Talon Metals Corp. Announces Interim Loan and Heads of Agreement with Saber Energy Corp. regarding Potential Merger



    TSX:TLO

    ROAD TOWN, Tortola, British Virgin Islands, Sept. 25 /CNW/ - Talon Metals
Corp. ("Talon") (TSX: TLO) is pleased to announce that it has entered into a
binding heads of agreement (the "HOA") with Saber Energy Corp. ("Saber"), a
private coal bed methane exploration company with extensive land holdings and
an active exploration program in Botswana. Under the HOA, Talon and Saber
(each a "Company" and together the "Companies") have agreed to negotiate a
pre-merger agreement (the "Pre-Merger Agreement") in respect of a business
combination of the Companies (the "Merger"), subject to the approval of the
Toronto Stock Exchange (the "TSX"). In addition, Talon has agreed to lend up
to $6 million to Saber. (All dollar figures are in Canadian dollars.)
    "The proposed Merger with Saber would allow Talon to participate in a
large, rapidly developing project," said Mr. Stuart Comline, President and CEO
of Talon Metals Corp. "Talon shareholders stand to benefit from Saber's plans
to further explore and develop its gas project to the feasibility stage, and
then into production. With its experienced management team and large land
holdings, Saber is a key strategic player in coal bed methane and shale gas in
southern Africa, a region facing significant energy shortages."

    Proposed Merger

    Under the terms of the HOA, Talon and Saber have agreed, among other
things, that, upon the Merger, the common shares of each of the Companies will
be exchanged for securities of the company resulting from the Merger
("MergeCo") on the following basis:

    
    (a) each outstanding common share of Talon shall be exchanged for that
        number of common shares of MergeCo (each, a "MergeCo Share") equal to
        the Talon Ratio (as defined in the HOA) and one (1) preference share
        of MergeCo (each, a "MergeCo Preference Share"); and

    (b) each outstanding common share of Saber shall be exchanged for one
        MergeCo Share.
    

    Talon continues to assess the optimum way to realize value for its gold
exploration projects in Brazil. Talon shareholders will benefit from the
realization of value for these gold projects should they only be divested
after the Merger, through the MergeCo Preference Shares. Each MergeCo
Preference Share will entitle Talon shareholders to participate in the net
proceeds of disposition of each of Talon's Brazilian mineral projects,
provided that, in respect of each such project, the net proceeds of
disposition exceed $500,000.
    Pursuant to the terms of the HOA, the total number of MergeCo shares to
be issued to Talon shareholders, should a merger be consummated, will be
calculated as follows: the sum of Talon's Net Realizable Value (as such term
is defined in the HOA) divided by the subscription price paid per common share
or unit of Saber (the "Saber First Subscription Price") under the first arm's
length private placement by Saber completed after September 24, 2008 (the
"Saber Private Placement") and 2% of the outstanding common shares of Saber at
the applicable time.
    Additionally, the HOA provides that when Saber completes the Saber
Private Placement, under which warrants are issued, the Talon shareholders
will receive one (1) common share purchase warrant for each common share of
Talon held by such shareholder. The warrants will entitle the holder thereof
to purchase one (1) common share of Talon at an exercise price equal to the
exercise price and terms of the warrants distributed in the Saber Private
Placement. Should the Merger occur, such Talon warrants will be exchanged at
the Talon Ratio for common share purchase warrants of MergeCo.
    As part of the Merger, the outstanding options and warrants of Talon and
Saber, as applicable, will be exchanged for options and warrants of MergeCo.
    Significant conditions that must be satisfied on or before March 24, 2009
in order for the Pre-Merger Agreement to be entered into include:

    
    (a) certain regulatory or government approval;

    (b) Talon having received an opinion from its financial advisors that the
        Merger is fair, from a financial point of view, to its shareholders;

    (c) no material adverse change shall have occurred in respect of each of
        Saber and Talon;

    (d) Saber shall have met certain funding requirements; and

    (e) the Net Realizable Value of Talon must be at least $12 million.
    

    The HOA may be terminated by Talon upon notice to Saber. The HOA may also
be terminated, among other circumstances, by either party if certain
conditions precedent for its benefit are not satisfied in accordance with the
terms of the HOA, in the event that Saber enters into an agreement in respect
of any of certain alternative transactions (as specified in the HOA, an
"Alternative Transaction") or by execution of the Pre-Merger Agreement by both
Talon and Saber.
    In the event that Saber intends to enter into an Alternative Transaction,
Talon has the right to subscribe for common shares of Saber at a subscription
price per share equal to the price or value per share offered in the
Alternative Transaction, and pursuant to the terms and conditions specified in
the HOA. Talon may also elect to apply any principal or interest owing by
Saber to Talon in respect of the loan against the aggregate subscription price
payable by Talon in respect of such subscription.
    Some of the directors of each Company beneficially own or have control or
direction over common shares of the other Company, including Warren Newfield
(who is a director of both Companies). Mr. Newfield and his associates
beneficially own, or have control or direction over, approximately 3% of the
outstanding common shares of Talon and approximately 12% of the outstanding
common shares of Saber. In light of the foregoing, an independent committee of
the board of directors of Talon comprised of Sandra Cowan, Stuart Comline and
Luis Mauricio de Azevedo, was formed to review each of the loan to Saber and
the HOA. Talon's independent committee and board of directors have approved
each of the loan to Saber and the HOA.

    Interim Loan

    Talon has agreed to loan Saber up to $6 million. An initial $3 million
loan has been advanced and Talon will receive 1.5 million common share
purchase warrants of Saber (each a "Value Warrant") as part of this
transaction. The Value Warrants will be issuable on the earlier of the first
closing date of the Saber Private Placement or the termination of the HOA, and
each Value Warrant will entitle Talon to purchase one common share of Saber at
an exercise price determined in accordance with a specified formula, expiring
three years after the date of issuance (subject to extension in certain
circumstances). Talon will be eligible for an additional 1.5 million Value
Warrants on similar terms if the remaining $3 million of the loan is advanced
to Saber.
    The loan bears interest at 12% per annum until January 22, 2009 and 18%
per annum thereafter. The loan is secured by a pledge of the shares of certain
wholly owned subsidiaries of Saber, with additional security to be placed on
additional assets prior to the advance of the second $3 million. The loan
matures on March 24, 2009 unless extended pursuant to the terms of the HOA.
    Should the Companies proceed with the Merger, the Value Warrants will be
distributed to Talon shareholders on a pro rata basis and subsequently
exchanged for a specified number (based on the Talon Ratio) of common share
purchase warrants of MergeCo.

    About Saber Energy Corp.

    Saber is a private energy company which was incorporated in the British
Virgin Islands. Saber is focused on developing a coal bed methane ("CBM") and
shale gas field in the Karoo Coal Basin in Botswana, Africa. Saber's current
prospecting licences cover almost 3.7 million acres in this area.
    Saber intends to use any production from its potential gas field for
power generation and conversion to liquid products such as fuels and
petrochemicals. Saber anticipates commercial operations for a planned 1,000
megawatt ("MW") power plant (the "Power Project") to begin in 2013, and
commercial gas production in 2010. Approximately 0.7 trillion cubic feet of
proven gas resource is required to supply a 1,000 MW power plant.
    Saber has currently evaluated 92 boreholes, and preliminary results
indicate attractive coal and organic shale thickness and gas contents. The
current test data from the core drilling and chip samples taken so far exceeds
management's expectations and compares favourably in resource, structure, age
and permeability to many CBM and shale gas basins currently in production.
    Saber is currently operating five production five well patterns ("5
Spots") and once dewatering is complete and full test results are obtained,
management plans to commence production drilling to establish proven, probable
and possible gas reserves.
    In 2007, Saber completed an initial power plant and pipeline technical
study, which was conducted by SNC Lavalin. Environmental studies regarding the
planned gas pipeline are currently underway.
    Led by Mr. Colin Kinley, Saber's well seasoned management team has over
120 years of combined experience in developing large scale unconventional gas
resources in remote regions, as well as extensive engineering and geological
expertise in unlocking gas in shales and coal beds.
    Saber has spent over $30 million on exploration activities since December
2007. For the year ended February 29, 2008, Saber had total assets of
approximately $50 million and net losses of $4 million. Saber has outstanding
150,610,690 common shares and 2,530,534 common share purchase warrants.
    For additional information on Saber please visit www.saberenergy.com

    About Talon Metals Corp.

    Talon is a TSX-listed company focused on the acquisition, exploration and
advancement of high quality resource projects. Talon has a well-qualified
exploration and management team with extensive experience in exploration and
project management.
    Talon has a treasury of approximately $12 million and holds 4,935,500
common shares of Brazauro Resources Corporation (TSX-V:BZO), and 2,450,000
common shares in Beadell Resources Limited (ASX:BDR). Talon has 27,054,222
common shares outstanding.

    
    Forward-Looking Statements
    -------------------------------------------------------------------------
    

    This press release contains certain "forward-looking statements". All
statements, other than statements of historical fact, that address activities,
events or developments that Talon believes, expects or anticipates will or may
occur in the future (including, without limitation, statements regarding
Talon's plans and objectives, the interim loan, the proposed Merger, the
proposed use by Saber and/or MergeCo of CBM gas for power generation and
conversion to fuels and petrochemicals and the anticipated commencement by
Saber and/or MergeCo of production drilling, commercial gas production and
commercial operation of the Power Project) are forward-looking statements.
These forward-looking statements reflect the current expectations or beliefs
of Talon based on information currently available to Talon. Forward-looking
statements are subject to a number of risks and uncertainties that may cause
the actual results of Talon to differ materially from those discussed in the
forward-looking statements, and even if such actual results are realized or
substantially realized, there can be no assurance that they will have the
expected consequences to, or effects on Talon. Factors that could cause actual
results or events to differ materially from current expectations include,
among other things: the failure of the Companies to reach agreement and to
execute the Pre-Merger Agreement; the failure of the Companies to complete the
Merger; Saber failing to repay the interim loan from Talon; volatility of and
sensitivity to market prices for gas and prices (market or otherwise) for
electricity; changes in the anticipated demand for electricity in southern
Africa; changes in equity and debt markets; inflation; changes in exchange
rates; uncertainties relating to the availability and costs of financing
needed to complete exploration activities, demonstrate the feasibility of the
gas reserve and to develop the Power Project; the ability of Saber and/or
MergeCo to conclude power purchase agreements with the intended offtakers of
the Power Project; exploration costs varying significantly from estimates;
delays in the exploration and development of, and/or commercial production
from, the Power Project and the properties in which Saber has an interest;
inability to commercially exploit the resources of the Power Project or the
areas covered by Saber's prospecting licences, including the production of
downstream products such as petrochemicals; inability to secure and produce
sufficient water to support gas production; actual gas usage varying from
assumptions; inability to, or delays in, procuring the engineering,
procurement and construction contract, labour, capital equipment and/or
operating parts and supplies required for the Power Project; equipment
failure; unexpected geological or hydrological conditions; political risks
arising from operating in Africa; imprecision in preliminary resource
estimates, including estimates of the life and recovery thereof; success of
future exploration and development initiatives; inability to establish the
minimum amount and quality of reserves required to support the proposed Power
Project; competition; operating performance of facilities; environmental and
safety risks, including increased regulatory burdens, seismic activity,
weather and other natural phenomena; inability to, or delays in, obtaining
necessary permits and approvals from government authorities, including
approval of environmental impact assessment applications; the existence of
undetected or unregistered interests or claims, whether in contract or in
tort, over the property of Saber and/or MergeCo, respectively; failure to
acquire interests in prospecting licences that Saber currently has an interest
in; changes in government regulations and policies, including tax and trade
laws and policies; risks relating to labour; and other exploration,
development and operating risks.
    Any forward-looking statement speaks only as of the date on which it is
made and, except as may be required by applicable laws, Talon disclaims any
intent or obligation to update any forward-looking statement, whether as a
result of new information, future events or results or otherwise. Although
Talon believes that the assumptions inherent in the forward-looking statements
are reasonable, forward-looking statements are not guarantees of future
performance and accordingly undue reliance should not be put on such
statements due to the inherent uncertainty therein. Information pertaining to
Saber has been furnished by Saber. Although Talon does not have any knowledge
that would indicate that any such information is untrue or incomplete, Talon
assumes no responsibility for the accuracy or completeness of such
information.





For further information:

For further information: on Talon please visit www.talonmetals.com or
contact: Erica Belling, VP Investor Relations, Tau Capital Corp., Tel: (416)
361-9636 x 243, Email: ebelling@taucapital.com

Organization Profile

Talon Metals Corp.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890