 20% of the issued and outstanding voting securities of Goldfield, Goldbelt's parent company and the vendor in respect of the Share Exchange Agreement.

At the Quartet Meeting, the Quartet Shareholders will also consider approving the issuance of Quartet Shares in connection with the Transaction and the Offering (as defined below) and to change the name of Quartet to "Goldbelt Empires Ltd.", or such other name as determined by Goldbelt prior to the mailing of the management information circular in respect of the Quartet Meeting to the shareholders of the Company. It is anticipated that such management information circular will be mailed near the beginning of August to the shareholders of the Company. The Company has applied to list the Quartet Shares on the Exchange as a Tier 2 Mining issuer pursuant to the policies of the Exchange.

Financing

Quartet is also pleased to announce that it has filed a preliminary prospectus, dated July 24, 2015 (the "Preliminary Prospectus") with respect to the financing to be completed in connection with the Transaction. The Preliminary Prospectus has been filed in connection with the previously announced engagement letter dated April 28, 2015 (the "Engagement Letter") with Industrial Alliance Securities Inc. (the "Agent"). The Preliminary Prospectus remains subject to completion or amendment. There will not be any sale or any acceptance of an offer to buy Quartet securities until a receipt for a final prospectus has been issued.

Under the terms of the Engagement Letter, and as disclosed in the Preliminary Prospectus, the Agent has been appointed to act as agent in connection with a "best efforts" long form prospectus offering of up to a maximum of 10,000,0000 units (and a minimum of 3,750,000 units) of Goldbelt ("Units") at a subscription price of $0.20 per Unit, for aggregate gross proceeds of a maximum of $2,000,000 (and a minimum of $750,000) (the "Offering"). The Offering is being made in British Columbia, Alberta, Saskatchewan, Manitoba and Ontario. Each Unit will be comprised of one ordinary share in the capital of Quartet (the "Ordinary Shares") and one Ordinary Share purchase warrant ("Warrants"). Each Warrant will entitle the holder thereof to purchase one Ordinary Share at a price of $0.30 at any time prior to 4:30 p.m. Eastern Standard Time on the date that is 24 months following the date of their issuance. No fractional Ordinary Shares will be issued upon the exercise of the Warrants. Subsequent to the date that is 12 months following the Listing Date, in the event the Quartet Shares are listed on any recognized stock exchange, including the Exchange, close for any 20 consecutive trading day period at a price of $0.40 or above, the Company shall have the right to require conversion of the Warrants at the exercise price therefor by providing the notice (the "Conversion Notice") to the holder thereof within ten days of such event. Upon receipt of the Conversion Notice the holder must exercise any Warrants then held in accordance with their terms within 30 days of receipt of such notification, after which any unexercised Warrants shall be deemed to have expired.

The proceeds from the Offering will be used to (i) further the exploration and development of Goldbelt's property in Mali, (ii) to cover the expenses of the Offering and the Transaction, and (iii) for general working capital purposes.

The Agent will receive a commission of 8% of the aggregate gross proceeds of the Offering payable in cash, excluding the gross proceeds raised from subscribers pursuant to a "President's List" as agreed between the Agent and Goldbelt from which the Agent will receive a 4% cash commission with respect to investment up to $1,000,000 from subscribers listed in such "President's List". The Agent will also be granted non-transferable compensation options ("Agent's Options") equal to 8% of the aggregate number of securities sold pursuant to the Offering, excluding securities sold to subscribers on the "President's List" from which the Agent will receive Agent's Options equal to 4% of the aggregate number of securities sold. Each Agent's Option entitling the Agent to purchase one Unit at $0.20 per Unit exercisable on or before the date that is 24 months from the date of issuance. The Company will also pay the Agent's legal fees and other reasonable expenses in connection with the Offering. The Agent has also received a non-refundable work fee, a non-refundable due diligence fee.

The Company will also grant the Agent an option, exercisable in whole or in part at any time and from time to time for a period of 30 days following the final closing of the Offering, to offer for sale up to 1,500,000 additional Units, solely to cover over-allotments, if any, and for market stabilization purposes (the "Over-Allotment Option"). If the Over-Allotment Option is exercised in full, the total maximum offering to the public will be $2,300,000, in the case of the maximum Offering.

The closing of the Offering will be conditional upon, among other things, the Agent being satisfied that all of the conditions of the Exchange as to the completion of the Qualifying Transaction have been satisfied or waived by the Exchange (other than the closing of the Offering), the completion of satisfactory due diligence in respect of the Offering, the receipt of all necessary corporate and regulatory approvals, and the execution of a definitive agency agreement among the Agent, Quartet and Goldbelt.

Sponsorship of the Qualifying Transaction is required by the Exchange unless an exemption from this requirement can be obtained in accordance with the policies of the Exchange. The Company has applied for an exemption to the sponsorship requirement. There is no assurance that an exemption from this requirement will be obtained.

The Company has applied to list its Ordinary Shares on the Exchange. Listing will be subject to the Company fulfilling all of the requirements of the Exchange. In the event that the Company satisfies the Exchange's Tier 2 Initial Listing Requirements (as defined in Exchange policies) upon Completion of the Qualifying Transaction, the Company will graduate to list on the Exchange.

Summary of Goldbelt Financial Information

The following table sets forth selected financial information for Goldbelt. The selected financial information has been derived from, and is qualified by, Goldbelt's unaudited financial statements for the six month period ended March 31, 2015, and its audited financial statements for the years ended from incorporation to September 30, 2012, September 30, 2013 and September 30, 2014. The following information should be read in conjunction with those financial statements and the accompanying notes, and Management's Discussion and Analysis of Goldbelt, copies of which are scheduled to the Preliminary Prospectus.

Six Months ended March 31, 2015
(unaudited)
Year ended September 30, 2014 (audited) Year ended September 30, 2013 (audited) Year ended September 30, 2012
(audited)
Total Revenue - - - -
Net income (loss) for the period (13,359 ) (152,036 ) (57,281 ) (1,011 )
Comprehensive Loss (64,573 ) (163,054 ) (58,981 ) (1,591 )
Basic and diluted earnings (loss) per share (1.34 ) (15.20 ) (5.73 ) (0.10 )
Total Assets 170,785 163,508 65,840 36
Total liabilities 473,694 401,844 141,122 16,265
Shareholder deficiency (302,909 ) (238,336 ) (75,282 ) (16,301 )

Resulting Issuer Directors and Officers

Jonathan Challis, CEO and Director

Mr. Challis (age 63) is a mining engineer with over 30 years' experience in the operation, management, financing and analysis of mining projects around the world. He is currently a director of a private mineral exploration company with interests in Africa. Mr. Challis has an honours degree in Mineral Exploitation from University College, Cardiff (1974) and an MBA degree from Cranfield University (1979). He has both the South African Metalliferous Mine Captain's and Mine Manager's Certificates of Competency. He is a Fellow of the Institution of Materials, Minerals and Mining (2001) and a Chartered Engineer (1979). Mr. Challis is currently Chairman of Rye Patch Gold Corp. (TSXV), and a director of Pasinex Resources Limited (CSE), Explor Resources Inc. (TSXV), WAI Capital Investments Corp. (TSXV), Canex Energy Corp. (TSXV) and Orinoco Gold Limited (ASX).

Victor Dusik, CFO, Corporate Secretary and Director

Mr. Dusik (age 65) is a Chartered Accountant (1972) and Chartered Business Valuator (1987) who has held senior positions with Ernst & Young. Mr. Dusik has been a director and CFO of several listed companies in the energy and resources sector. He holds a MBA from the Richard Ivey School of Business, Western University (1977) and an ICD.D from the Rotman School of Management, University of Toronto (2010).

James Varanese, Director, Chairman and Promoter

Mr. Varanese (age 53) has over 20 years' experience in natural resource mergers and acquisitions. Mr. Varanese has negotiated numerous natural resource concessions and joint ventures in emerging markets, including the Middle East, Caspian region, and Africa. Mr. Varanese began his career in law with White & Case, and subsequently served as a partner with the firms of LeBoeuf, Lamb, Greene & Macrae, Coudert Brothers, and Clyde & Co. Mr. Varanese is based in London. He is a graduate of Harvard College (Bachelor of Science, 1983), the Kennedy School of Government (Master of Public Policy, 1987), and the Harvard Law School (Juris Doctor, 1987).

Harry Ackerman, Director

Mr. Ackerman (age 41) has extensive experience in West Africa in the acquisition of mining and resource projects. Mr. Ackerman manages exploration programs in West Africa and Middle East for several public resource companies.

Marc T. Bamber, Director

Mr. Bamber (age 50) is a senior natural resources investment specialist and was a core member of the $2.5 billion RAB Capital Special Situations Fund for over 7 years when he vetted and executed investments in over 900 resources companies.

Philipp Koether, Director

Mr. Koether is the Founder and Managing Director of the Cabot Group, a private equity investment house based in Hamburg and Hong Kong. Mr. Koether has over 10 years' experience in international investments, and serves as a director on various boards. After graduating with a degree in law from Humboldt University of Berlin, Mr. Koether began his career with Arthur Andersen in Berlin, and subsequently completed a Judicial Clerkship with the High Court of Appeal of Berlin to qualify as a lawyer. Mr. Koether is a graduate of Humboldt University (BA in Law), and the University of Hong Kong (LLM in Corporate & Financial Law). Mr. Koether is German national, and holds a Residency Permit for Hong Kong where he spends a substantial amount of time.

Robb McNaughton, Director

Mr. McNaughton (age 45) has been a partner in the corporate and capital markets group at the law firm Borden Ladner Gervais LLP since August 2013. Prior to this, Mr. McNaughton was a partner in the corporate finance group at the law firm Gowling Lafleur Henderson LLP from March 2010 to August 2013. From August 2004 to March 2010, he was a lawyer and partner with Fraser Milner Casgrain LLP.

Additional Information

The Quartet Shares are currently suspended from trading and are not expected to be reinstated for trading until completion of the Qualifying Transaction.

Investors are cautioned that, except as disclosed in the management information circular or a final prospectus to be prepared in connection with the Transaction and any related press release, 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.

This press release contains forward-looking information. More particularly, this press release contains statements concerning the prospective Qualifying Transaction of the Company, the Quartet Meeting, the Offering, the operations of the Resulting Issuer, the Mali ROFR, the business strategy of the Resulting Issuer and the management information circular in respect of the Quartet Meeting. The information about Goldbelt and Goldfield contained in the press release has not been independently verified by the Company. Although the Company believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Company can give no assurance that they will prove to be correct.

Forward looking information involves known and unknown risks, uncertainties, assumptions (including, but not limited to, assumptions on the performance and financial results of the properties of Goldbelt and certain other risks detailed from time to time in the Company's public disclosure documents including, without limitation, those risks identified in the Preliminary Prospectus which is available on the Company's SEDAR profile at www.sedar.com) and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information. The terms and conditions of the prospective Qualifying Transaction, the Quartet Meeting and the Offering may change based on the Company's due diligence on Goldbelt, regulatory and third party comments, consents and approvals and the ability to meet the conditions of the required timeframes, including completing any financing. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligations to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

Completion of the Qualifying Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the proposed Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the proposed Transaction will be completed as proposed or at all.

This press release is not an offer of the securities for sale in the United States. The securities have not been registered under the U.S. Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an exemption from registration. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

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 press release.

Contact Information

  • Quartet Resources Limited
    Michael Kahn
    Director
    (647) 427-7330