Southern Arc Minerals Inc. Makes Strategic Investment in Canada Nickel Corporation, Operationally Remains Focused on Advancement of Indonesian Properties
Southern Arc Minerals Inc. (TSX-V: SA) ("Southern Arc” or the "Company”) is pleased to announce a strategic investment in Canada Nickel Corp. ("Canada Nickel”), a new private company. Southern Arc has purchased 15.3 million common shares for $5.355 million.
Southern Arc remains committed to its Indonesian properties and anticipates having a first review of the fifteen porphyry prospects at Selodong completed by July 31, 2008. Drill results from holes 21 to 23 will be released on July 10, 2008. Southern Arc operations will remain focused on Indonesia.
Subsequent to the investment in Canada Nickel and Southern Arc completing its 2008 Indonesian work program, the Company estimates that at December 31, 2008 it will still hold a minimum of $2.5 million in working capital.
Benefits of the Investment in Canada Nickel to Southern Arc Shareholders
- This investment in Canada Nickel is an unique opportunity for Southern Arc shareholders to participate in an emerging exploration district with a number of recent significant discoveries
- Canada Nickel has first-mover advantage in a previously undiscovered greenstone belt located in the James Bay Lowlands (northern Ontario, Canada)
- The James Bay Lowlands Nickel Project which is comprised of three non-contiguous blocks of mineral claims, the north block (Area 1), the east block (Area 2) and the south block (Area 3) see Figure 1, has an established operator in Diamondex Resources Ltd. ("Diamondex”), including a team of accomplished geologists and geophysicists with extensive experience in the region
- Diversification of Southern Arc assets with respect to projects, regions and commodities
- Reduction of the risk profile of the Company by participating in a project in Canada, and
- Creation of liquidity and funding options
Canada Nickel is a private company that is completing a non-brokered private placement consisting of up to 28 million shares at $0.35 per share for gross proceeds of up to $9.8 million. Southern Arc has subscribed for 15.3 million non-flow-through shares in consideration for $5.355 million. Canada Nickel is issuing the balance of up to 13.7 million shares to strategic arm's-length investors. Upon completion of the financing, Canada Nickel will have a maximum of 38 million common shares issued and outstanding.
The proceeds from Canada Nickel's private placement will be used toward meeting its obligations to earn a 51% interest in the James Bay Lowlands Nickel Project (the "Property”), pursuant to an option (the "Option”) from Diamondex, a company listed on the TSX Venture Exchange (symbol: DSP). Canada Nickel can earn a 51% interest in the Property by:
- paying Diamondex $5 million on July 7, 2008 to reimburse Diamondex for prior exploration expenditures (which earns Canada Nickel a 10% interest). Canada Nickel has used the proceeds of the private placement to make this payment to Diamondex; and
- making $5 million in exploration expenditures in year 1 (which earns Canada Nickel a further 12% interest in the Property). Canada Nickel will use the proceeds of the private placement to immediately fund $1.1 million of the year 1 budget; and
- making a further $7 million in exploration expenditures in year 2 (which earns Canada Nickel a further 14% interest in the Property); and
- making a further $8 million in exploration expenditures in year 3 (which earns Canada Nickel a further 15% interest, for a total interest of 51%).
James Bay Lowlands Nickel Project
The Property was originally staked by Diamondex on the basis of regional aeromagnetic data, with support from recent and historic government interpretations of geology from magnetic data. The property includes key positive magnetic anomalies, typical of mafic and ultramafic lithologies and prospective for nickel mineralization, along the entire 250 km length of the newly interpreted greenstone belt. A few drill holes in the public domain corroborate the presence of the volcanic belt. There are few known rock outcrops in the staked area. Consequently, accurate interpretation of geophysical surveys has been used to identify viable drill targets. A 5,105 line-km Variable Time-delayed Electro-Magnetic (VTEM) survey was recently completed over approximately one-third of the Property (Area 2). Initial results indicate the presence of numerous high quality conductors with strong coincident magnetic anomalies. Interpreted strike lengths of thirty-five late-time conductors range from 300 metres to 1,600 metres. The basement conductors on this property have been interpreted by independent consultants to be excellent targets for magmatic sulphide exploration. The Property, at 407,400 acres (approximately 165,000 hectares), represents the largest land position in the district.
The Property is located in the "Ring of Fire" area (Figure 1), portions of which are within 12 kilometres of both the Double Eagle Nickel deposit (Ni 7.9%, Cu 3.4%, PGE (platinum group elements) 18.3 g/t over of 35 metres – hole 27, Jan 28, 2008, Noront Resources news release) and the McFauld's Lake VMS (volcanogenic massive sulphide) deposit (Cu 8.02% over a width of 18.8 metres – hole McF-04-57, Nov 4, 2004, Spider Resources news release). The property is approximately 65 kilometres southwest of De Beers' Victor Diamond Mine. The district has clear and demonstrated nickel, PGE and VMS (e.g., copper, zinc, lead, silver) potential.
CanadaNickel - Diamondex Exploration Program
Geotech Ltd. has been contracted to fly VTEM over the remaining parcels of the Property (Areas 1 and 3). The 8,000 line km survey is expected to get underway in the near term. During the summer season, Diamondex and Canada Nickel will follow-up selected high-priority airborne anomalies with detailed ground geophysical surveys to further assist conductor characterization and ranking (including width, dip, depth, and ultra-low frequency EM response). These efforts will aid in the target selection for the initial diamond drill test program, which is expected to get underway during Q4 of 2008 and be completed during Q1, 2009. It is expected that approximately 16 targets will be tested over this period.
Related Party Transaction
Southern Arc's investment in Canada Nickel was unanimously approved by the independent directors of the Company, who were advised by independent legal counsel that this transaction is a related-party transaction which does not require the Company to prepare a valuation or to seek shareholder approval under the policies of the TSX Venture Exchange or Multilateral Instrument 61-101. This investment in Canada Nickel represents less than 25% of Southern Arc's market capitalization, permitting the Company to rely upon the exemptions from the valuation and shareholder approval requirements contained in section 5.5 (a) and 5.7 (a) of MI 61-101. One item of primary consideration for the independent directors was the financial status of Southern Arc. Subsequent to the investment in Canada Nickel and Southern Arc completing its 2008 Indonesian work program, the Company estimates that at December 31, 2008 it will still hold a minimum of $2.5 million in working capital.
On closing of the private placement, John Proust, a director and President of Southern Arc, will own directly or indirectly 9.2 million common shares of Canada Nickel, for which he will have paid aggregate consideration of $348,800. These shares are comprised of 8.8 million founders shares purchased for consideration of $208,800. The founders shares will be escrowed if Canada Nickel seeks a public listing. These shares were issued to John Proust for founding the company and advancing $1.1 million in risk capital in order to permit Canada Nickel to secure the Option with Diamondex. In addition, John Proust purchased 400,000 shares of Canada Nickel at $0.35 for consideration of $140,000.
The subscription agreement with Canada Nickel gives Southern Arc a right of first refusal to participate in future financings of Canada Nickel, in order to maintain its proportionate ownership stake. In addition, John Proust has entered into a voting trust with Southern Arc pursuant to which he has agreed to vote his shares in favor of Southern Arc's slate of directors for the board of Canada Nickel. The voting trust and right of first refusal will expire on the earlier of 18 months or the date on which Southern Arc's shares in Canada Nickel represents less than 30% of the issued and outstanding shares of Canada Nickel.
Striving for the highest standards of corporate governance, although not required by law or regulation, the Company will call a special meeting at which Southern Arc will recommend that disinterested shareholders ratify and confirm the investment decision of the board of directors. Southern Arc will call the meeting immediately and mail out an information circular after receipt of a report on the Property, prepared in accordance with National Instrument 43-101. If the shareholders do not ratify this investment decision, Southern Arc may recover its investment by giving Canada Nickel notice of the shareholder vote, after which Canada Nickel will have 90 days to purchase Southern Arc's shares or find a third party purchaser. In either case, Southern Arc would be repaid its investment in Canada Nickel.
The current board of directors of Canada Nickel is comprised of:
Mr. Proust has advised public and private companies with respect to debt and equity financing, mergers and acquisitions, and corporate restructuring since 1986. Mr. Proust has served on numerous boards and in several senior operating positions for private companies and TSX Venture Exchange listed companies, including as current President, Chief Executive Officer and a Director of Southern Arc Minerals Inc. (TSXV:SA), Chairman and a Director of Canada Energy Partners Inc. (TSXV:CE), President, Chief Executive Officer and a Director of Superior Mining International Corporation (TSXV:SUI), and as a Director of Western Uranium Corporation (TSXV: WUC) and Pamodzi Gold Limited (JSE).
Mr. Proust has extensive experience in corporate governance and is a graduate of The Directors College, De Groote School of Business at McMaster University and holds the designation of Chartered Director (C.Dir.).
Mr. Durham is currently Executive Chairman of Temex Resources Corp. Prior to joining Temex, Mr. Durham served as Vice President Exploration (2001 to 2007) and Vice President Business Development for Canadian Royalties Inc. (2006-2007); he was also President of Canadian Royalties from 2003-2006. He continues to serve as a Director of Canadian Royalties, a position he has held since 1998, and is also a Director of East West Corporation.
A graduate of the University of Western Ontario, Mr. Durham has worked in mineral exploration for more than 30 years in various positions with junior mining companies exploring primarily for precious and base metal deposits in Ontario and Quebec, but also with companies exploring across Canada, in the USA, and in Africa. Mr. Durham has been an integral member or leader of various exploration teams credited with the discovery or definition of several significant mineral deposits including: the David Bell Mine (Hemlo), the Golden Giant Mine (Hemlo), the Redstone Nickel Mine (Timmins), the Bell Creek Mine (Timmins) and several nickel-copper deposits on the Raglan South Project of Canadian Royalties that are being evaluated for their economic viability.
Mr. Snucins is the Chairman and Founder of Fallingbrook Management Inc., a private investment company engaged in the business of investing in significant minority or controlling positions in both public and private companies. Mr. Snucins began his business career in 1978 at which time he helped create Canadian Corporate Funding Limited ("CCFL") as a founding shareholder and Director. From 1988 to 1993, Mr. Snucins was President, Chief Operating Officer and Director of Clairvest Group Inc., a Canadian merchant bank listed on the Toronto Stock Exchange. Mr. Snucins was formerly: the President and a Director of Atlas Cromwell Ltd. (May 1998 to October 2003); Chief Financial Officer and Director of Binscarth PVC Ventures Inc. (March 2004 to June 2005), both TSX Venture Exchange companies; Director of NHC Communications Inc. (August 1998 to December 2003), a Toronto Stock Exchange company; and President and Director of Avanti Mining Inc. (February 2006 to June 2007), a CNQ company. Mr. Snucins has been involved in the management and direction of numerous public and private companies, including Masonite (formerly Premdor Inc.), ANZ Bank Canada, Prestolite Batteries Inc., Unitron Industries Inc. and IBEX Technologies Inc.
Mr. Giuffre, B.A. (Economics/Business), LLB., has over twenty five years of combined experience in business and legal matters, and has a transaction-based practice in the areas of corporate finance, securities and corporate and commercial, project finance, and mergers and acquisitions. He acts for a wide range of Canadian and foreign corporations, public and private, and those who finance them such as underwriters, investment dealers, financial institutions and venture capitalists.
Mr. Giuffre has extensive experience acting for Canadian public companies, many of which have progressed from private start-up companies to publicly-listed emerging companies trading on the TSX Venture Exchange, The Toronto Stock Exchange, American Stock Exchange or NASDAQ. Mr. Giuffre advises on securities and stock exchange regulatory matters, public offerings, joint venture transactions, debt and equity financing structures and agreements, mergers and corporate reorganizations, purchase and sale arrangements, corporate governance matters, licence agreements, and various other commercial agreements. Mr. Giuffre has also acted for various clients involved in cross-border transactions which involve complex commercial structures and Canadian and U.S. securities law issues. Mr. Giuffre also conducts seminars on securities law and regulatory matters, corporate governance and commercial transactions.
On Behalf of the Board of
Southern Arc Minerals Inc.
President and CEO
For more information please contact:
Southern Arc Minerals Inc.
c/o John G. Proust, CEO
Telephone: (604) 676-5241 Fax: (604) 676-5246
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