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TORONTO, May 7 /CNW/ - Coalcorp Mining Inc. ("Coalcorp") (TSX-CCJ) is pleased to announce the purchase, as part of its new corporate strategy, of a CAD$8,000,000 unsecured convertible debenture (the "Debenture") from Formation Metals Inc. ("Formation") (TSX-FCO).
Coalcorp has agreed to purchase the Debenture, on a non-brokered private placement basis, pursuant to a subscription agreement dated May 6, 2010. The Debenture will have an initial term of 18 months with an interest rate of 12%, payable in shares, and may be extended by either party for an additional 18 months. The Debenture is convertible into Formation's common shares at $1.50 per share during the initial term and at the market price of the common shares at the end of the period if the term is extended for a subsequent 18 months. Upon conversion of the Debenture, Coalcorp would have ownership of and control over approximately 15% of Formation's common shares as of today's capitalization.
Charles Entrekin, a Coalcorp director, will join the board of Formation upon the close of this transaction. Dr. Entrekin has over 35 years of experience in the specialty and exotic non-ferrous metal industries, including cobalt.
"We are pleased to be entering into a relationship with Formation Metals," said Richard Lister, Chairman of Coalcorp. "This marks the beginning of a new chapter for Coalcorp and we look forward to supporting Formation as they progress in the development of their high purity cobalt mine in Idaho."
As part of its new strategy for maximizing shareholder value, Coalcorp will capitalize on the mining sector expertise of its board members and management and use its cash resources to pursue early-stage opportunities in the mining, metallurgical and mineral industries.
Coalcorp purchased the Debenture in reliance on the exemptions available under National Instrument 45-106 - Prospectus and Registration Exemptions and does not currently have any future intention to acquire ownership of or control over additional common shares of Formation.
Coalcorp is also pleased to announce that it intends to change its name to Metallum Resources Inc. subject to shareholder approval at its next annual meeting, to more appropriately reflect its new mandate.
Statements made in this news release may be forward-looking and therefore subject to various risks and uncertainties. Such statements can be identified by terminology such as "may", "will", "could", "should", "expect", "plan", "anticipate", "believe", "intend", "possible", "continue", "objective" or other similar expressions concerning matters that are not historical facts and include statements related to the investment and proposed strategy of the company. Certain material factors or assumptions are applied in making forward-looking statements such as the availability of resources and opportunities, management expertise and the viability of the company's strategy. Actual results may differ materially from those expressed or implied in such statements. Coalcorp does not undertake to update any forward-looking statements; such statements speak only as of the date made.
Further information can be obtained under Coalcorp's profile at www.sedar.com. Coalcorp's head office is located at 120 Adelaide Street West, Toronto, Ontario M5H 1T1, Canada.
SOURCE Coalcorp Mining Inc.
For further information: For further information: Steven Cresswell, Interim Chief Executive Officer, (416) 644-1217; Richard Lister, Chair, (416) 920-4840