THUNDER BAY, ON, June 30 /CNW/ - Marksmen Capital Inc. (TSX-V: MKS.P) is pleased to announce that it has entered into a letter agreement dated June 25, 2010 (the "Letter Agreement"), with Exploration Syndicate, Inc., a private Delaware corporation ("Target"), to acquire all the issued and outstanding securities of Target (the "Acquisition"). For the purposes of this news release, Marksmen Capital Inc. is referred to as "Marksmen" prior to the closing of the Acquisition and is referred to as "ESI Resources" following the closing of the Acquisition to reflect the proposed name change of Marksmen as described below.
The Acquisition is subject to TSX Venture Exchange ("TSXV") approval and is intended to constitute Marksmen's Qualifying Transaction, as that term is defined in the policies of the TSXV.
Terms of the Agreement
Under the terms of the Letter Agreement, and on or prior to the closing date of the Acquisition (the "Closing Date"), Marksmen has agreed to incorporate a wholly-owned subsidiary ("Subco"), change the name of Marksmen to "ESI Resources Inc." and consolidate Marksmen's issued and outstanding shares on the basis of one common share for every 1.7857 issued and outstanding common shares.
Target has agreed to change its governing jurisdiction from Delaware to Ontario (or another Canadian jurisdiction) on or prior to the Closing Date. Marksmen and Target have agreed that, pursuant to the terms of an amalgamation agreement ("Amalgamation Agreement") to be entered into among Marksmen, Subco and Target, and on the Closing Date, Subco will amalgamate with Target to form a new corporation ("Amalco"), at which time Marksmen will issue common shares to the former shareholders of Target in exchange for their shares of Target, based on an exchange ratio of one common share of Marksmen for each one common share of Target and Amalco will be converted into an unlimited liability corporation (ULC). Each holder of other issued and outstanding securities of Target will receive substantially similar securities of Marksmen. The parties have agreed that the number of Marksmen common shares and other Marksmen securities to be issued on the Closing Date is subject to change and will depend in part on the precise number of securities of each of Marksmen and Target that are outstanding on the Closing Date.
The Acquisition will not be a Non-Arm's Length Qualifying Transaction under the policies of the TSXV. Although the amalgamation of Target and Subco will not require shareholder approval from the shareholders of Marksmen, the proposed consolidation of its common shares will require both shareholder and TSXV approval. In addition, Target will be required to obtain shareholder approval in order to effect the continuance from the State of Delaware to the Province of Ontario (or other Canadian jurisdiction) and to approve the amalgamation.
The parties have agreed to undertake commercially reasonable efforts to close the Acquisition on or before September 30, 2010. The Letter Agreement terminates in the event the parties fail to enter into the Amalgamation Agreement on or prior to July 15, 2010, unless extended in writing by the parties.
As of the date hereof, Marksmen has 3,090,000 common shares issued and outstanding, 143,000 non-transferable share purchase warrants outstanding (issued in connection with Marksmen's initial public offering) and 290,000 stock options outstanding. Currently, Target has 38,262,338 common shares outstanding, 10,222,419 warrants outstanding, 3,725,000 options outstanding, and $150,000 principal amount of convertible debentures convertible into 600,000 common shares.
Following completion of the Acquisition, which includes the consolidation of ESI Resources' common shares, and assuming: (i) 10,000,000 FT Shares and 10,000,000 Units are issued in the Financing as described below; (ii) the Agent's Option is not exercised; and (iii) the $150,000 principal amount of convertible debenture is repaid, it is anticipated that ESI Resources will have 59,992,738 common shares issued and outstanding, 15,302,499 warrants outstanding, and 3,887,400 stock options outstanding. ESI Resources anticipates that the former Target shareholders will hold approximately 63.78% of the common shares of ESI Resources on the Closing Date on a non-diluted basis, assuming 20,000,000 common shares are issued in the Financing and the Agent's Option is not exercised.
Conditions for Closing
The Letter Agreement provides that closing of the Acquisition is subject to several conditions including, among other things: (i) receipt of all regulatory approvals, including the TSXV; (ii) requisite corporate approval of the various transactions contemplated by the Acquisition from the directors and shareholders of Marksmen, Target and Subco, as applicable; (iii) closing of the Financing, as described below; (iv) Target effecting a continuance from the State of Delaware to the Province of Ontario (or another Canadian jurisdiction); and (vi) the board of directors of ESI Resources consisting of seven individuals, including six nominated by Target as described below (in addition to Ewan Downie who is currently a director of Marksmen).
On or prior to the Acquisition, Target is required to complete a brokered private placement to raise up to $5,000,000 by issuing up to 20,000,000 common shares in any combination of flow-through common shares (the "FT Shares") or units (the "Units") of Target, at a price of $0.25 per FT Share or Unit (the "Financing"). Each Unit will be comprised of one common share of Target and one-half of one common share purchase warrant exercisable for an additional Target common share at a price of $0.40 for two years from the completion date, subject to the acceleration right described below.
If the closing price of Target's common shares (or ESI Resources as the successor company) on the TSXV is greater than $0.60 for 20 or more consecutive trading days, Target may give 21 days prior notice (the "Prior Notice") to the holders of the warrants, that the expiry date for exercise of the warrants has been accelerated and the warrants will expire on the 21st calendar day following the date of the Prior Notice.
Jennings Capital Inc. has been retained as lead agent for the brokered financing. Target and ESI Resources anticipate that the net proceeds of the Financing will be spent on ESI Resources' exploration properties and for working capital purposes following the Closing Date. Jennings Capital Inc. has the option, exercisable until the completion date, to sell up to an additional 3,000,000 FT Shares and Units in any combination (the "Agent's Option").
In consideration for the services of Jennings Capital Inc. with respect to the Financing, Target has agreed to: (i) pay a cash commission of 7% of the gross proceeds of the Financing; (ii) issue non-transferable broker warrants equal to 7% of the number of Units sold in the Financing, each warrant of which entitles the broker to acquire one Unit for a period of 24 months after the closing of the Financing; and (iii) issue non-transferable broker warrants equal to 7% of the number of FT Shares sold in the Financing, each warrant of which entitles the broker to acquire one common share of Target at a price of $0.25 per common share for a period of 24 months from the closing of the Financing.
On June 23, 2010, Target entered into a letter agreement (the "Sentient Agreement") with Sentient Executive GP III, Ltd. ("Sentient") providing for the purchase by Sentient, on behalf of the Sentient Global Resources Fund III LP and SGRF III Parallel I, L.P., of $4,000,000 of $1,000 principal amount five-year non-interest bearing senior secured convertible equity notes of Target (the "Notes"), and 8,000,000 common share purchase warrants (the "Warrants"). The Notes are convertible into common shares of Target at the option of the holder at a conversion price of $0.25 per share. Each Warrant is exercisable for one common share of Target at a price of $0.40 per share for a period of two years from issuance and will expire immediately prior to the Acquisition, as applicable. Sentient has been granted a pre-emptive right to participate in any future equity financings of Target on a pro rata basis and has been granted the right to propose two nominees for election to the board of directors of Target. Under the terms of the Sentient Agreement, Sentient has the right to review and approve the terms of the Amalgamation Agreement, acting reasonably, and, as a condition to approving the terms of the Amalgamation Agreement, Marksmen and Sentient are to enter into an agreement providing for the exchange of the Notes (or notes issued, in the course of the amalgamation, in substitution therefor) for common shares and warrants of ESI Resources following the completion of the Acquisition based on the exchange ratio for the amalgamation.
Business of Target and the McKenzie Lake Project
Founded in 2005, Target is a private Delaware exploration company with a focus on the discovery of large undercover mineral deposits employing state of the art airborne VTEM and ZTEM geophysical technologies.
Target has identified and currently retains 100% interest in the McKenzie Lake Project (the "Project"), a prospective new VMS camp in Saskatchewan, southwest of Flin Flon, Manitoba, on which follow up surveys and drilling resulted in high-grade copper discoveries.
The Project is intended to constitute ESI Resources' Qualifying Property, as that term is defined in the TSXV policies. Target holds 100% beneficial and legal ownership of 53,490 Ha of prospective ground southwest of Flin Flon, Manitoba. Following the 2006 VTEM survey, a previously unknown prospective volcanic centre was identified, 5100 conductors concealed under limestone cover were detected and 30 further targets were selected for drilling during the 2007/2008 winter program.
The 2007/2008 drilling program discovered three new copper-zinc massive sulphide zones: M2 Suggi Lake, M45, and Emily, with the best grades (5.69% Cu) intersected at M2 Suggi Lake. The 2010 winter drill program tested the upper lense. Hole ML 10-01 intersected 4.41% Cu, 4.80% Zn and 22.43 g/t Ag over 16.40 metres and ML 10-02 intersected 6.14% Cu, 5.84% Zn and 33.12 g/t Ag over 9.80 metres. Based on initial results, Target intends to concentrate its exploration efforts and budget on M2 Suggi Lake. Target believes the M2 Suggi Lake is open in all directions and plans to use its cash resources to further drill this area with a view of delineating a resource package within the next 18 months.
Watts, Griffis and McOuat have prepared an independent review of the M2 Suggi Lake discovery in support of a National Instrument 43-101 qualifying property technical report. Stanley Clemmer, P.Geo., Target's independent consulting geologist, a qualified person as defined in National Instrument 43-101, has reviewed the technical information in this news release.
Target has a Net Smelter Return Royalty Agreement with Geotech Airborne Limited providing a 1% net smelter return royalty on certain airborne survey projects, effective on the earlier of (a) the date on which all expenditures in respect of such project have been paid or (b) five years from the start of production on the property in the case of an underground mine and seven years in the case of an open cast mine.
Target granted a security interest in favour of the holders of $150,000 in convertible debentures to all right, title and interest in Target's properties as security for the performance of its obligations in respect of the convertible debentures.
Under the Sentient Agreement, Target shall grant a first-ranking charge to Sentient over all of its assets and mineral interests as security for the performance of its obligations in respect of the Notes.
In addition to the Project, Target also owns extensive survey data. Target owns a 1,485 km V-TEM data base in the vicinity of Jerome, Arizona for VMS deposits. Target also owns an extensive Z-TEM data base in Arizona, 18,000 sq. km in the porphyry belt and 25,000 sq. km in the Selwyn Basin, Yukon Territory for SEDEX deposits. Target has also surveyed 8,442 sq. km of Z-TEM in Arizona under an agreement with Freeport McMoRan. The agreement entitles Target to receive certain cash payments and royalties on discoveries identified by the Z-TEM survey.
Shareholders of Target
Name Jurisdiction Number of % of Total
Seamans Capital Per: Brian D. Massachusetts 10,798,538 32.52%
Management, LLC Corcoran, Senior
for beneficial Portfolio Trader
J. Trevor Eyton Director Ontario 200,000 0.60%
Ann Dumyn Director Ontario 796,250 2.40%
Clyde Harrison Director Illinois 200,000 0.60%
H. Neville Rhoden Director Nevada 300,000 0.90%
Unaudited Financial Information of Target
The following presents a summary of the most recently prepared unaudited financial information (unaudited) of Target as at December 31, 2009 and for the year ended December 31, 2009:
Year Ended December 31, 2009
Net Loss ($1,516,944)
Net Loss per Common Share ($0.05)
As at December 31, 2009
Current Assets $76,456
Total Assets $148,606
Current Liabilities $367,489
Total Liabilities $367,489
Shareholder's Equity ($218,883)
On the closing of the Acquisition, ESI Resources anticipates being classified as a Tier 2 mining issuer and is required to change its name to "ESI Resources Inc." ESI Resources, through Amalco, would own the McKenzie Lake Project subject to applicable underlying agreements and expects to be actively engaged in the exploration of the Project, as well as the acquisition and exploration of other mineral resource properties predominantly within the Flin Flon belt.
The following sets out the name and background of the directors and officers of ESI Resources following the Closing Date. With the exception of Ewan Downie, the current directors and officers of Marksmen are required to resign on closing of the Acquisition in accordance with the terms of the Letter Agreement.
Paul A. Gorman, President & CEO, Director
Mr. Gorman was appointed President & CEO of Target in March 2010. He is a corporate specialist with over 15 years experience in junior mining finance, taking companies public and operating growth-emerging public companies. Mr. Gorman was most recently and for 10 years President and Managing Partner of Riverbank Capital Inc., a merchant bank working with small-cap companies to assist them in financing, property exploration and developing well-defined marketing programs. His responsibilities have included raising capital, promoting companies to the investment community and writing strategic plans for business growth. Mr. Gorman is a director of several private and public companies. Mr. Gorman graduated from Carleton University, Ottawa in 1991 with a B.A., Mass Communications Major and Political Science Minor.
Ann Dumyn, CFO, Corporate Secretary & Director
Mrs. Dumyn is a director of Niskibi Group Inc., has served as a director and officer of a number of resource sector joint venture companies and as a director of Aeroquest International Limited (AQL-T) between 2004 and 2006. She is an Officer and Corporate Secretary to American Lithium Minerals, Inc. (OTCBB:AMLM). Ms. Dumyn is a graduate of the ICD Corporate Governance College, Directors Education Program (February 2006). From 2000 to 2004 Mrs. Dumyn was Vice-President, Aboriginal and Northern Affairs with SNC-Lavalin Inc., and previous to that, from 1968 to 2000, held various management positions with the Bank of Montreal including Director, Aboriginal Banking. Mrs. Dumyn has served on numerous not-for-profit boards including the Board of Governors of Lakehead University in Thunder Bay, Ontario since 2004 and as the Vice-Chair, Board of Trustees of the Royal Ontario Museum since 2005.
The Hon. J. Trevor Eyton, O.C., Chairman of the Board
The Hon. J. Trevor Eyton currently serves as Chairman and Director of Ivernia Inc. and as a director of Silver Bear Resources Inc., Nayarit Gold Inc., Altus Group Income Fund and Magna International Inc. Senator Eyton was appointed to the Senate of Canada in 1990 and served until his retirement in 2009. Senator Eyton has been a director of numerous companies during his career, including Noranda Inc. (1981-2005), Norcen Energy Resources (1986-1996), Barrick Gold Corporation (1990-2000), Royal Trust Company Ltd. (1983-1993), General Motors of Canada (1987-2004), and Coca-Cola Enterprises Inc. (1998-2007). Senator Eyton is an Officer of the Order of Canada and Queen's Council for Ontario. Senator Eyton received his B.A. from Victoria College, University of Toronto in 1957 and earned his J.D. from the University of Toronto Law School in 1960 and holds Honorary Doctorates in Civil Law from both the University of Waterloo and the University of King's College at Dalhousie where he served as Chancellor from 1996 to 2001.
Ewan Stewart Downie, Director
Mr. Downie served as the President and Chief Executive Officer of Wolfden Resources Inc. from 1999 until May 2007 and the President of Zinifex Canada Inc. from May 2007 to October 2008. He is presently the President and Chief Executive Officer of Premier Gold Mines Limited (PG: TSX) (since August 2006). Mr. Downie is a director of several reporting issuers involved in mineral development and exploration, including: Mega Precious Metals Inc. (MGP: TSX-V), since May 2008; Newstrike Resources Ltd. (NR: TSX-V), since July 2005; Benton Resources Corp. (BTC: TSX-V), since March 2005; PC Gold Inc. (PKL: TSX-V), since May 2008; Source Exploration Corp. (SOP: TSX-V) since July 2008; and Premier Gold Mines Limited (PG: TSX), since August 2006.
Clyde Harrison, Chief Investment Officer & Director
Mr. Harrison began his career in finance in 1968 with Lamson Brothers and in 1974 became General Partner with Carl Icahn, managing hedge positions for corporate takeovers of up to $100 million. Mr. Harrison is the founding member of Beeland Management Co, LLC which manages the Rogers Raw Materials Index Funds and served as CEO for its first five years. Mr. Harrison was a member of the Managed Futures Committee of the Chicago Mercantile Exchange, served as a bank director for five years, consulted for NBD Bank, Northern Trust and served as Special Consultant to the Chairman of the Chicago Board Options Exchange. He currently serves on the Board of Directors of Golden Phoenix Materials, Inc. and on the Advisory Board of Preservation Capital Fund, L.P. Mr. Harrison has also served as general partner for a number of private investment and trading funds.
Matthew Keegan, Director
Mr. Keegan is an Investment Manager with The Sentient Group, an independent private equity investment firm specializing in the global resources industry. His primary role is in the area of deal sourcing, management and investment strategy in the areas of base metals and bulk commodities investments. Between 2003 and 2006, Mr. Keegan was a commodities analyst with AME Mineral Economics. Prior to that he was a mine geologist for a number of Australian producers such as Rio Tinto Plc, Barrick Gold Corporation and WMC Ltd. Mr. Keegan is a graduate of the University of Technology Sydney with a B.App.Sci. (Geology).
John Mears, Director
Mr. Mears is the Chief Geologist for The Sentient Group, responsible for ensuring that geological assessments are undertaken at the highest standard by qualified personnel as well as for initiating new exploration concepts. He has been working with members of the Sentient team since the mid 1990s. Mr. Mears has over 15 years experience in exploration and mining, has served on the board of a number of junior explorers, and successfully started and operated his own consulting firm and drilling company. Mr. Mears is a licensed geologist in the USA, a member of AusIMM and a qualified person under NI 43-101.
Sponsorship of a Qualifying Transaction of a capital pool company is required by the TSXV unless an exemption from the sponsorship requirement is available. Marksmen intends to apply for an exemption from the sponsorship requirement. There is no assurance that Marksmen will be able to obtain such an exemption.
Marksmen's common shares are currently halted at Marksmen's request and Marksmen anticipates they will remain halted until the documentation required by the TSXV for the proposed Acquisition can be provided to the TSXV.
MARKSMEN CAPITAL INC.
Chief Executive Officer and Director
Telephone: (807) 766-3401
Completion of the above transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV requirements, majority of the minority approval of the shareholders of Marksmen. Where applicable, the transaction cannot 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 management information circular or filing statement to be prepared in connection with the transaction any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.
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. Neither the TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.
This press release contains forward-looking information within the meaning of Canadian securities laws. Such information includes, without limitation, information regarding the completion of the proposed acquisition of ESI and the Financing; and the anticipated business plans of Marksmen. Although Marksmen believes that such information is reasonable, it can give no assurance that such expectations will prove to be correct.
Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. Marksmen cautions investors that any forward-looking information provided by Marksmen are not guarantees of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to, the state of the financial markets for Marksmen's equity securities, the state of the market for gold or other minerals that may be produced generally, recent market volatility; variations in the nature, quality and quantity of any mineral deposits that may be located, Marksmen's ability to obtain any necessary permits, consents or authorizations required for its activities, to raise the necessary capital or to be fully able to implement its business strategies and other risks associated with the exploration and development of mineral properties. The reader is referred to Marksmen's most recent annual and interim Management's Discussion and Analysis for a more complete discussion of such risk factors and their potential effects, copies of which may be accessed through Marksmen's page on SEDAR at www.sedar.com.
SOURCE MARKSMEN CAPITAL INC.
For further information: For further information: MARKSMEN CAPITAL INC., Dan Mechis, Chief Executive Officer and Director, Telephone: (807) 766-3401