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VANCOUVER and TORONTO, Feb. 25 /CNW/ - Sierra Minerals Inc. (TSX: SIM) ("Sierra") and Goldgroup Resources Inc., a privately-held British Columbia company ("Goldgroup") are pleased to announce that, further to their joint news release issued January 29, 2010, they have signed a definitive arrangement (the "Agreement") dated February 23, 2010 with respect to the proposed business combination (the "Transaction") which is intended to create a premier junior gold producing company focused exclusively on Mexico targeting growth in production, mineral resources, profitability and cash flow from an impressive group of near-term production and advanced stage projects.
Under the terms of the Agreement, the outstanding common shares of Sierra will be consolidated on a 2.85:1 basis and shareholders of Goldgroup will receive one post-consolidation common share of Sierra for each one Goldgroup common share. Goldgroup will amalgamate with a wholly-owned subsidiary of Sierra pursuant to a statutory plan of arrangement under the Business Corporations Act (British Columbia). The combined entity will be named Goldgroup Resources Inc. ("New Goldgroup") and will continue to be listed on the TSX. On a post-Transaction basis, New Goldgroup will have approximately 83.3 million shares outstanding (90.6 million fully diluted, all of which are currently in-the-money), subject to adjustment for any additional Goldgroup shares that may be issued under the private placement financing discussed below. The fully diluted ownership split is expected to be approximately 58.5% for the Goldgroup shareholders and approximately 41.5% for the Sierra shareholders.
Further details regarding the proposed business combination shall be provided in a joint information circular (the "Circular") which will be mailed to shareholders of Goldgroup and Sierra in connection with Goldgroup and Sierra's respective shareholders' meetings to approve the Transaction. The parties expect to complete and mail the Circular in March 2010 and plan to hold the special meetings in early April 2010. The Transaction is expected to close shortly thereafter.
Closing of the Transaction, as contemplated by the Agreement, is subject to a number of conditions and approvals which include; approval of the respective shareholders of Goldgroup and Sierra; court approval of the plan of arrangement; and the approval of all relevant regulatory authorities and third parties, including the TSX. Special independent committees of Goldgroup and Sierra have recommended the agreement to their respective boards of directors who will recommend the Transaction to their respective shareholders in the Circular. The Agreement provides for termination rights, including termination in the event the Transaction is not completed by May 31, 2010, unless extended by mutual agreement.
Pursuant to the terms of the Letter of Agreement signed January 28, 2010, Goldgroup committed to raise between $5 million and $10 million through a non-brokered private placement of Goldgroup common shares at a price of $1.00 per share. Investors have oversubscribed the minimum $5 million commitment to-date and additional funds are being raised under the financing.
About Sierra and Goldgroup
For further information on Sierra, please visit Sierra's website at www.sierraminerals.ca. For further information on Goldgroup, please visit Goldgroup's website at www.goldgroupresources.com. The Sierra and Goldgroup business combination presentation will be available on the homepage of both companies' websites in due course.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain information contained in this news release, including any information relating to the proposed transaction and Sierra or Goldgroup future financial or operating performance may be deemed "forward-looking". All statements in this news release, other than statements of historical fact, that address events or developments that Sierra or Goldgroup expects to occur, are "forward-looking information". These statements relate to future events or future performance and reflect Goldgroup's and Sierra's expectations regarding the Transaction and the financings, and the future growth, results of operations, business prospects and opportunities of each of Goldgroup and Sierra and the combined company. These forward-looking statements reflect Goldgroup's and Sierra's current internal projections, expectations or beliefs and are based on information currently available to Goldgroup and Sierra, respectively. In some cases forward-looking information can be identified by terminology such as "may", "will", "should", "expect", "intend", "plan", "anticipate", "believe", "estimate", "projects", "potential", "scheduled", "forecast", "budget" or the negative of those terms or other comparable terminology. Assumptions upon which such forward looking information regarding completion of the Transaction is based include that Sierra and Goldgroup will be able to satisfy the conditions in the Agreement, that the required approvals will be obtained from the shareholders of each of Sierra and Goldgroup, that all third party regulatory and governmental approvals to the transactions will be obtained and all other conditions to completion of the transaction will be satisfied or waived. Although Goldgroup and Sierra believe that the forward-looking information contained in this news release are based on reasonable assumptions, readers cannot be assured that actual results will be consistent with such statements. Accordingly, readers are cautioned against placing undue reliance on forward-looking information. Sierra and Goldgroup expressly disclaim any intention or obligation to update or revise any forward-looking information, whether as a result of new information, events or otherwise, except in accordance with applicable securities laws.
This news release and the information contained herein does not constitute an offer of securities for sale in the United States and securities may not be offered or sold in the United States absent registration or exemption from registration.
SOURCE GOLDGROUP RESOURCES INC.
For further information: For further information: For Sierra Minerals Inc.: Michael H. Farrant, President & CEO, 8 King Street East, Suite 810, Toronto, ON, M5C 1B5, T: (416) 278-4149; For Goldgroup Resources Inc.: Keith Piggott, President & CEO or Gregg Sedun, Executive Chairman, Suite 2184, 1055 Dunsmuir Street, Vancouver, BC, V7X 1L3, T: (778) 330-2760