April 20, 2010 – Vancouver, British Columbia. Further to the previously announced Memorandum of Understanding between Merit Mining Corp. (TSX-V:MEM) (“Merit”) and Tianjin Huakan Group Co. Ltd. (“Tianjin”), Merit announces that it has signed a Subscription Agreement with Hong Kong Huakan Investment Co., Limited (“Huakan”), a subsidiary of Tianjin, whereby Huakan will subscribe for 27,955,223 common shares of Merit for aggregate proceeds of $15,500,000, subject to due diligence, shareholder and regulatory approval (the “Offering”).
Under the terms of the Subscription Agreement, the Offering will be completed in two tranches. The first tranche of $9,500,000, priced at $0.50 per share, will be completed as soon as possible but no later than May 31, 2010. The second tranche of $6,000,000, priced at $0.67 per share, will be completed as soon as possible after the closing of the first tranche, but in any event no later than June 30, 2010.
The proceeds of the Offering will be used to:
(i) pay approximately $350,000 to unsecured creditors in connection with Merit’s proposal under the Bankruptcy and Insolvency Act (Canada) (the “BIA Proposal”);
(ii) repay all outstanding principal amounts and accrued interest of approximately $4.39 million (assuming the first tranche closes on May 31, 2010) in the aggregate to extinguish debt owed to Wega Mining AS (“Wega”) and Munday Home Sales Ltd. (“Munday”);
(iii) pay any and all accrued and unpaid interest in arrears of approximately $442,000 (assuming the first tranche closes on May 31, 2010) to the holders (the “Jory Debentureholders”) of debentures (the “Jory Debentures”) issued pursuant to the Trust Indenture dated July 21, 2008 (“Trust Indenture”) between Merit and Computershare Trust Company of Canada;
(iv) to advance the Greenwood Gold project, located near Greenwood, BC and the J&L project, located near Revelstoke, BC; and
(v) for general corporate purposes in the ordinary course of business.
“The Huakan investment will enable Merit to return to its vision of becoming an intermediate sized mining company with its initial focus in British Columbia. Merit’s management looks forward to working with Huakan’s mine operating and technical staff in the development of its projects”, said Fred Sveinson, President and CEO of Merit.
Jiang Chen, Chairman of the board of Huakan, said “The investment in Merit by Huakan will be a win-win situation. Huakan intends to be a responsible and long-term investor. I believe that Merit will have a great future”.
In connection with the execution of the Subscription Agreement, Merit has appointed Mr. Deli Tian to its board of directors, subject to approval of the TSX Venture Exchange (“TSXV”). Upon closing of the first tranche, the parties have agreed, subject to TSXV approval, to appoint a second nominee of Huakan to Merit’s board of directors and a designate of Huakan as Chief Financial Officer. Following closing of the first tranche, Merit will also call a shareholders’ meeting to facilitate the appointment of a third nominee of Huakan to its board of directors.
The closing of the first and second tranches will be conditional on customary terms and conditions, including certain approvals of the People’s Republic of China, as well as conditions that the amounts owed under the BIA Proposal and to Wega and Munday are extinguished, and the interest in arrears owed to the Jory Debentureholders is paid. In addition, it is a condition of closing that the Jory Debentureholders approve an extraordinary resolution:
(i) to extend the term of the Jory debentures by three years to July 21, 2014;
(ii) to modify the conversion terms of the Jory Debentures so that they are convertible on the fourth and fifth year of the term as they are in the third year ($20 per share);
(iii) to provide for no conversion in the sixth and final year; and
(iv) to modify the redemption terms of the Jory Debentures to delete the 5% Redemption Premium set out in the Trust Indenture so that the Jory Debentures may be redeemed upon payment of the principal, together with accrued and unpaid interest, with no payment of premium.
Subject to regulatory approval and registration exemptions, Merit will pay a finder’s fee of 3% (payable as to 2% in cash and 1% in shares) and 5% in warrants, exercisable at the applicable subscription price of the subscription amount.
Merit Mining Corp.
Signed “Fred Sveinson”
Fred Sveinson, President & CEO
For further information please contact:
Fred Sveinson at (604) 694-2344
Neither the TSX Venture Exchange nor its Regulations Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accept responsibility for the adequacy or accuracy of this release.
CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING INFORMATION
Certain of the statements made and information contained herein may contain forward-looking statements or forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or forward-looking information include, but are not limited to, statements concerning: the disclosed use of proceeds. Forward-looking statements or information include statements regarding the expectations and beliefs of management. Often, but not always, forward-looking statements and forward-looking information can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “believes” or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Forward-looking statements or information include, but are not limited to, statements or information with respect to known or unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information.
Forward-looking statements or information are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements or information, including, without limitation, risks and uncertainties relating to: completion of announced transactions, history of losses; requirements for additional capital; dilution; loss of its material properties; interest rates increase; global economy; limited history of production; speculative nature of exploration activities; periodic interruptions to exploration, development and mining activities; environmental hazards and liability; industrial accidents; failure of processing and mining equipment; labour disputes; supply problems; commodity price fluctuations; uncertainty of production and cost estimates; the interpretation of drill results and the estimation of mineral resources and reserves; legal and regulatory proceedings and community actions; title matters; regulatory restrictions; permitting and licensing; volatility of the market price of common shares; insurance; competition; hedging activities; currency fluctuations; and loss of key employees. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements or information. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. The Company disclaims any intent or obligation to update forward-looking statements or information except as required by law, and you are referred to the full discussion of the Company’s business contained in the Company’s reports filed with the securities regulatory authorities in Canada.