Sparton Resources Inc.
TSX VENTURE : SRI
October 03, 2008 15:05 ET
Sparton Closes $2 Million Bridge Financing to Complete Initial Acquisition of Profitable Coal/Germanium/Uranium Opportunity
TORONTO, ONTARIO--(Marketwire - Oct. 3, 2008) -
NOT FOR DISSEMINATION TO UNITED STATES NEWSWIRES OR FOR DISSEMINATION IN THE UNITED STATES
Sparton Resources Inc. (TSX VENTURE:SRI) (the "Company") is pleased to announce that its wholly-owned subsidiary, Sparton Energy Inc. ("SEI") has closed a US$2 million bridge loan (the "Loan") provided by a Quam Limited ("Quam") subsidiary company, Quam Ventures BVI Ltd. The proceeds of the Loan will be used to complete SEI's previously announced acquisition of an initial 60% share interest in Linxing 306 Huajun Coal Co. Ltd. Lincang City ("Huajun"), which owns the Huajun coal and germanium producing operations in Yunnan, China. This will result in SEI taking over control of the operations and cash flow at Huajun. SEI has completed the sourcing of experienced technical and financial staff to effect a smooth transition of the operational and management changes.
As previously announced (see news release dated June 24, 2008), Quam Securities Company Limited ("Quam Securities") of Hong Kong has entered into an engagement letter with SEI to raise up to US$10 million in convertible debentures of SEI (the "Convertible Debentures") on a "best efforts", private placement basis (the "Financing"). Quam through a subsidiary has agreed to subscribe for US$ 2 million of the Convertible Debenture on closing of a minimum of US$5 million, at which time the Loan will be repaid in full. The proceeds from the sale of the full US$10 million of the Financing will be partly used for purchase of an additional 25% share interest in Huajun and for technical upgrades to those operations. (see news release dated April 17, 2008 for details of this transaction).
The Financing proceeds will also provide capital for the final design, permitting and construction of a pilot plant and uranium extraction testing facility in the Lincang area, which will be built at the Huajun site. Following final testing, commercial plant design and feasibility work, these funds will then support the construction of a commercial uranium extraction plant for Lincang area waste coal ash, and support SEI's ongoing international secondary uranium recovery programs.
Various conditions precedent, including receipt of required regulatory and corporate approvals, and completion of independent due diligence reviews have now been met or completed, allowing the closing of the Loan part of this transaction.
BRIDGE LOAN TERMS
The Loan is for a principal amount of $USD2 million, will carry interest at 10% annually and is repayable on or before maturity on March 31, 2009. The maturity date may be extended to May 31, 2009 under certain conditions. The loan will be repaid out of proceeds of funds from the Convertible Debenture sales as long as a minimum of US$ 5 million in Convertible Debentures are sold by Quam Securities or SEI alternately raises a similar minimum amount. SEI will repay the Loan and interest immediately upon completion of the minimum of a further US$ 5 million in proceeds of the Financing. Quam has indicated it intends to subscribe for US$2 million of the Financing for its subsidiary's account, subject to a minimum initial closing of US$5 million of the Convertible Debentures.
In addition to the interest payable on the principle amount of the Loan, Quam will receive up to 2,310,000 SEI preference shares, representing up to a 7.7 % interest in SEI, which will be diluted to 5% should the full US$10 million in Convertible Debentures be sold. Quam may elect to convert these Preference Shares into common shares of SEI, or, Quam may elect to convert the full number of Preference Shares into 3,555,000 Bonus Common Shares of the Company at a value of C$0.11 per Bonus Common Share if SEI has not completed a transaction to become a listed entity on a recognized stock exchange prior to the maturity date of the Convertible Debentures.
SEI and the Company are providing security for the Convertible Debentures to both Quam and the debenture holders in the form of a guarantee backed by the Huajun shares, SEI's interest in the agreements and operating vehicles related to the secondary uranium recovery programs in Yunnan, and the Company's estimated 6% working interest in the Chebucto gas field offshore of Nova Scotia, Canada.
Quam Limited is a listed Hong Kong (952 SEHK) based financial services group comprised of several renowned Hong Kong businesses, including Quam Securities, Quam Capital, Quam Asset Management, Quam Wealth Management, Quamnet.com and Quam Investor Relations. Utilizing both its online and offline resources, Quam offers one-stop financial services in Hong Kong and China for corporations and individual investors alike. It also provides capital markets assistance in Tokyo, Bangkok, Dubai, Hong Kong and through its representative offices or wholly-owned foreign enterprises in Shenzhen, Shanghai, Shenyang of China. The Company has been associated with Quam as its financial advisor in Hong Kong for more than two years.
The proceeds of the Financing will further the Company's goal of becoming a profitable operating company through its subsidiaries. The medium term objectives are to upgrade the Huajun operations and enhance their profitability by increasing output and upgrading the current production of concentrate to germanium metal. Additionally, utilizing its proprietary technology, the Company has strong government support for uranium extraction from Lincang ash and through its joint venture with China National Nuclear Corporation plans to complete a bulk test plant, a feasibility study, and ongoing construction of a commercial production facility in the Lincang area. Initial design and permitting for this work is currently underway.
Experienced operating staff has been engaged to oversee the Lincang operations and organize the design and implementation of the new germanium metal production plant. Lyntek Inc., the Company's process engineering consultants, has completed an initial design for the uranium extraction bulk test plant and this has been submitted to the PRC environmental permitting authorities for review.
Sparton's international exploration and evaluation programs are being carried out under the direct supervision of A. Lee Barker, P. Eng., P Geol., the Company's President and CEO who is a Qualified Person under National Instrument 43-101.
Listed: TSX Venture Exchange
Trading Symbol: SRI
This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may" ,"could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to exploration and development, the environment, local and foreign government regulation, currency fluctuation infrastructure, capital markets and additional funding requirements and the departure of key executives as well as those factors discussed in the Company's documents filed on SEDAR (www.sedar.com).
Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on Sparton Resources Inc. is available at www.sedar.com.
This news release and the information contained herein does not constitute an offer of securities for sale in the United States and securities may not be offered or sold in the United States absent registration or exemption from registration.
The TSX Venture Exchange has not reviewed and does not accept responsibility for adequacy or accuracy of the content of the information contained herein.