Rattlesnake Ventures Inc.
TSX VENTURE : RVI.P

October 28, 2009 09:28 ET

Rattlesnake Ventures Inc. Announces Qualifying Transaction

- RATTLESNAKE AGREES TO A BUSINESS COMBINATION WITH INDUSTRIAL MINERALS CANADA INC. AS ITS QUALIFYING TRANSACTION - INDUSTRIAL MINERALS CANADA INC. TO RAISE $6,000,000 TO ADVANCE THE BISSETT CREEK GRAPHITE PROJECT

TORONTO, ONTARIO--(Marketwire - Oct. 28, 2009) -

NOT FOR DISTRIBUTION IN THE UNITED STATES OR THROUGH UNITED STATES WIRE SERVICES.

All amounts in Canadian Dollars

Rattlesnake Ventures Inc. ("Rattlesnake") (TSX VENTURE:RVI.P), a capital pool company listed on the TSX Venture Exchange (the "Exchange"), is pleased to announce that it has entered into a letter of intent dated October 27, 2009 with Industrial Minerals Canada Inc. ("IMCI") and its sole shareholder, Industrial Minerals, Inc. ("IMI") (OTCBB:IDSM), that sets out the principal terms and conditions pursuant to which it is intended that Rattlesnake and IMCI will complete a business combination (the "Proposed Transaction").

The Proposed Transaction is intended to be the Qualifying Transaction of Rattlesnake pursuant to Policy 2.4 of the Exchange. It is expected that the combined entity after completion of the Proposed Transaction (the "Resulting Issuer"), which is intended to be named "Northern Graphite Corporation", will qualify as a Tier 1 Mining Issuer pursuant to the policies of the Exchange. The Proposed Transaction will be an arm's length transaction as the directors and officers of Rattlesnake presently have no interest in either IMCI or IMI. It is intended that the Proposed Transaction shall take place by way of an amalgamation, plan of arrangement, share exchange or other similar form of transaction.

ABOUT IMCI AND IMI

IMCI is incorporated under the laws of Ontario and is a wholly-owned subsidiary of IMI. IMI is incorporated under the laws of the State of Delaware and is a reporting issuer in the Province of British Columbia. No person directly or indirectly beneficially holds a controlling interest in, or otherwise controls or directs, IMI.

IMCI holds a 100% interest in the Bissett Creek mining lease and surrounding claims (the "Bissett Creek Project") located approximately 100 km east of North Bay, Ontario. The Bissett Creek Project contains a large graphite resource located less than 20 km from the Trans-Canada highway. The Bissett Creek Project is the subject of a preliminary assessment report (the "PA Report") dated December 18, 2007 prepared for IMI by Systemes Geostat International Inc. of Blainville, Quebec in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects ("NI 43-101"). The PA Report will be filed on SEDAR (www.sedar.com) by Rattlesnake within 45 days of the date of this press release.

A full feasibility study was completed on the Bissett Creek Project by Kilborn Engineering and others in 1989, which pre-dates the effective date of NI 43-101 and is, therefore, not compliant with NI 43-101. However, the Bissett Creek Project was not developed due to a decline in graphite prices in the 1990s.

Financial statements are not available for IMCI, the financial information for which is currently consolidated into the financial statements of IMI. Separate financial statements for IMCI will be prepared in connection with the Proposed Transaction.

About Graphite

Graphite prices have increased as the result of growing demand in traditional steel and automotive markets driven by the industrialization of China and other developing economies. Demand growth is expected to accelerate due to emerging applications of graphite in such end-products as lithium ion batteries, fuel cells, nuclear and solar power generation, and semiconductors. For example, there is 10 times more graphite than lithium in a lithium ion battery. China produces more than 70% of the world's graphite and rare earth elements and has implemented export restrictions and export quotas. Concerns over security of supply from China, as well as the overall declining quality of the graphite produced in that country, have also had a positive impact on graphite prices.

THE PROPOSED QUALIFYING TRANSACTION

Consolidation of Rattlesnake Shares

Prior to the completion of the Proposed Transaction, Rattlesnake will amend its articles of incorporation to effect the consolidation of its common shares (the "Consolidation") such that approximately each three and seven-tenths (3.7) pre-Consolidation common shares of Rattlesnake will become one (1) post-Consolidation common share of Rattlesnake (each a "Rattlesnake Share") such that there will be issued and outstanding 1,965,000 Rattlesnake Shares. Prior to the completion of the Proposed Transaction, all outstanding stock options of Rattlesnake shall be exercised or cancelled and Rattlesnake shall, on a best efforts basis, encourage the exercise of all outstanding warrants. It is presently expected that all outstanding options and warrants of Rattlesnake will be exercised in advance of the closing of the Proposed Transaction.

Proposed Transaction

Rattlesnake will issue 24,000,000 Rattlesnake Shares to IMI in exchange for 100% of the issued and outstanding shares of IMCI by way of an amalgamation, plan of arrangement, share exchange or other similar form of transaction. Following the closing of the Proposed Transaction and the Brokered Offering, described further below, it is estimated that approximately 51% of the Resulting Issuer will be owned by IMI on a fully-diluted basis. The Proposed Transaction will represent a reverse takeover of Rattlesnake by IMCI.

The completion of the Proposed Transaction and the Brokered Offering (as hereinafter defined) are subject to the approval of the Exchange and all other necessary approvals. The completion of the Proposed Transaction is also subject to certain other additional conditions precedent, including, but not limited to: (i) the entering into of a definitive agreement by Rattlesnake and IMCI on or before December 15, 2009 (the "Definitive Agreement"); (ii) completion of satisfactory due diligence by each of Rattlesnake and IMCI; (iii) the approval of the Proposed Transaction by each of Rattlesnake's, IMCI's and IMI's respective board of directors; (iv) the receipt of all required approvals of the shareholders of Rattlesnake, IMCI and IMI, including the receipt of the approval of Rattlesnake's shareholders for the Consolidation; (v) completion of the Brokered Offering; (vi) the absence of any material change or change in a material fact which might reasonably be expected to have a material adverse effect on the financial and operational conditions or the assets of each of the parties to the Definitive Agreement; (vii) that on or before the execution of the Definitive Agreement, IMI, its directors and officers shall have entered into lock-up agreements with Rattlesnake whereby they will agree to vote in favour of the Proposed Transaction with certain conditions surrounding the release of the Rattlesnake Shares over a minimum period of 15 months; and (viii) certain other conditions typical in a transaction of this nature.

IMI, as well as all of its directors and officers, shall enter into lock up agreements, in a form which would be customary in such similar circumstances prior to the execution of the Definitive Agreement pursuant to which they will agree: (A) to support and vote in favor of the Proposed Transaction; and (B) deposit any of the 24,000,000 Rattlesnake Shares issued by Rattlesnake to acquire IMCI and received by them, if any, as a result of the Proposed Transaction with an escrow agent to be mutually agreed to by the parties. The release of the Transaction Shares subject to this agreement will by triggered by the commissioning by IMCI of a pilot production plant at the Bissett Creek Project, such release to occur in equal tranches of 33.3%, on 3, 9 and 15 months from the commissioning date.

Sponsorship

Rattlesnake intends to make an application to the Exchange for an exemption from the sponsorship requirements in connection with the Proposed Transaction. There is no assurance that such exemption will be granted. Trading in Rattlesnake Shares, which are halted on the issuance of this press release, will remain halted until such time as the sponsorship exemption has been granted or, if not granted, a sponsor has been engaged and sponsorship materials will be filed with the Exchange.

Stock Options

It is intended that the Resulting Issuer will grant approximately 3,600,000 incentive stock options ("Stock Options") on closing of the Proposed Transaction, subject to the approval of the Exchange, to employees, consultants, directors, officers of the Resulting Issuer and its subsidiaries, if any. Rattlesnake hereby reserves the exercise price of $0.50 for the Stock Options.

Name Change

It is intended that the Resulting Issuer will be re-named "Northern Graphite Corporation" or such other name as the parties may reasonably agree upon, and the Resulting Issuer will be governed by the Business Corporations Act (Ontario). The Resulting Issuer will endeavour to affect the change of name as soon as possible and in any case not later than the next regularly scheduled meeting of shareholders of Rattlesnake.

PROPOSED BROKERED OFFERING AND SHORT TERM FINANCING

Brokered Offering

The Proposed Transaction is expected to be completed concurrent with, and is conditional upon IMCI raising a minimum of $5,000,000, under a proposed brokered equity offering (the "Brokered Offering"). Research Capital Corporation ("Research") has agreed to act as lead agent for and on behalf of IMCI pursuant to the Brokered Offering to raise, on a commercially reasonable efforts basis, up to $6,000,000 from the sale of: (i) a maximum of $3,000,000 in flow-through shares of IMCI (the "Flow-Through Shares") at a price of $0.50 per Flow-Through Share; and (ii) a maximum of $3,000,000 in subscription receipts of IMCI (the "Subscription Receipts") at a price of $0.50 per Subscription Receipt. Each Subscription Receipt shall, subject to the satisfaction of certain conditions as described below, be convertible into one unit of IMCI ("Unit") consisting of one (1) IMCI common share ("IMCI Share") and one-half of one IMCI common share purchase warrant (each whole warrant, a "Warrant"), with each Warrant entitling the holder thereof to purchase one (1) additional IMCI common share at a price of $0.625 for a period of 24 months from the date that the Proposed Transaction closes.

The gross proceeds received from the sale of the Subscription Receipts, less any amounts paid to Research and any other agents under the Brokered Offering on account of commission and expenses, shall be deposited into escrow on closing of the Brokered Offering with an escrow agent agreed upon between IMCI and Research. These escrowed funds will be released to IMCI, and the Subscription Receipts will automatically convert into Units, upon the satisfaction of the following conditions (the "Escrow Release Conditions"): (i) the execution of the Definitive Agreement; (ii) receipt of the conditional approval of the Exchange for the Proposed Transaction; (iii) IMI having received all required shareholder and regulatory approvals for the Proposed Transaction; and (iv) such other conditions as may be required by Research, acting reasonably.

In the event that the Escrow Release Conditions are not satisfied by the date which is 6 months from the closing of the Brokered Offering (the "Escrow Deadline"), the escrowed proceeds from the sale of the Subscription Receipts, together with the agents' commission in respect thereof, shall be returned to the subscribers for the Subscription Receipts, provided that IMCI shall have the right to extend the Escrow Deadline with the approval of the holders of not less than 50% of the Subscription Receipts.

In addition, in the event that the Proposed Transaction has not been completed on or prior to the date which is four months from the closing of the Brokered Offering (the "Listing Deadline"), IMCI shall issue to each subscriber for Subscription Receipts under the Brokered Offering a number of common shares as is equal to 10% of the total number of Subscription Receipts purchased by each subscriber. In addition, IMCI shall issue to each subscriber for Subscription Receipts under the Brokered Offering a number of common shares as is equal to 1.5% of the total number of Subscription Receipts purchased by each subscriber upon the expiration of each calendar month following the Listing Deadline until the Proposed Transaction has been completed.

At closing of the Brokered Offering, Research will receive a cash commission equal to 7% of the gross proceeds received by IMCI from the Brokered Offering, as well as agent's options to acquire that number of IMCI Shares equal to 7% of the number of Subscription Receipts sold under the Brokered Offering. These agent's options will have a price equal to the price of the Subscription Receipts. Concurrently with the closing of the Proposed Transaction, these agent's options shall be exchanged for options to purchase an equal number of Rattlesnake Shares having the same terms as the agent's options of IMCI. Research will also be reimbursed for its reasonable out-of-pocket fees and expenses in connection with the Brokered Offering.

Concurrently with the closing of the Proposed Transaction, each Flow-Through Share shall be exchanged for one flow-through Rattlesnake Share, and each IMCI Share and Warrant comprising the Units shall be exchanged for one Rattlesnake Share and one post-Consolidation common share warrant of Rattlesnake having the same terms as the Warrants, respectively. A maximum of 16,260,000 Rattlesnake Shares will be issued or issuable on a fully-diluted basis in connection with the completion of the Brokered Offering and the exchange of the securities issued under the Brokered Offering for securities of the Resulting Issuer pursuant to the Proposed Transaction, including through the issuance of agents' compensation securities.

The proceeds from the Brokered Offering will be principally used by the Resulting Issuer for exploration and confirmation drilling on the Bissett Creek Project, the completion of metallurgical testing and a Pre Feasibility Study and the construction of a pilot plant to provide large samples to potential customers. Proceeds from the issuance of the Flow-Through Shares will be used to incur and renounce for the 2009 taxation year certain types of "Canadian Exploration Expense" and "Canadian Development Expense" (as defined in the Income Tax Act (Canada)). Additional amounts have been allocated for costs required to complete the Proposed Transaction and for general working capital requirements. There may be circumstances where, for sound business reasons, a reallocation of funds may be necessary in order for the Resulting Issuer to achieve its business objectives.

Short Term Financing

IMCI is in the process of completing a non-brokered financing with various lenders, including a director of IMI, of approximately $300,000 through the issuance of senior secured convertible non-interest bearing notes (the "Notes") to cover the costs that will be incurred by IMCI in connection with completing the Proposed Transaction, certain operating expenses of IMCI and for working capital. The Notes will be secured by a security interest over all of the assets of IMCI, including the mineral claims and leases comprising the Bissett Creek Project.

In the event that IMCI completes the Brokered Offering and raises not less than $1,000,000 in aggregate pursuant thereto, the Notes shall automatically convert into units of IMCI (the "IMCI Conversion Units"), each IMCI Conversion Unit consisting of one common share and one common share purchase warrant of IMCI ("IMCI Conversion Warrant") and having terms substantially similar to the IMCI Units to be issued pursuant to the Brokered Offering; provided that: (i) the IMCI Conversion Units shall be priced at a 30% discount to the Private Placement Units and the exercise price for the IMCI Conversion Warrants comprising part of the IMCI Conversion Units shall also be priced at a 30% discount to the exercise price of the Warrants to be issued under the Brokered Offering; and (ii) holders of the Notes shall be entitled to one full IMCI Conversion Warrant as part of each IMCI Conversion Unit issued on conversion of the Notes. The foregoing conversion rights shall be subject to standard anti-dilution provisions.

Concurrently with the closing of the Proposed Transaction, each IMCI common share and IMCI Conversion Warrant comprising the IMCI Conversion Units shall be exchanged for one Rattlesnake Share and one post-Consolidation common share warrant of Rattlesnake having the same terms as the IMCI Conversion Warrants, respectively.

If IMCI does not complete the Brokered Offering or raises less than $1,000,000 pursuant thereto, the Notes shall be convertible into units of IMI (the "IMI Conversion Units") at the option of the holder at any time after the date which is six months from the date of closing of the issuance of the Notes, at a conversion price of $0.02 per IMI Conversion Unit (the "IMI Conversion Price"), being at a rate of 5,000 IMI Conversion Units per $100 principal amount of Notes. Each IMI Conversion Unit shall consist of one common share and one common share purchase warrant of IMI ("IMI Conversion Warrant"), with each IMI Conversion Warrant entitling the holder to purchase one common share of IMI at a price of $0.03 per share for a period of 24 months.

Rattlesnake has agreed to loan $100,000 to IMCI on the same terms as the Notes in order to assist IMCI in completing the Proposed Transaction, subject to Exchange approval and completion of satisfactory due diligence. This loan will be made in compliance with Exchange Policy 2.4.

Capitalization of the Resulting Issuer

Following the completion of the Proposed Transaction and (i) assuming issuance of the maximum number of Flow-Through Shares and Unit Subscription Receipts under the Brokered Offering and (ii) the conversion of the entire principal amount of the Notes, approximately 38.8 million Rattlesnake Shares are anticipated to be issued and outstanding. In addition, following the completion of the Proposed Transaction and assuming (i) issuance of the maximum number of Flow-Through Shares and Unit Subscription Receipts under the Brokered Offering and (ii) the conversion of the entire principal amount of the Notes, approximately 8.5 million Rattlesnake options and warrants are anticipated to be outstanding.

DIRECTORS AND SENIOR MANAGEMENT OF THE RESULTING ISSUER

Subject to and following the closing of the Proposed Transaction, the directors and senior officers of the Resulting Issuer are expected to be the following individuals:

Gregory Bowes, B.Sc. (Geology), MBA - President, CEO and Director. Mr. Bowes has over 25 years of experience in the resource and engineering industries. He holds an MBA from Queens University and an Honours B.Sc., Geology degree from the University of Waterloo. Mr. Bowes was Senior Vice President of Orezone Gold Corporation (TSX:ORE) from February 2009 to October 2009, and was Vice President, Corporate Development of its predecessor, Orezone Resources Inc., from January 2004 until September 2005 and was Chief Financial Officer from October 2005 to March 2007, and from April 2008 to February 2009. From December 2006 until April 2008, Mr. Bowes served as President, CEO and a director of San Anton Resource Corporation (TSX:SNN). Mr. Bowes is a director of IMI.

Iain Scarr, B.Sc. (Geology), MBA - Director. Mr. Scarr is founder and principal of IMEx Consulting which provides business development, mining and marketing services to the industrial minerals industry. Mr. Scarr spent 30 years with Rio Tinto Exploration and was most recently Commercial Director and VP Exploration, Industrial Minerals Division. He holds a B.Sc. in Earth Sciences from California State Polytechnic University and MBA from Marshall School of Business at the University of Southern California.

Ron Little, P.Eng - Director. Ron Little is a professional engineer and a geologist and is currently the President, CEO and a director of Orezone Gold Corporation (TSX:ORE), as well as the founder of its predecessor company, Orezone Resources Inc. Mr. Little has more than 20 years of experience, at senior levels, in mineral exploration, mine development, mine operations and capital markets. Half of his experience was gained with major Canadian mining companies and included exploration and mine operations of domestic and international projects.

Chris Crupi, CA - Director. Mr. Crupi is a chartered accountant. He currently serves as President, CEO and a director of Paramount Gold & Silver (TSX:PZG)(NYSE Amex:PZG), which Mr. Crupi founded in 2005. From 2000 to 2004, Mr. Crupi was a Vice President of PricewaterhouseCoopers LLP. Mr. Crupi received his Bachelor of Commerce degree from the University of Ottawa in 1992. Mr. Crupi received his Chartered Accountant designation in 1995. Mr. Crupi is a director of IMI.

K. Sethu Raman, Ph.D - Director. Dr. Raman is a professional geologist with over 35 years of international experience in all phases of exploration and development and has held senior executive positions in several public mining companies. He spent 13 years with Campbell Chibougamau Mines and Royex Gold Group of companies (now Barrick Gold) in various management positions including Vice President (1980-86) where he played a key role in gold discovery and development in six operating gold mines and major acquisitions including Hemlo Gold Mine and Nickel Plate Gold Mine. From 1986 to 2004, Dr. Raman was President and CEO of Holmer Gold Mines Limited which over the years discovered and developed the Timmins West Gold deposit. On December 31, 2004 Lake Shore Gold Corp. (TSX:LSG) acquired all of the issued and outstanding shares of Holmer. Dr. Raman is currently a director of Lake Shore. Dr. Raman holds a Ph.D (1970) in geology from Carleton University, Ottawa and a UNESCO Post-Graduate Diploma (1965) from University of Vienna, Austria.

Mike Durose M.Sc., P.Geo - Director. Mr. Durose is currently CEO of HanOcci Group Inc., a private company of which he is a principal and founder. Mr. Durose has 16 years capital markets experience including 14 years as a sell-side mining analyst with a number of brokerage companies including Scotia Capital, Morgan Stanley, Bunting Warburg, and BMO Nesbitt Burns. He has a Graduate Diploma in Waste Management and Groundwater Contamination from McGill University, an M.Sc. in Mineral Economics from Queens University, a B.Sc. (Honours) in Geology from Carleton University, and is a Professional Geoscientist (P.Geo.) registered in the Province of Ontario.

Sean Homuth CA, CPA - Chief Financial Officer. Mr. Homuth is a Chartered Accountant and a Certified Public Accountant with several years of financial accounting and public company reporting experience with Ernst & Young LLP and Nortel Networks. He is currently Chief Financial Officer of Orezone Gold Corporation (TSX:ORE), and was previously Vice President, Finance and Administration of its predecessor, Orezone Resources Inc. He has a strong background in Canadian and United States financial accounting and public company reporting, and Sarbanes-Oxley compliance. Mr. Homuth holds a Bachelor of Commerce (Highest Honours) degree from Carleton University and is a member of the Institute of Chartered Accountants of Ontario, the Canadian Institute of Chartered Accountants and is registered as a Certified Public Accountant in the State of Illinois.

READER ADVISORY

Investors are cautioned that, except as disclosed in the information circular or filing statement to be prepared in connection with the Proposed Transaction, any information released or received with respect to the Proposed 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.

All information contained in this news release with respect to Rattlesnake, IMI and IMCI was supplied by Rattlesnake, IMI and IMCI, respectively, for inclusion herein, and Rattlesnake and its directors and officers have relied on IMI and IMCI for any information concerning them.

Statements in this press release may contain forward-looking information including, operating costs, administrative costs, acquisitions and dispositions, capital spending, access to credit facilities, income taxes, regulatory changes, and other components of cash flow and earnings. Any statements that are contained in this press release that are not statements of historical fact may be deemed to be forward looking statements. Forward-looking statements are often identified by terms such as "may", "should", "anticipate", "expects" and similar expressions. The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Rattlesnake. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

The forward-looking statements contained in this press release are made as of the date of this press release, and Rattlesnake does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as expressly required by securities law.

THIS PRESS RELEASE, REQUIRED BY APPLICABLE CANADIAN LAWS, IS NOT FOR DISTRIBUTION TO U.S. NEWS SERVICES OR FOR DISSEMINATION IN THE UNITED STATES, AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO SELL ANY OF THE SECURITIES DESCRIBED HEREIN IN THE UNITED STATES. THESE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S. PERSONS UNLESS REGISTERED OR EXEMPT THEREFROM.

Completion of the Proposed 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.

THE TSX VENTURE EXCHANGE HAS IN NO WAY PASSED UPON THE MERITS OF THE PROPOSED TRANSACTION AND HAS NEITHER APPROVED OR 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

  • Rattlesnake Ventures Inc.
    Scott White
    President and Chief Executive Officer
    (416) 704-6611
    (905) 337-2395 (FAX)
    or
    Rattlesnake Ventures Inc.
    David Callander
    Chief Financial Officer
    (416) 459-1649
    (905) 337-2395 (FAX)
    or
    Industrial Minerals Canada Inc.
    Gregory Bowes
    Director
    (613) 241-9959