Sandspring Resources Ltd.
TSX VENTURE : SSP.P

Sandspring Resources Ltd.

June 27, 2008 14:00 ET

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

CALGARY, ALBERTA--(Marketwire - June 27, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAWS.

Sandspring Resources Ltd. (the "Corporation") (TSX VENTURE:SSP.P) is pleased to provide an update on its qualifying transaction (the "Qualifying Transaction") and announce the entering into of a new letter of intent. Subsequent to the letter of intent dated effective August 24, 2007 and disclosed in a press release (the "Initial Press Release") dated that same date, which letter of intent has expired, it has entered into a further letter of intent dated effective June 12, 2008 (the "2008 Letter of Intent"), with GoldHeart Investment Holdings Ltd. ("GoldHeart"), whereby the Corporation will acquire an interest in GoldHeart, which owns 100% of the outstanding stock of ETK, Inc. ("ETK"), the owner and operator of certain mineral exploration interests located in Guyana, South America (the "Acquisition").

As a result of restructurings of certain corporate entities, the ownership of ETK and the parties to the 2008 Letter of Intent have changed from that disclosed in the Initial Press Release. The Qualifying Transaction as restructured will result in the Corporation acquiring an indirect interest in the same mineral exploration property located in Guyana, South America (the "Property"), as disclosed in the Initial Press Release.

GoldHeart is a private company existing under the laws of the British Virgin Islands. ETK is a private company organized under the laws of Guyana that controls the mineral prospect which is the subject of the Qualifying Transaction. The shareholders of GoldHeart are Crescent Global Gold Ltd., a private company existing under the laws of the British Virgin Islands and Mr. Alfro Alphonso, a businessman resident in Georgetown, Guyana. The principals of Crescent Global Gold Ltd. include P. Greg Barnes, John R. Adams, Gregory K. Graham and Richard A. Munson, businessmen residing in Colorado, U.S.A.

Highlights of the Acquisition

Pursuant to the terms of the 2008 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 a 23.83% equity interest in GoldHeart. As consideration for the Acquisition, the Corporation will issue to GoldHeart, a total of 8,000,000 common shares in the capital of the Corporation (the "Acquisition Shares"), pay outstanding debt incurred by ETK in the amount of US$1.15 Million (the "Convertible Debt") pursuant to the terms of convertible promissory notes, through the issuance of Special Warrants (as hereinafter defined), convertible into common shares in the capital of the Corporation ("Common Shares") and will also pay certain debts incurred by ETK in connection with its mineral operations presently being conducted on the Property, up to a maximum of US$850,000. Accordingly, upon completion of the Acquisition and repayment of the Convertible Debt, the Corporation will control 23.83% of GoldHeart. The Acquisition Shares will be issued at a deemed price of CAD$0.50 per share. The Acquisition Shares will be subject to the escrow requirements of the Exchange, if applicable.

In addition, pursuant to the terms of the 2008 Letter of Intent, the Corporation will obtain rights ("Earn-In Rights"), to be issued additional shares of GoldHeart from its treasury, at a rate of 3.33% of the issued and outstanding capital of GoldHeart, for each US$1 Million expended on the Property and/or on other agreed-upon expenditures and will also acquire an option, by virtue of the Put or Call (as hereinafter defined), to acquire all of the remaining outstanding shares of GoldHeart from the shareholders of GoldHeart (the "GoldHeart Shareholders").

Upon completion of the Acquisition, the Corporation will hold 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

For a brief geological overview of the Property and for an overview of recent documentation of geological reporting on the Property, please refer to the Initial Press Release filed on SEDAR at www.sedar.com. An updated technical report, compliant with National Instrument 43-101 - Standards of Disclosure For Mineral Projects, is being prepared in respect of the Property.

Board of Directors of the Resulting Issuer

Management of the Corporation expects that upon completion of the Qualifying Transaction, the board of directors of the Corporation will be comprised of those individuals outlined in the Initial Press Release:

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

Richard A. Munson - Proposed President, Chief Executive Officer and Director

Charles Gryba - Current Director

Joel Schneyer - Current Director

P. Greg Barnes - Proposed Director

Concurrent Private Placements

Concurrent with the closing of the Acquisition, the Corporation expects to complete a brokered private placement through Richardson Partners Financial Ltd., of Calgary, Alberta ("RPFL"), of Common Shares at a price of CAD$1.00 per Common Share for minimum gross proceeds of CAD$5.0 Million and maximum gross proceeds of CAD$6.0 Million (the "Brokered Private Placement"). The net proceeds of the Brokered Private Placement will be used by the Corporation to finance an initial work program agreed upon between the Corporation, ETK and GoldHeart (the "Initial Work Program"), for general working capital purposes of the Corporation, and to pay closing costs associated with the Brokered Private Placement. Terms and conditions of the agency relationship between RPFL and the Corporation shall, in due course, be negotiated by and agreed upon among the Corporation and RPFL.

Concurrent with the closing of the Acquisition, the Corporation also proposes to issue up to 500,000 Common Shares at an offering price of CAD$1.00 per Common Share, for aggregate proceeds of up to CAD$500,000.00, to accredited US domiciled investors.

Convertible Debt

To pay a portion of the costs of the drilling program commenced in June 2007 and to finance other exploration activities undertaken by ETK with respect to the Property pending the completion of the Acquisition, ETK borrowed the funds resulting in the Convertible Debt. The Convertible Debt is evidenced by a convertible promissory note (the "Promissory Note") and will be repaid by the Corporation through the issuance of special warrants ("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 Brokered 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 in compliance with the requirements of the Exchange. All amounts paid by the Corporation in respect of the Convertible Debt, will be payments credited toward Earn-in Rights.

Revolving Debt

To pay property holding costs, exploration costs, mining operational costs and for working capital purposes, ETK continues to borrow funds under the terms of a revolving credit agreement (the "Revolving Debt"). In connection with the Acquisition, the Corporation will assume the obligation to pay up to US$850,000 of the Revolving Debt, interim payments being payable from and after the closing of the Acquisition in monthly instalments. All amounts paid by the Corporation in respect of the Revolving Debt, will be payments credited toward Earn-in Rights.

Earn-In Rights and Related Entitlements

In addition to committing to a work program agreed upon by the Corporation, GoldHeart and ETK (the "Initial Work Program"), the 2008 Letter of Intent contemplates that the Corporation will commit to an additional work program (the "Follow-On Work Program") in respect of the Property, to be conducted over a period of thirty-six (36) months from completion of the Acquisition. Pursuant to the 2008 Letter of Intent, the Corporation has agreed to incur aggregate expenditures of up to US$10.0 Million (the "Maximum Amount"), relating to the Initial Work Program, the Follow-On Work Program and other expenditures incurred in respect of the Property and agreed upon between the Corporation, ETK and GoldHeart. The details of the Follow-On Work Program will be established by a technical committee to be appointed by GoldHeart and the Corporation, however, final decision-making authority over expenditures proposed in respect of the Follow-On Work Program, will be at the discretion of the Corporation.

Upon incurring expenditures of US$1.0 Million and for each successive US$1.0 Million provided by the Corporation thereafter (up to the Maximum Amount), the Corporation will be entitled to Earn-In Rights, with each successive US$1.0 Million expended, entitling the Corporation to be issued an additional three and one-third percent (3.33%) of the issued and outstanding shares of GoldHeart. Accordingly, in addition to acquiring any relevant Earn-in Rights resulting from the payment of the Convertible Debt or the Revolving Debt, if the Corporation contributes the Maximum Amount, it will be entitled to acquire an additional thirty-three and one-third percent (33.333%) of GoldHeart.

Pursuant to the 2008 Letter of Intent, for a period of eighteen (18) months after the Initial Work Program has been completed, the GoldHeart Shareholders will have the right to sell to the Corporation (the "Put"), all (but not part), of the remaining outstanding shares of GoldHeart, provided, however, that the value of 100% of the Project is at least US$20.0 Million. The 2008 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 GoldHeart Shareholders to sell to the Corporation (the "Call"), all (but not part), of the remaining outstanding shares of GoldHeart.

In the event that either the Put or Call is exercised, the value of the Property shall be paid to the GoldHeart 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.

ETK Royalty Obligations

ETK is subject to a five percent (5%) royalty obligation payable to Guyana State and a six percent (6%) royalty payable to Mr. Alfro Alphonso. The royalty payable to Mr. Alphonso can be purchased at any time for US$20 million.

Non-Brokered Private Placement - Pre-Acquisition

To finance the Acquisition and related costs, the Corporation proposes to issue, by way of a non-brokered private placement (the "Non-brokered Private Placement"), up to 1,200,000 Common Shares at an offering price of CAD$0.25 per Common Share for gross aggregate proceeds of up to CAD$300,000.00, which is expected to be completed promptly upon the receipt of all required regulatory approvals and in any event, prior to the completion of the Acquisition.

Certain subscribers to the Non-Brokered Private Placement are directors of the Corporation. Accordingly, the Non-Brokered Private Placement is a "related party transaction" pursuant to Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). Exemptions from the formal valuation and minority approval requirements of MI 61-101 are available to the Corporation in connection with the related party transaction.

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. The Corporation is seeking to engage a sponsor in connection with the Qualifying Transaction and will announce, in a press release to be disseminated at a later date, the sponsor once engaged.

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.

Other Information and Updates

The Corporation's shares were halted from trading on August 24, 2007 upon release of the Initial Press Release and will remain halted pending filing of documentation regarding the Qualifying Transaction with the Exchange and 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, GoldHeart, ETK, the Property or (as applicable), 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