Sandspring Resources Ltd.

Sandspring Resources Ltd.

August 24, 2007 14:04 ET

Sandspring Resources Ltd. Announces Letter of Intent to Acquire Material Interest in Mineral Exploration Property Situated in Guyana, South America

CALGARY, ALBERTA--(Marketwire - Aug. 24, 2007) -


Sandspring Resources Ltd. (the "Corporation") (TSX VENTURE:SSP.P) is pleased to announce that it has entered into a letter of intent dated effective August 7, 2007 (the "Letter of Intent"), with A.S.T. Securities & Trade (BVI) Ltd. ("AST"), Crescent Global Gold, Ltd. ("CGG") and Carden Ventures (BVI) Ltd. ("Carden"), whereby the Corporation will acquire an interest in CGG, which owns 100% of the outstanding stock of ETK, Inc. ("ETK") the owner and operator of certain mineral exploration properties located in Guyana, South America (the "Acquisition").

The Corporation is a capital pool company and intends for the Acquisition to constitute the "Qualifying Transaction" of the Corporation as such term is defined in the policies of the TSX Venture Exchange (the "Exchange"). The Acquisition is an arm's length transaction and upon completion thereof, it is expected that the Corporation will be a Tier 2 Mining Issuer.

AST and CGG are private companies existing under the laws of the British Virgin Islands. ETK is a private company organized under the laws of Guyana that controls a mineral prospect in that country (as more specifically discussed below).

Highlights of the Acquisition

Pursuant to the terms of the Letter of Intent, subject to completion of satisfactory due diligence, a definitive acquisition agreement (the "Definitive Agreement"), the satisfaction of certain closing conditions customary to transactions of the nature of the Acquisition and receipt of applicable regulatory approvals, the Corporation intends to acquire from AST, ninety percent (90%) of the shares currently held by AST in CGG (the "Acquisition"), which will result in the Corporation owning 19.35% of CGG. As consideration for the Acquisition, the Corporation will issue to AST, a total of 20,296,209 common shares in the capital of the Corporation (the "Acquisition Shares"). Accordingly, upon completion of the Acquisition, the Corporation will control 19.35% of ETK. The Acquisition Shares will be issued at a deemed price of CAD$0.20 per share representing a deemed Acquisition value of CAD$4,059,241.80. The Acquisition Shares will be subject to the escrow requirements of the Exchange, if applicable.

In addition, pursuant to the terms of the Letter of Intent, the Corporation will also: (a) satisfy and pay in full the ETK Debt (as defined below) through the issuance of Special Warrants (as defined below), convertible into common shares in the Capital of the Corporation ("Common Shares"); (b) obtain rights ("Earn-In Rights") to be issued an additional five percent (5%) of the issued and outstanding shares of CGG; and (c) obtain an option by virtue of the Put or Call (as hereinafter defined), to acquire all of the remaining shares of CGG from the shareholders of CGG (the "CGG Shareholders").

Upon completion of the Acquisition, the Corporation will have a significant interest in ETK, a company engaged in the business of exploring for, with the ultimate goal of developing and producing, precious and base metals from its Guyana, South America mineral prospect.

The Property

The following is a brief description of the Upper Puruni Prospect (as defined below), the mineral prospect controlled by ETK:

The Upper Puruni Prospect, (the "Property"), is comprised of 173 contiguous Medium Scale Prospecting Permits that cover an area of 175,431.6 acres or 70,997.2 hectares. To the north of this block, five contiguous Prospecting Licenses cover an area of 57, 997 acres or 23,471.4 hectares. All are located in the Upper Puruni River Area of northwestern Guyana. The geographic location of mining operations at the Toroparu open pit, the main focus of gold mining operations on this property, is at 060 27' North Latitude and 600 05' West Longitude, corresponding to UTM co-ordinates of 714450 N and 826200 E.

A geological report entitled "2006/2007 DRILLING REPORT ON THE TOROPARU COPPER-GOLD PROSPECT UPPER PURUNI RIVER AREA, GUYANA" (the "Meixner Technical Report") dated August 10, 2007, has been prepared with respect to the Property. The Meixner Technical Report has been prepared by Mr. Henry M. Meixner, P. Geol., in compliance with the provisions of National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101"). Mr. Meixner is an "independent qualified person" as defined in NI 43-101.

The Meixner Technical Report builds on a prior report prepared in respect of the Property by Henry M. Meixner and G.L. Wesa entitled "Geological Report On The Toroparu Open Pit Gold Prospect, Upper Puruni River Area, Guyana" (the "Meixner-Wesa Report"), dated August 4, 2006. The Corporation expects to provide, in a press release to be disseminated at a later date, summary technical information derived from the Meixner Technical Report. A copy of both the Meixner Technical Report and the Meixner-Wesa Report, will be submitted to the Exchange in due course.

Board of Directors of the Resulting Issuer

In connection with the completion of the Acquisition, it is intended that Mark Maier will resign as President and Chief Executive Officer of the Corporation. Upon the resignation of Mr. Maier, Richard A. Munson, currently Executive Vice President of ETK, will be appointed as President and Chief Executive Officer of the Corporation, to serve in such capacity for a minimum term commencing upon the completion of the Acquisition and terminating after the completion of the Phase I Work Program (as hereinafter defined) (the "Minimum Term"). Pursuant to the terms of the Letter of Intent, it is anticipated that Greg Barnes will be appointed as a director of the Corporation.

The following is a brief description of the background and experience of the current and proposed directors and officers of the Corporation and of those individuals expected to act in such capacity upon completion of the Acquisition:

Mark Maier - Current President, Chief Executive Officer, Chief Financial Officer and Director

Mark Maier, of Calgary, Alberta, holds the Chartered Financial Analyst designation. In addition, Mr. Maier holds a Masters of Science degree, a Masters degree in Business and a Bachelor of Arts. Mr. Maier was employed by Merrill Lynch (London) as an Associate VP, whereafter; he worked in Florida, USA, as a Risk Manager for AVM L.P., a registered broker/ dealer and service company to III Associates LP, a hedge fund advisor. Currently, Mr. Maier is the VP Corporate Development of Aurum Group, and investment manager for AlphaVest Partners and Aurum Venture Partners.

Richard A. Munson - Proposed President, Chief Executive Officer

Rich Munson of Littleton, Colorado, has served as an officer and director of various natural resource companies over the past 20 years. He has been involved in numerous domestic and international natural resource acquisitions, joint ventures, sales, environmental permitting and planning activities, mining ventures and oil and gas operations and reclamation activities.

Mr. Munson has also been affiliated with the privately held Energy Fuels group of companies since 1985, where he has focused on domestic and international interests in the natural resource area. Mr. Munson also serves as an officer and director of the various Energy Fuels entities and of other international entities. Prior to joining Energy Fuels, Mr. Munson was a resident partner in the Denver, Colorado office of a Montana-based law firm. Mr. Munson obtained a B.A. from Montana State University, a J.D. from the University of San Diego School of Law and an L.L.M. (Taxation) from the University of Denver.

Charles Gryba - Current Director

Charles Gryba P.Eng., of Toronto, Ontario, received his B.Sc. (Mining), from the University of Saskatchewan and is an accredited professional engineer with over 30 years of operational experience in the mining industry. From 1986 to 1996, Mr. Gryba was the President and a director of Moneta Porcupine Mines, a gold and base metals exploration corporation listed on the Toronto Stock Exchange (the "TSX"). From 1996 to 2001, Mr. Gryba was the President and a director of St. Andrew Goldfields Ltd., a TSX-listed mining corporation. Since 2002, Mr. Gryba has established two private corporations, Urban Mining International Inc. and DPM Mining Inc., both of which carry on business in the mining industry. Mr. Gryba also assisted in establishing Groundstar Resources Limited, an oil and gas company listed on the Exchange that is pursuing exploration opportunities in Guyana, Central Asia and North Africa. Currently Mr. Gryba is Chief Operating Officer and a director of First Metals Inc., a TSX-listed company actively developing a base metal deposit in Quebec. Mr. Gryba is also the President, Chief Executive Officer and also a director of Claim Post Resources Inc., a private junior mining exploration and development company he founded in 2005.

Joel Schneyer - Current Director

Joel Schneyer, of Parker, Colorado, is a mineral economist and natural resource analyst who has acted as a financial and strategic planning advisor and expert witness to TSX, private equity and hedge funds, as well as law firms and foreign governments. Mr. Schneyer holds a M.Sc. in Mineral Economics from the Colorado School of Mines and a M.A. in Geology from the University of Texas at Austin. In 1996, Mr. Schneyer founded Mercantile Resource Finance Inc., an advisory firm to the natural resource sector, where he currently holds the office of President. From October of 1999 until July of 2006, Mr. Schneyer was a director of Rupert Resources Ltd. and from June of 2004 until November of 2006, he was a director of Emgold Mining Corporation, both of which are Canadian based gold exploration companies listed on the Exchange. Mr. Schneyer is currently a director of two TSX-listed mining companies focusing on the exploration of precious metals: Etruscan Resources Inc. and Globex Mining Enterprises Inc.

Greg Barnes - Proposed Director

Greg Barnes of Denver, Colorado, holds a B.Sc. in Geological Sciences from the University of Texas at Austin and a M.Sc. in Economics from the London School of Economics. Mr. Barnes' background includes physical commodity trading, structuring and managing portfolios of global hedge funds and private equity investments, as well as direct management experience of natural resource project companies. Mr. Barnes has experience in Eastern European, the Former Soviet Union, Southern Asia, and North and South American markets. Mr. Barnes began his career at Marc Rich & Co., Zug, Switzerland where he was responsible for lead-zinc concentrate trading in several eastern European, Middle Eastern and Southern Asian markets. Mr. Barnes left Marc Rich & Co. in 1994 to run a private family investment office and hedge fund in Nassau, Bahamas and is currently on the Board of several privately held natural resource companies.

Private Placement

Prior to or concurrent with the closing of the Acquisition, the Corporation expects to complete a brokered private placement through Integral Wealth Securities Limited of Calgary, Alberta ("Integral"), in Common Shares in the capital of the Corporation at a price of CAD$0.50 per Common Share for minimum gross proceeds of CAD$3,300,000 and maximum gross proceeds of CAD$4,400,000 (the "Private Placement"). The net proceeds of the Private Placement will be used by the Corporation to finance the Phase I Work Program recommended in the Meixner Technical Report, for general working capital purposes of the Company, and to pay closing costs associated with the private placement. Terms and conditions of the agency relationship between Integral and the Corporation shall, in due course, be negotiated by and agreed upon among the Corporation and Integral.

ETK Debt

To pay a portion of the costs of the drilling program commenced in June 2007, to finance other exploration activities undertaken by ETK with respect to the Property, to subsidize ongoing property holding costs and to provide ETK with sufficient cash for general corporate working capital purposes pending the completion of the Acquisition, ETK is borrowing US$1.0 Million (the "ETK Debt"), from Carden. The ETK Debt will be evidenced by a convertible promissory note (the "Promissory Note") and will be repaid through the issuance by the Corporation of special warrants (the "Special Warrants"), convertible into Common Shares at the lower of: (a) CAD$0.50 per Common Share; and (b) the price at which each Common Share is sold pursuant to the Private Placement. The Special Warrants will be issued in such number as is required to satisfy in full the principal and interest then accrued under the terms and conditions of the Promissory Note and as is in compliance with the requirements of the Exchange.

Earn-In Rights and Related Entitlements

The Letter of Intent contemplates that the Corporation will commit, within thirty-six (36) months from completion of the Acquisition, US$6.0 Million to work programs on the Property; these funds include the agreed costs in respect of the second phase of drilling and exploration at the Toroparu Copper-Gold prospect (the "Phase I Work Program"). Upon the financing by the Corporation of the Phase I Work Program of US$1.0 Million and for each successive US$1.0 Million provided by the Corporation thereafter (to a maximum of US$6.0 Million) (the "Maximum Amount"), the Corporation shall trigger the Earn-In Rights, with each successive US$1.0 Million expended, entitling the Corporation to be issued an additional five percent (5%) of the issued and outstanding shares of CGG. Accordingly, if the Corporation contributes the Maximum Amount, it shall be entitled to acquire an additional thirty percent (30%) of CGG.

Pursuant to the Letter of Intent, for a period of eighteen (18) months after the Phase I Work Program has been completed, the CGG Shareholders will have the right to sell to the Corporation (the "Put"), all (but not part), of the remaining outstanding shares of CGG provided, however, that the value of 100% of the Project is at least US$20.0 Million. The Letter of Intent also contemplates that for a period of six (6) months after the Corporation has expended the Maximum Amount and so long as the Corporation is a publicly traded company, the Corporation will have the right to cause the CGG Shareholders to sell to the Corporation (the "Call"), all (but not part), of the remaining outstanding shares of CGG.

In the event that either the Put or Call is exercised, the value of the Property shall be paid to the CGG Shareholders at the closing of the Put or Call, as the case may be, in Common Shares pursuant to a valuation method determined with reference to the weighted average trading price of the Common Shares and as more specifically set out in the Definitive Agreement, which is currently being negotiated.

Sponsorship of Qualifying Transaction

Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless an exemption from this requirement can be obtained in accordance with the policies of the Exchange. It is the intention of the Corporation to have Integral conduct due diligence on the Private Placement, the terms and conditions of which (as described above), will be negotiated by and mutually agreed upon among, the Corporation and Integral. Accordingly the Corporation intends to make application to the Exchange for an exemption from the sponsorship requirement. Notwithstanding the foregoing, there is no assurance that an exemption will be obtained.

Summary Financial Information

Financial statements as required by the Exchange, were not available at the time of this press release. However, the Corporation will in due course make available to the Exchange, all financial information as required by the Exchange and will provide, in a press release to be disseminated at a later date, summary financial information derived from such statements.

Conditions of the Acquisition

Completion of the Acquisition is subject to a number of conditions including, but not limited to, the closing of the Private Placement, the satisfaction of the Corporation and of CGG in respect of certain due diligence investigations to be undertaken by each party, closing conditions customary to transactions of the nature of the Acquisition, Exchange acceptance and, if required by Exchange policies, majority of the minority shareholder approval. Where applicable, the Acquisition cannot close until the required shareholder approval is obtained and there can be no assurance that the Acquisition will be completed as proposed or at all.

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

The Corporation's shares are currently listed for trading on the Exchange. In accordance with Exchange policy, however, the Corporation's shares are currently halted from trading and will remain halted until such time as determined by the Exchange, which, depending on the policies of the Exchange, may not occur until the completion of the Acquisition.

The Corporation will provide further details in respect of the Qualifying Transaction, in due course by way of press release.

Cautionary Statements

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the Acquisition and associated transactions, including statements regarding the terms and conditions of the proposed Acquisition and associated transactions. Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Acquisition and associated transactions, that the ultimate terms of the Acquisition and associated transactions will differ from those that currently are contemplated, and that the Acquisition and associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, CGG, ETK, the Property, or their respective financial or operating results or (as applicable), their securities.

The TSX Venture Exchange, Inc. has in no way passed upon the merits of the proposed Acquisition and associated transactions and has neither approved nor disapproved of the contents of this press release.

Contact Information

  • Sandspring Resources Ltd.
    Mr. Mark Maier, President, Chief Executive Officer,
    Chief Financial Officer and Director
    (403) 228-8154
    115 - 17th Ave. S.W.
    Calgary, Alberta, T2S 0A1