Santoy Resources Ltd.
TSX VENTURE : SAN

Santoy Resources Ltd.

December 22, 2008 14:23 ET

Santoy Merges With Virginia Uranium Ltd.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 22, 2008) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Santoy Resources Ltd. ("Santoy" or the "Company") (TSX VENTURE:SAN) is pleased to announce the signing of a Letter of Intent ("LOI") between Santoy and two private companies pursuant to which Santoy will acquire all of the shares of Virginia Uranium Ltd. ("Limited"), a private Yukon corporation, in exchange for shares in Santoy, at the ratio of six shares of Santoy for each one share of Limited. Limited currently holds a 12% minority interest in VA Uranium Holdings, Inc. ("Holdco"), a Yukon corporation. Holdco's 100% owned subsidiary, Virginia Uranium Inc., a Virginia corporation, controls the leasehold development and operating rights of the Coles Hill uranium property in southside Virginia. Santoy following the transaction is hereafter referred to as "Newco").

As part of the transaction, certain shareholders of Holdco will exchange their Holdco shares for shares of the Company on the same six for one basis. In addition, Santoy will invest $1,000,000 in Limited which will be secured by a promissory note issued by Limited and a pledge of shares of Holdco. The note will be convertible into 1,666,666 shares of Limited upon the successful completion of the contemplated transaction. Santoy will invest up to an additional $2,500,000 in exchange for up to an additional 4,166,666 shares of Holdco at an issue price of $0.60 per share. The above transactions will result in Newco holding a minimum of 20% of Holdco (increasing to approximately 25% following completion of the Newco Financing). Newco will have the same rights of first refusal as currently held by Limited on future financings required by Holdco as it advances the Coles Hill uranium project.

In addition, shareholders of Santoy immediately prior to closing will receive 1/4 of one warrant for each Santoy share held, with each whole warrant (an "Incentive Warrant") being exercisable for one Newco share at a price of $0.12 per share for a period of 12 months following the closing of transaction. If the closing price of the common shares of Newco for any 10 consecutive trading days exceeds $0.18, then Newco may accelerate the expiry of the warrants to the date which is 30 days following the end of such 10 trading day period. In turn, Holdco will issue warrants to Newco entitling Newco to acquire Holdco shares equivalent to the number of common shares of Newco underlying the Incentive Warrants, multiplied by the 1/6 share exchange ratio, at a price of $0.72 per share for a period of 12 months following the closing of the transaction.

The board of directors of Newco will consist of nominees of Santoy and Limited of which Newco expects to have up to seven directors with a minimum of three being independent. Norm Reynolds, currently Chief Executive Officer of Limited, is expected to be appointed as Chief Executive Officer of Newco. Walter Coles Jr., currently Executive Vice President of Limited, is expected to be appointed Executive Vice President of Newco. Ron Netolitzky, currently Chief Executive Officer of Santoy, will continue his active involvement in the company as a director of Newco. Mike Cathro of Santoy will remain as VP of Exploration for Newco.

The LOI contemplates that the Company will acquire Limited pursuant to a plan of arrangement under the Business Corporations Act (British Columbia). Both of Santoy and Limited will continue their jurisdictions of incorporation to British Columbia to facilitate the transaction. It is expected that Newco will have approximately 234,189,430 issued shares on completion of the above. At the meeting to approve the Arrangement, Santoy will seek shareholder approval for the continuance of its jurisdiction to British Columbia, approval of the arrangement and approval for a consolidation of the Newco shares on a one for six basis. All dollar and share figures given in this news release are provided on a pre-consolidation basis.

The Coles Hill uranium deposit is located in southern Virginia, USA and is considered to be one of the largest undeveloped uranium deposits in the United States. It has an estimated measured and indicated resource of 119 million pounds of U308(1)(2)(3) at a cut-off grade of 0.025% U308 based on a National Instrument 43-101 technical report on the Coles Hill property prepared for Virginia Uranium, Inc. by Behre Dolbear and Company, Ltd., Marshall Miller and Associates, Inc., and PAC Geological Consulting Inc. dated June 30th, 2008 (the "Behre Dolbear report"). A summary of the findings of this report is available on Virginia Uranium Inc.'s website at www.virginiauranium.com:



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EXCERPT FROM TABLE 1.1
RESOURCE ESTIMATES - JUNE 4, 2008
(MILLIONS OF TONS AND POUNDS IN-PLACE)
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Measured(1) Indicated(1) Total(1)
--------------------- --------------------- ---------------------
% % %
Cutoff Tons U3O8 Pounds Tons U3O8 Pounds Tons U3O8 Pounds
%U3O8 (2) (3) U3O8 (2) (3) U3O8 (2) (3) U3O8
---------------------------------------------------------------------------
Project Total (South and North Coles Hill Deposits)
---------------------------------------------------------------------------
0.100 0.755 0.228 3.45 6.27 0.215 26.9 7.03 0.216 30.4
---------------------------------------------------------------------------
0.075 1.35 0.164 4.44 24.0 0.116 55.9 25.4 0.119 60.4
---------------------------------------------------------------------------
0.050 2.28 0.124 5.65 35.4 0.101 71.7 37.7 0.103 77.4
---------------------------------------------------------------------------
0.025 6.62 0.064 8.42 92.1 0.060 111 98.7 0.060 119
---------------------------------------------------------------------------
(1) Total tonnage above cutoff grade and average weight % U3O8 of that
tonnage
(2) Short tons based on a rock density of 2.56 g/cc
(3) Weight %
---------------------------------------------------------------------------

1. The "Qualified Persons" (as defined in NI 43-101) who prepared the
resource estimate were Betty L. Gibbs for Behre Dolbear and K. Scott
Keim for Marshall Miller and Associates, Inc.
2. Mineral resources which are not mineral reserves do not have
demonstrated economic viability. The estimate of mineral resources may
be materially affected by environmental, permitting, legal, marketing,
or other relevant issues.
3. Santoy has not conducted appropriate due diligence work to verify this
resource estimate. Santoy plans to immediately commission its own
NI 43-101 compliant technical report.


A statutory framework has been enacted into law for uranium exploration in Virginia. However, the Commonwealth of Virginia prohibits any agency of the Commonwealth from accepting applications for uranium mining until a program for permitting uranium mining is established by statute. Such legislation has not been enacted. In November 2008, Virginia's Commission on Coal and Energy endorsed commencement by a state panel of a study of uranium mining's health, economic, social and other impacts. A subcommittee of the commission must approve an outline of the study before it moves forward.

Mr. Ron Netolitzky, Chief Executive Officer of Santoy, is also a director and a shareholder of Holdco. To increase the number of Holdco shares available to Santoy, Mr. Netolitzky has offered that Santoy may acquire his Holdco shares at cost as part of the transaction. If this exchange completes, Mr. Netolitzky would receive Newco shares representing his cost of approximately US$400,000 for the Holdco shares ($0.20 US per Holdco share) plus interest. The LOI has been negotiated by an independent committee of the Board of Santoy and has received full Board approval. Toll Cross Securities has been retained to provide a fairness opinion with respect to the contemplated transaction. The ultimate structure and form of the transaction will be mutually determined by Limited and the Company based on tax, securities and corporate law and other considerations.

The parties will negotiate in good faith to agree on the definitive terms of a formal agreement in respect of the transaction by January 31, 2009. The completion of the plan of arrangement is subject to various conditions, including applicable regulatory approval, approval by the shareholders of Limited and the Company; the approval by the Supreme Court of British Columbia of the fairness to Santoy shareholders of the terms and conditions of the plan of arrangement satisfactory negotiation of other transaction-related documents; and the structure being satisfactory to the parties from a tax and securities law perspective. It is contemplated that the Company will change its name to reflect the significance of the transaction to the Company. Limited and Santoy will use their commercially reasonable efforts to complete the transaction by April 15, 2009.

Santoy is pleased to proceed with this transaction as it gives the Company a significant position in a uranium project situated in a stable political location. At the same time, Limited shareholders will gain diversification and will benefit from Santoy's exploration properties. The acquisition complements Santoy's portfolio of uranium exploration properties in the Athabasca Basin of Saskatchewan, the Otish Mountains in Quebec and the Central Mineral Belt of Labrador. The Company is also the largest shareholder of Boss Power Corp. which owns the Blizzard uranium deposit in British Columbia.

The technical information in this news release has been reviewed and approved by Michael S. Cathro, P,Geo., Santoy's Vice President of Exploration, a Qualified Person. The Qualified Person has not verified the data disclosed in the news release as the Company plans to immediately commission a NI 43-101 compliant technical report to confirm the resource estimate.

This news release includes certain "forward-looking statements". All statements other than statements of historical fact included in this release, including, without limitation, statements regarding potential mineralization, exploration results and future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include market prices, exploitation and exploration results, availability of capital and financing, general economic, market or business conditions, uninsured risks, regulatory decisions, regulatory changes, defects in title, availability of personnel, materials and equipment, timeliness of government approvals, unanticipated environmental impacts on operations and other exploration risks detailed herein and from time to time in the filings made by the Company with securities regulators. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise except as otherwise required by applicable securities legislation.

Contact Information

  • Santoy Resources Ltd.
    R. K. Netolitzky
    President & CEO
    (604) 669-4799
    (604) 669-2543 (FAX)
    Email: netolitzky@gmail.com