San Marco Resources Inc.
TSX VENTURE : SMN

San Marco Resources Inc.

October 24, 2014 08:30 ET

San Marco Resources Plans Share Consolidation and Financing and Reduces Property Holdings in Order to Focus on Cuatro de Mayo

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Oct. 24, 2014) - The Board of Directors of San Marco Resources Inc. (TSX VENTURE:SMN) ("San Marco" or "the Company") reports that as a result of extensive discussions with various financial advisors, it believes it is in the best interest of the Company to consolidate its common shares on the basis of one (1) post-consolidation common share for every five (5) pre-consolidation common shares. Subsequent to this consolidation, which is subject to regulatory and shareholder approval, San Marco intends to raise approximately $500,000 by way of a private placement financing on the terms set out below.

San Marco will use the new funds raised to further advance the very prospective Cuatro de Mayo project in Sonora State, Mexico (http://www.sanmarcocorp.com/s/CuatroDeMayo.asp) and for general working capital purposes. Initial investigations by the Company at Cuatro de Mayo have already resulted in the identification of two exciting targets and the majority of the property, known to comprise numerous mineral showings, remains open to additional discoveries. In order to focus its resources on this well-located and low-opportunity cost project, San Marco has elected to reduce its other property holdings as described below.

Consolidation

San Marco currently has 61,418,560 common shares issued and outstanding, and warrants and options to purchase a further 15,150,000 shares. Following the 5:1 consolidation, there will be 12,283,712 shares outstanding, and warrants and options to purchase a further 3,030,000 shares at an exercise price equal to five times the original exercise price.

The Company will hold a special meeting of shareholders on December 22, 2014 to seek the approval necessary to carry out the consolidation, which will also be subject to TSX Venture Exchange approval. San Marco does not propose to change its name in connection with the share consolidation although its CUSIP number and ISIN will change.

The Board of Directors is recommending shareholders approve the share consolidation to assist the Company in obtaining equity financing and increase its flexibility with respect to potential business transactions. If the consolidation is approved, the Board of Directors will have the authority to implement the consolidation or abandon it without further approval from, action by, or prior notice to shareholders.

Financing

Subsequent to the proposed share consolidation being implemented, San Marco intends to raise new capital through a non-brokered private placement of up to 6,700,000 units at a post-consolidation price of $0.075 per unit, for gross proceeds of up to $502,500. Each unit will consist of one post-consolidation common share (a "Share") and one non-transferable share purchase warrant (a "Warrant"). Each Warrant will entitle the holder to purchase one additional Share for a period of three years at $0.075 in the first year, $0.125 in the second year and $0.175 in the third year.

The Company may accelerate the Warrant expiry date if the closing market price of the Shares (after the expiry of the hold period) on the TSX Venture Exchange for a period of 15 consecutive trading days is $0.22 or greater in the first year of the Warrant, $0.27 or greater in the second year of the Warrant or $0.32 or greater in the third year of the Warrant (in all cases, an "Acceleration Triggering Event"), by issuing a news release and giving written notice of acceleration ("Notice of Acceleration") to the Warrant holders within five trading days of the Acceleration Triggering Event. The new Warrant expiry date shall be 20 trading days after the date of the Notice of Acceleration.

Finders' fees may be paid on a portion of the placement, consisting of a cash fee equal to 7% of the proceeds from units sold to investors introduced by finders (at the finder's option, the fee may be satisfied with units at $0.075 each) and non-transferable share purchase warrants equal to 10% of the units sold to such investors. The finders' fee warrants will have the same terms as the Warrants.

Certain insiders of San Marco intend to participate in the proposed private placement, and San Marco may, if warranted, increase the size of the placement. The Shares, and any Shares issued on the exercise of the Warrants and finders' fee warrants, will be subject to a four month restricted resale period.

Focus on Cuatro de Mayo and Reduction in Property Holdings

As a result of San Marco's early success at the Cuatro de Mayo project, the property area's known propensity for mineralization, the low opportunity-cost of the existing Cuatro de Mayo option, and the property's location in the vicinity of several operating gold mines, San Marco's management and Board of Directors strongly believe that a focus on the Cuatro de Mayo District going forward is not only warranted, it provides the best opportunity for increasing shareholder value.

San Marco's management has aggressively sought joint venture partners for its Angeles and La Buena projects over the past year, however, the persistently difficult mining market conditions have resulted in the Company being unable to locate a suitable partner. Therefore, the Company has elected to reduce the costs associated with maintaining the Angeles, La Buena and Los Carlos properties as described below.

The Angeles property optioned concessions will be discontinued, effective immediately, and the property area will consist solely of those concessions staked or purchased by the Company. The net result is a reduction in the size of the Angeles property from 1,667 hectares to 1,282 hectares. The remaining concessions will cover a portion of the Company's 2013 drilling as well as the 100 year old El Tompiate adit accessing the original mine workings. The cessation of option payments coupled with the reduction in assessment fees and taxes associated with the smaller land holding will allow San Marco to maintain the remaining concessions for the foreseeable future.

The Los Carlos property, which was staked by the Company, will be reduced in size from 15,635 hectares to 3,759 hectares. The reduced property area protects the key target areas on the property while reducing maintenance costs significantly.

San Marco intends to terminate its La Buena project as the annual assessment fees and taxes required to maintain this concession are prohibitive at this time.

About San Marco

San Marco Resources Inc. is a Canadian mineral exploration company with a current portfolio of three promising properties in mining-friendly Mexico and an aggressive project generation program focused on high-calibre, low-opportunity cost projects. San Marco has a committed management team with extensive experience in Mexico and a proven track record of building shareholder value.

Forward Looking Information

Information set forth in this document includes forward-looking statements, such as: the Company's intent to consolidate its common shares; the Company's intent to undertake a private placement financing subsequent to the consolidation of its shares; the proposed terms of the financing; the intent of certain insiders of the Company to participate in the financing; the use of funds raised in the financing; the Company's intent to reduce or abandon certain of its land holdings; the Company's belief that it can retain its reduced land holdings at the Angeles and Los Carlos properties for the foreseeable future; the Company's intent to continue to seek joint venture partners for the Angeles and Los Carlos properties; the Company's initial interpretation of geological observations at the Cuatro de Mayo project; and, potential exploration plans and programs for the Cuatro de Mayo project. While these statements reflect management's current understanding, plans, projections and intents, by their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the control of San Marco Resources Inc. For instance: the consolidation may not receive the necessary approval of shareholders and the TSX Venture Exchange, in which case the consolidation would not proceed; there can be no assurances that the proposed financing will proceed at all, or under the terms currently being contemplated, or if it does proceed, that it will be successful; the Company may be unable to retain its holdings at the Angeles or Los Carlos properties indefinitely and there are no assurances a joint venture partner for either of these projects will be secured; and the execution of any exploration programs planned by the Company will be dependent upon the availability of both human and financial resources, both of which are presently limited. Furthermore, geological interpretations are open to revision as additional information becomes available. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on these forward-looking statements. San Marco's actual results, programs and financial position could differ materially from those expressed in or implied by these forward-looking statements.

Neither the TSX Venture Exchange nor the Investment Industry Regulatory Organization of Canada accept responsibility for the adequacy or accuracy of this release.

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