Scarlet Resources Ltd.
CNSX : SCT

February 05, 2010 09:00 ET

Scarlet Resources Announces Letter Agreement With United Mine Services

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 5, 2010) -

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

Scarlet Resources Ltd. ("Scarlet") (CNSX:SCT) is pleased to announce that it has entered into an agreement, (the "Letter Agreement") for the arm's length acquisition (the "Proposed Transaction") of 100% of the shares of common stock of United Mine Services, Inc. ("UMS"). UMS and its wholly-owned subsidiary, Syringa Exploration Inc. ("Syringa"), are both incorporated under the laws of Idaho, USA.

Pursuant to the Letter Agreement, Scarlet will acquire all of the issued and outstanding shares of UMS in consideration for securities of Scarlet consisting of common shares and securities convertible into common shares so that if converted or exercised on closing, the shareholders of UMS would hold in the aggregate 30,000,000 common shares of Scarlet.

UMS, a private company based in Pinehurst, Idaho, USA, was founded in 2006 with the goal of becoming a fully vertically integrated mine services company. UMS's growth strategy is to combine companies under one umbrella and provide mine owners and exploration companies with a one-stop shop of mine services, no matter what stage of the life cycle their project is in. The scope of UMS has grown to include surface and underground mine development, mine site construction, environmental reclamation, claim staking, machining and the fabrication of specialized mining equipment and tools. UMS is comprised of a Mining Services Division, Construction/Contracting Services Division and a Specialized Manufacturing Division.

UMS has recently entered into an Exploration Earn In Agreement (the "Earn In Agreement") with SNS Silver Corp. Pursuant to the Earn In Agreement, UMS will expend a total amount of US$9,000,000 over 3 years toward continued exploration and development of the Crescent Mine in North Idaho's Silver Valley to earn an 80% interest in the property.

The Crescent Mine is an advanced-stage, former-producing exploration and mining project, located in the heart of the second-largest silver-producing district in the world. The area around, and including the mine, has produced more than 1 billion ounces of silver over the past century. The Crescent Mine has had little exploration performed and is flanked to the west by the Bunker Hill mine (161 million ounces of silver produced) and to the east by the Sunshine Mine (328 million ounces of silver produced). To date, the Crescent Mine has produced 25 million ounces silver at an average grade of 27.3 ounces per ton silver.

During 2007, the most recent exploration carried out, 70 surface and 30 underground holes were completed for a total of 31,460 meters. Significant intersections were encountered, the best being 10 feet grading 56 ounces per tonne silver. On the basis of these drill results, SNS Silver Corp. calculated a measured and indicated resource of 524,000 tonnes grading 18.7 opt silver (6.1M ounces) and an inferred resource of 211,000 tonnes grading 19.5 opt silver (4.1 M ounces), with such resource categories being the same as under National Instrument 43-101 -Standards of Disclosure for Mineral Projects. The deposit is wide open to depth and along strike and underground drilling and tunneling will be carried out with the objective of increasing the resource.

Based on audited financial statements (prepared in accordance with U.S. generally accepted accounting principles) for the fiscal year ended December 31, 2008, UMS had gross revenues of US$7,242,990, gross margin of US$944,146 and a net income of US$191,352. As at December 31, 2008, UMS had a working capital of US$19,220, total assets of US$1,734,289 and total liabilities of US$1,258,646 (of which US$1,035,123 were current liabilities).

According to unaudited management prepared financial statements (prepared in accordance with U.S. GAAP) for the fiscal year ended December 31, 2009, UMS had gross revenues of US$15,813,873, gross margin of US$3,726,557, and a net income of US$1,731,813. As at December 31, 2009, UMS had a working capital of US$696,010, total assets of US$5,821,241 and total liabilities of US$2,242,604 (of which US$2,271,198 were current liabilities).

The Letter Agreement will be superceded by a definitive agreement to be negotiated between the parties. Completion of the Proposed Transaction is subject to certain conditions, including the completion at closing of a financing to raise up to C$6,000,000, obtaining necessary CNSX, regulatory and shareholders' approvals in respect of the Proposed Transaction, the election/appointment of new board members of Scarlet, the satisfactory completion by each party of their respective due diligence investigations, and such other closing conditions as may be specified in the Definitive Agreement. It is expected that Scarlet's name will be changed to "United Mining Group, Inc." or such other name as the parties may agree and which may be acceptable to the relevant regulatory authorities.

Pursuant to the Letter Agreement, upon completion of the Proposed Transaction the board of directors of Scarlet will consist of five directors. The directors and expected officers of Scarlet upon the completion of the Proposed Transaction include:

Greg Stewart – President, Chief Executive Officer and Director
Erik Panke – Chief Financial Officer, Corporate Secretary and Director
Herrick Lau – Director
Lawrence Dick – Director
Wade Black – Director

Their backgrounds are as follows:

Mr. Stewart founded Stewart Contracting Inc in 1992 and steadily grew his company in scope, scale and sales, then was retained as the CEO when UMS acquired Stewart Contracting in 2007. His experience includes surface and underground mine development, environmental remediation and reclamation, site development, pond and dike construction, and stream restoration for a long list of public and private clients. He is a successful businessman with the ability to put together strong teams and execute projects.

Mr. Panke has more than 20 years of experience on engineering and construction projects throughout the United States. Prior to joining UMS, he worked as a Senior Manager of Business Administration for Washington Group International, a multi-billion dollar engineering, construction, contract mining and program management firm. He was responsible for budgeting, forecasting, and financial reporting on projects ranging from $1 million to more than $1 billion. He relocated to six different States during his career, and his responsibilities have spanned the continental U.S., Hawaii, and the South Pacific.

Mr. Lau is an experienced investment banking professional with over 14 years of experience in investment research and corporate finance. He has conducted transactions in initial public offerings, reverse takeovers, mergers & acquisitions, divestitures, and various advisory services and has experience as a finance executive in publicly traded and private companies. Mr. Lau is currently Vice President, Corporate Finance of Baron Global Financial Canada Ltd.

Dr. Dick is a professional geologist with more than 35 years experience in geology and mineral exploration, including 17 years with Chevron Minerals Ltd as Director of Exploration in Latin America. He is credited with major finds at Collahuasi (Chile); Can Can (Chile); Golden Bear (B.C.); San Jose (Mexico). Dr. Dick was Co-Founder of General Minerals Corporation (now Sprott Resource Corporation), and Founder, President and CEO of Evolving Gold Corp. His current positions include Chief Geologist & Manager of Resources for Baron Global Financial Canada Ltd., President & CEO of Pinnacle Mines Ltd and President of Confederation Minerals Ltd.

Mr. Black is the Chief Operating Officer of Scarsdale Equities LLC, a New York City investment banking and brokerage firm. He has more than 15 years of experience managing operations for broker-dealers and investment advisory firms, including Brimberg & Co. and Leeb Brokerage Services Inc. He, along with his partners, founded Scarsdale Equities LLC in 2005. He is also currently a director of US Silver Corp, a TSX Venture Exchange listed company with operations in northern Idaho.

All information contained in this press release with respect to UMS and its directors and officers was supplied by management of UMS.

In compliance with National Instrument 43-101, Dr. Lawrence Dick, Scarlet's Director is the Qualified Person who prepared or supervised the preparation of the technical information contained in this news release.

On behalf of the board of directors of Scarlet Resources Ltd.

Lawrence Dick, Director

Forward-looking statements: This press release contains forward-looking statements about Scarlet Resources Ltd. and United Mine Services, Inc. (collectively referred to as the "resulting issuer") their respective businesses and future plans, including, without limitation, the Proposed Transaction and the concurrent financing. The forward-looking statements in this press release are subject to various risks, uncertainties and other factors that could cause the resulting issuer's actual results or achievements to differ materially from those expressed in or implied by forward-looking statements. These risks, uncertainties and other factors include, without limitation, uncertainty as to resulting issuer's ability to achieve the goals and satisfy the assumptions of management; uncertainties as to the availability and cost of financing; general economic factors and other factors that may be beyond the control of the parties. Forward-looking statements are based on the beliefs, opinions and expectations of the management of Scarlet Resources Ltd. and United Mine Services, Inc. at the time they are made, and Scarlet Resources Ltd. does not assume any obligation to update the forward-looking statements if those beliefs, opinions or expectations, or other circumstances, should change.

The Canadian National Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this news release.

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