Telstar Resources Ltd.

January 23, 2006 15:26 ET

Telstar Resources Ltd. Accepts Proposal for Share Capital Reorganization

CALGARY, ALBERTA--(CCNMatthews - Jan. 23, 2006) - Telstar Resources Ltd. (TSX VENTURE:TST) (the "Corporation") announces it has accepted a proposal dated January 16, 2006 (the "Proposal") made by Kary Holdings Ltd. and Kenneth M. Kary (collectively, the "Majority Shareholder") for a reorganization of share capital of the Corporation (the "Reorganization"). The Reorganization is proposed to be completed pursuant to Section 173 of the Business Corporations Act (Alberta). Under the Reorganization, each common share of the Corporation, other than those held directly or indirectly by the Majority Shareholder and any shareholders that dissent from the proposed Reorganization ("Dissenting Shareholders") will be converted into one Series 1 Preferred Share of the Corporation. The Series 1 Preferred Shares will not be entitled to vote, will not be entitled to receive dividends and will be immediately redeemed after issuance for $0.11 cash (the "Redemption Price") per share. The 16,160,941 common shares (90.3% of the issued shares) of the Corporation held by the Majority Shareholder will not be converted into Series 1 Preferred Shares. In the absence of any Dissenting Shareholders, the aggregate redemption price for the Series 1 Preferred Shares to be redeemed by the Corporation is a maximum amount of approximately $191,301 ("Aggregate Redemption Price"). To facilitate the payment of the Aggregate Redemption Price, it is anticipated that the Majority Shareholder will provide a shareholder's loan to the Corporation in the amount of $191,301 or will arrange for alternate financing.

The redemption price of the Series 1 Preferred Shares was determined by the board of directors of the Corporation after receiving a valuation (the "Valuation") from Ernst & Young Orenda Corporate Finance Inc. ("EYOCF") dated December 30, 2005 and effective October 31, 2005. The Valuation provides a range of values for the common shares from a minimum of $0.106 per share to a maximum of $0.110 per share. A committee (the "Independent Committee") made up of the sole independent member of the board of directors of the Corporation was formed to review and consider any matters relevant to the Reorganization in order to provide a recommendation to the board of directors. The Independent Committee hired EYOCF, reviewed the Valuation and the Proposal and made a recommendation to the board of directors that the board of directors: "(a) determine that the Reorganization and the Redemption Price of $0.11 per Series 1 Preferred Share is in the best interest of the Corporation and is fair to shareholders of the Corporation other than the Majority Shareholder; and (b) recommend that the shareholders of the Corporation vote in favour of the special resolution approving the Reorganization."

The Reorganization will have to be approved by a special resolution of the holders of common shares of the Corporation. In addition, the Reorganization cannot be completed until the TSX Venture Exchange has accepted notice of the Reorganization and the Corporation has complied with any conditions to such acceptance of notice. Upon completion of the Reorganization, the common shares of the Corporation will be delisted from the TSX Venture Exchange Inc.

Further to the halt issued on January 20, 2006, trading in the common shares of the Corporation will recommence at the open of the markets on January 24, 2006.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Telstar Resources Ltd.
    Greg Kary
    (403) 261-4020