Treat Systems Inc.
NEX BOARD : TSZ.H

September 18, 2007 08:00 ET

Treat Systems (Mega Silver Inc.) Announces Acquisition of Options to Earn Interests in Mexican and Canadian Silver Properties and Up to CDN$16.025 Million Financing

TORONTO, ONTARIO--(Marketwire - Sept. 18, 2007) -

NOT FOR DISSEMINATION TO US NEWS WIRE SERVICES OR DISSEMINATION INTO THE UNITED STATES.

Treat Systems Inc. ("Treat" or "Mega Silver") (NEX BOARD:TSZ.H) is pleased to announce that it has entered into agreements with three different vendors to acquire options to earn interests in several prospective silver exploration properties located in Mexico, British Columbia and the Yukon Territories. Completion of the acquisitions is subject to a number of conditions, including the receipt of requisite regulatory approval by Treat, including the approval of the TSX Venture Exchange (the "TSXV"). Treat is also pleased to announce that it intends to raise gross proceeds of up to CDN$16,025,000. PI Financial Corp. ("PI") has been engaged to raise up to CDN$8,500,000 on a reasonable efforts basis, and Treat intends to complete a non-brokered private placement for up to CDN$7,525,000.

For the purposes of the TSXV manual, the acquisition by Treat of the mining property options will constitute a change of business to the mining sector and will require Treat to satisfy applicable TSXV requirements including shareholder approval and the preparation of a filing statement. Treat intends to re-activate by completing the change of business. By re-activating, Treat will transfer its listing to the TSXV subject to shareholder and TSXV approval.

Reference is made to Treat's press release dated May 24, 2007 with respect to the proposed change of business. As previously disclosed, at Treat's annual and special meeting of shareholders on June 28, 2007, where shareholders approved, among other things, an amendment to the Corporation's articles to change its name to "Mega Silver Inc." and approved, in general terms, the proposed change of business. Treat intends to prepare and file on SEDAR, a filing statement (which must be approved by the TSXV) which will more particularly describe the proposed change of business and the terms and conditions of the various options agreements which are described below. Shareholders of Treat will be asked to sign written consents in respect of the completion by Treat of the change of business transaction, including the related financings, as will be set forth in such filing statement.

Treat has been inactive for at least seven years, when it ceased its operations as a company that was involved in the research and development of advanced technologies to improve environmental air and water quality.

Treat's shares are listed on the NEX board of the TSXV under the symbol TSZ.H. Treat has been classified by the TSXV as an "inactive issuer". Treat's shares remain halted pending the reactivation of the corporation together with the change of business.

Certain material terms of the option agreements are summarized below.

1. Option Agreement among Silverstone Resources S.A. de C.V., Treat and Grupo Minero Bacis, S.A. de C.V. - Promontorio Project

Pursuant to an agreement dated September 17, 2007 (the "Silverstone Promontorio Option Agreement") Silverstone Resources S.A. de C.V. ("Silverstone"), a company incorporated pursuant to the laws of Mexico and owned by Silverstone Resources Corp. (TSX VENTURE:SST) has granted Treat an option to acquire a 60% interest or a 70% interest, as hereinafter provided, in the Silverstone interest in the Promontorio Gold/Silver Project, which project comprises 2,093.87 hectares in the Municipality of El Oro, State of Durango, Mexico (the "Promontorio Project"). The Promontorio Project consists of 33 concessions.

Pursuant to an amended and restated option agreement between Silverstone, Silverstone Resources Corp. and Grupo Minero Bacis S.A. de C.V. ("Bacis"), Silverstone was granted the right to acquire an undivided 90% interest in the Promontorio Project (among other properties), subject to a 1.5% net smelter return royalty in favour of Bacis (Bacis retaining a 10% carried interest). The amended and restated option agreement also provides that Silverstone may acquire the remaining 10% carried interest, after completion of a feasibility study, if Bacis elects to exercise its right to cause the 10% carried interest to be purchased by Silverstone. Bacis may also at anytime elect to exchange the 10% carried interest with Silverstone for the right to receive an additional 1.5% net smelter return royalty. Silverstone also has a right of first refusal in respect of any intended sale by Bacis of such 10% carried interest.

Pursuant to the Silverstone Promontorio Option Agreement, Treat has the right to acquire a 60% interest in the Silverstone interest in the Promontorio Project (such interest to reflect the interest Silverstone has or acquires pursuant to Bacis' exercise of its above stated rights concerning the 10% carried interest), upon: (i) incurring an aggregate of CDN$5.0 million in expenditures over a five year period (with CDN$1.0 million of such expenditures to be incurred on or prior to the first anniversary of the effective date of the Silverstone Promontorio Option Agreement); (ii) Treat issuing to Silverstone and Bacis an aggregate of 150,000 common shares in its capital on or before the later of 2 days after TSXV approval of the Silverstone Promontorio Option Agreement or the completion of a financing of not less than CDN$10,000,000 by Treat; and (iii) Treat issuing to Silverstone an additional 150,000 common shares on or before such first anniversary date and an additional 250,000 common shares in its capital to Silverstone on or before the second anniversary date.

Treat may acquire an additional 10% interest in the Silverstone interest in the Promontorio Project (as the same may be then or in the future constituted), upon Treat delivering a completed feasibility study to Silverstone on or before December 31, 2017.

Silverstone has a back-in option to re-acquire a 20% interest in the Silverstone interest in the property (for an aggregate 50% legal and beneficial interest).

The Silverstone Promontorio Option Agreement is conditional upon Treat completing a financing of not less than CDN$10,000,000.

2. Option Agreement among Silverstone Resources S.A. de C.V., Treat and Grupo Minero Bacis, S.A. de C.V. - Montoros Project

Pursuant to an agreement dated September 17, 2007 (the "Silverstone Montoros Option Agreement") Silverstone, has granted Treat an option to acquire a 60% interest or a 70% interest, as hereinafter provided, in the Silverstone interest in the Montoros Project, which project comprises 2,147 hectares, located 190 kilometres northwest of Durango City, situated in the Santiago Papasquiro Municipality in the State of Durango, Mexico (the "Montoros Project"). The Montoros Project consists of 13 exploitation and four exploration concessions. The Montoros Project is an exploration stage property. The Montoros Project is situated within the belt of gold-silver vein mines and significant prospects in Sierra Madre Occidental Province of Mexico.

The terms and conditions of the Silverstone Montoros Option Agreement mirror the terms and conditions of the Silverstone Promontorio Option Agreement as set forth above.

Treat anticipates filing a Technical Report in accordance with the requirements of National Instrument No. 43-101 of the Canadian Securities Administrators with respect to each of the Promontorio Project and the Montoros Project in connection with its change of business application to be submitted to the TSXV. It is anticipated that the Promontorio Project and the Montoros Project will comprise the material properties of the Company.

3. Option Agreement between Treat and Endurance Gold Corporation ("Endurance")

Pursuant to an agreement dated September 14, 2007 (the "Endurance Option Agreement") Endurance, a company continued pursuant to the laws of the Province of British Columbia (TSX VENTURE:EDG), has granted Treat an option to acquire a 75% interest in the claims and permits held by Endurance (or in which Endurance has an option to earn a 100% interest) in the Smithers area of northwestern British Columbia, Canada, comprising 10 claims and covering 3,041 hectares of land and known as the Virginia Silver Property (the "Endurance Properties").

Pursuant to the Endurance Option Agreement, to exercise the option, Treat must incur an aggregate of CDN$3.0 million in expenditures (or make commensurate cash payments to Endurance) on or before August 7, 2009, a minimum of CDN$250,000 to be expended within the first year following execution and delivery of definitive agreements. Treat must also make additional cash payments to Endurance as follows: (i) CDN$25,000 on execution and delivery of the definitive agreements; (ii) CDN$75,000 on the first anniversary of the date of the execution and delivery of the definitive agreements; (iii) CDN$100,000 on the second anniversary; and (iv) CDN$150,000 on August 7, 2009 (being the last day of the option period).

If Treat duly exercises the option, within 15 days, Treat and Endurance must, on a pro rata basis, make a final property payment to the original vendor of the Endurance Properties in the aggregate amount of CDN$250,000.

The Endurance Option Agreement is conditional upon Treat completing a financing of not less than CDN$3,000,000 allocated to the funding of the expenditure obligations.

4. Option Agreement between Treat and Strategic Metals Ltd. ("Strategic")

Pursuant to an agreement dated as of September 17, 2007 (the "Strategic Option Agreement") Strategic, a company continued pursuant to the laws of the Province of British Columbia (TSX VENTURE:SMD), has granted Treat an option to acquire a 100% undivided interest in certain mineral tenures situated in the Yukon Territories, which include the Uno, Jake and Rogue properties known as the Selwyn Silver Project (the "Strategic Properties").

Pursuant to the Strategic Option Agreement, Treat must pay to Strategic a cash fee in the amount of CDN$200,000 and issue to Strategic 150,000 common shares, on the effective date. Additionally, Treat must incur an aggregate of CDN$3,000,000 in expenditures on the Strategic Properties within two years of the effective date, of which a minimum of CDN$1,000,000 must be incurred within the first year of the effective date on any of the Strategic Properties, in order to preserve the option on all of the Strategic Properties. On the exercise of the option with respect to any of the Strategic Properties, Treat must issue to Strategic an additional 1,000,000 common shares for each of the Strategic Properties for which the option is exercised (being up to a maximum of 3,000,000 common shares).

The Strategic Option Agreement is conditional upon Treat completing a financing of not less than CDN$3,200,000.

Each of the optionors under the above option agreements is at arm's length with Treat. Each of the optionors is a public company whose shares are listed on the TSXV. Additional information with respect to each of Silverstone, Endurance and Strategic is available under their respective profile at www.sedar.com.

In order to meet the financing conditions set forth above in each of the option agreements, enable Treat to incur the necessary exploration expenditures and be in a position to exercise any or all of the options as and when deemed advisable by Treat and to ensure that Treat has additional funds to cover general administrative and overhead expenses over the next 12 months, Treat has arranged a reasonable efforts private placement with PI to raise gross proceeds of up to CDN$8,500,000 and a non-brokered private placement to raise gross proceeds of up to $7,525,000. Completion of each of the private placements is conditional upon TSXV approval as well as contemporaneous completion of the change of business. If the financings are fully subscribed, Treat expects to receive net proceeds from these private placements of approximately CDN$14.5 million. It is anticipated that the terms of the financings will be as follows:

1. Gross proceeds of up to CDN$8,500,000 million will be raised pursuant to an offering by PI of up to 8,500,000 Subscription Receipts, at an issue price of CDN$1.00 per Subscription Receipt. Each Subscription Receipt will be exercisable for no additional consideration into one unit of Treat upon the satisfaction of certain of Treat release conditions being met. Each unit will be comprised of one common share and one-half of a warrant. Each whole warrant will be exercisable from one common share of Treat at an exercise price of CDN$1.50 over a two year term. PI will be entitled to receive a commission equal to 8% of the gross proceeds raised, payable at PI's election in cash or units, and broker warrants to acquire that number of common shares that is equal to 8% of the number of units sold in the financing. Each broker warrant will entitle PI to purchase one common share at a price of CDN$1.50 for two years. Closing of this financing into escrow and issuance of the Subscription Receipts will occur as soon as possible. Gross proceeds will be held in escrow pending satisfaction of the release conditions.

2. Gross proceeds of up to CDN$4,500,000 million will be raised pursuant to a non-brokered financing which will have substantially same terms and conditions as the Subscription Receipts. Finders fee's may be payable in respect of this financing. Closing of this financing into escrow and issuance of the Subscription Receipts will occur as soon as possible. Gross proceeds will be held in escrow pending satisfaction of the release conditions.

3. Gross proceeds of up to CDN$3,025,000 million will be raised pursuant to a non-brokered flow-through financing of up to 2,750,000 flow-though units at a price of CDN$1.10 per unit. Each flow-through unit will be comprised of one flow-through common share and one-half of one common share purchase warrant at an exercise price of CDN$1.60 over a two year term. Finders fees may be payable in respect of this financing. The flow-through funds raised from the issuance of the flow-through units will be used for general exploration expenditures, which will constitute Canadian exploration expenses (as defined in the Income Tax Act (Canada)) and will be renounced for the 2007 taxation year. This financing will close concurrently with the completion of Treat's change of business transaction.

The release conditions for the Subscription Receipt financings and the closing conditions for the offering of flow-through units include the receipt by Treat of all requisite shareholder and regulatory approvals to the execution and delivery by Treat of the above option agreements.

Treat will be seeking an exemption from the sponsor requirements in respect of the change of business in accordance with the rules of the TSXV given that its anticipated that a portion of the financing will be completed on a brokered basis.

In conjunction with the change of business, Treat anticipates that Mr. Sheldon Inwentash will resign and will be replaced by Mr. Ken Carter both as a director of the Company and as President of Treat, subject to the approval of the TSXV. Mr. Carter is currently a director of a number of junior resource companies listed on the TSXV, and has extensive experience in both exploration and mining operations and in the management and development of junior mining companies. It is anticipated that management of Treat (Mega Silver) will be transferred to Vancouver where Mr. Carter will be putting together a new management team.

Completion of the above change of business transaction is subject to a number of conditions, including TSXV acceptance and disinterested Shareholder approval. The transaction can not close until the required Shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the above mentioned filing statement and management information circular to be prepared, any information released or received with respect to the reverse takeover transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Merc International Minerals Inc. should be considered highly speculative.

Certain statements contained in this news release may contain forward-looking information within the meaning of Canadian securities laws. Such forward-looking information are identified by words such as "estimates", "intends", "expects", "believes", "may", "will" and include without limitation, statements regarding the Company's plan of business operations; ability to negotiate and enter into definitive agreements; potential benefits of the acquisitions; the costs and timing associated with integrating the acquisitions; production levels, timing and costs; potential contractual arrangements and the delivery of equipment; receipt of working capital; anticipated revenue; mineral reserve and resource estimates; and projected expenditures. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include, among others, metal prices, third party risks, acquisition risks, risks inherent in the mining industry, financing risks, regulatory risks and environmental concerns. Most of these factors are outside the control of the Company. Investors are cautioned not to put undue reliance on forward-looking information. Except as otherwise required by applicable securities statutes or regulation, the Company expressly disclaims any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

The TSXV has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Contact Information

  • Treat Systems Inc.
    Richard Patricio
    Director
    (416) 941-9600 ext. 5099