Forte Signs Letter of Intent for Proposed Qualifying Transaction with Santacruz Silver Mining, Ltd.
FORTE RESOURCES INC.
1750 – 999 West Hastings Street Vancouver, B.C. V6C 2W2
FORTE SIGNS LETTER OF INTENT FOR PROPOSED QUALIFYING TRANSACTION WITH SANTACRUZ SILVER MINING, LTD.
October 25, 2011 TSX Venture Exchange Trading Symbol: FJX.P
Forte Resources Inc. (the “Company”), a capital pool company pursuant to Policy 2.4 of the TSX Venture Exchange (the “TSX-V”), is pleased to announce that it has entered into a binding letter of intent dated October 21, 2011 to complete a business combination (the “Transaction”) with Santacruz Silver Mining, Ltd. (“Santacruz”) by acquiring all of the issued and outstanding securities of Santacruz from its securityholders. Santacruz is a private company incorporated under the laws of the Province of British Columbia, which is the parent of Impulsora Minera Santacruz S.A., a private Mexican company which holds options to acquire a 100% interest in the Rosario, Gavilanes and San Felipe silver projects, located in the historical mining districts of Charcas, San Luis Potosi, San Dimas Durango and San Felipe Sonora, Mexico, respectively. Upon completion of the Transaction, the combined entity will carry on the business of Santacruz, which is the further advancement and development of the Rosario silver property (the “Rosario Property”), as well as exploration work on its remaining properties and will be listed as a mining issuer on the TSX Venture Exchange.
Transaction Summary
The Transaction will be effected by the Company issuing an aggregate of 26,504,945 common shares at a deemed price of CDN$1.00 per share to shareholders and special warrantholders of Santacruz and a further approximately 664,473 share purchase warrants exercisable at a price of CDN$1.25 per share until April 21, 2012 to warrantholders of Santacruz, which will result in Santacruz becoming a wholly-owned subsidiary of the Company (the Company after the Transaction being referred to herein as the “Resulting Issuer”). Each shareholder/ special warrantholder of Santacruz will exchange a Santacruz share for approximately 4.772 common shares of the Company.
The Transaction is an arm’s length transaction.
The Company currently has 15,440,000 common shares issued and outstanding, as well as 200,000 stock options to acquire common shares exercisable at a price of CDN$0.10 per share until October 7, 2016 and 200,000 warrants to acquire common shares at a price of CDN$0.10 per share until October 7, 2013.
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Following the completion of the Transaction (based on the outstanding share capital of each of the Company and Santacruz as of the date hereof,), approximately 41,944,945 common shares of the Resulting Issuer would be issued and outstanding (prior to the completion of any financing completed concurrently with the Transaction). Forte shareholders will hold common shares representing approximately 36.77% of the outstanding common shares of the Resulting Issuer following the completion of the Transaction, but prior to the completion of any financing.
The proposed Transaction is subject to a number of terms and conditions, including the entering into by the parties of a definitive agreement with respect to the Transaction (such agreement to include representations, warranties, conditions and covenants typical for a transaction of this nature), the completion of satisfactory due diligence investigations, the approval of the directors of each of the Company and Santacruz, the completion of a financing of the Company generating minimum proceeds of $15 million, and the approval of the TSX-V and other applicable regulatory authorities.
The parties intend that the Resulting Issuer will be listed on the TSX-V as a Tier 2 mining issuer following completion of the Transaction. Trading in the common shares of the Company will remain halted pending the satisfaction of all applicable requirements of the TSX-V. There can be no assurance that trading in the common shares of the Company will resume prior to the completion of the Transaction. Further details concerning the Transaction, Santacruz (including additional financial information and technical information respecting the assets of Santacruz) and other matters will be announced if and when a definitive agreement is reached.
Information Concerning Santacruz
Santacruz is a private company incorporated in the Province of British Columbia, which beneficially owns, all of the issued and outstanding shares of Impulsora Minera Santacruz S.A., a company incorporated in Mexico, which holds options to acquire a 100% interest in the Rosario, Gavilanes and San Felipe Properties.
Santacruz currently has approximately 30 shareholders. Significant shareholders of Santacruz who will become insiders of the Resulting Issuer following the completion of the Transaction include Arturo Préstamo, a resident of Mexico and the proposed Chief Executive Officer and a proposed director of the Resulting Issuer.
Information Concerning the Rosario, Gavilanes and San Felipe Properties
Rosario Property:
The Rosario Property is an advanced exploration stage silver property, located at the historical mining district of Charcas in the state of San Luis Potosi in Mexico, approximately 184 km north of the capital city San Luis Potosi. Mineralization is hosted in two veins, the Rosario I and II veins with a general strike of N60W, dipping between 45 to 60 degrees southwest. The veins extend over a length of 2.5 to 3.0 km, and to a depth of at least 150 to 200 meters, as determined by drilling. The vein thickness varies from 0.4 to 2.5 meters. Based on a review of the drill logs and a physical examination of the property, including an examination of the outcrops, workings and drill collar monuments, Donald Hulse of Gustavson Associates, LLC, a qualified person pursuant to National Instrument 43-101, believes the projected down dip projection of the structures is reasonable. Mineralization appears to have occurred in three stages, the third stage precipitating the argentiferous (silver bearing) minerals. The mineralization has been defined as a mesothermal vein system, although mineralization is typical of other epithermal deposits in Mexico.
Gavilanes Property:
The Gavilanes project is located approximately 110 km west northwest of Durango City in the municipality of San Dimas in Durango State, Mexico. The property is situated in the Sierra Madre Occidental Mountain Range
Seven major veins have been identified. Each structure has a strike length exceeding 1,000 meters on average with widths averaging 1.5 meters – 2.5meters. Channel samples from the various veins run up to 4 g/t Au, 1,100+ g/t Ag, 9% lead, 5 % zinc and 6% copper. The veins at Gavilanes are epithermal.
San Felipe Property:
The San Felipe project is an advanced stage development project located in the state of Sonora 130 km northeast from the city of Hermosillo in the Sierra Madre Occidental Mountain Range.
Selected Santacruz Financial Information
As of September 30, 2011, Santacruz had approximately CDN$2,000,000.00 in cash and commitments of approximately CDN$600,000 (unaudited).
Management and Board of Directors of Resulting Issuer
Four members of the board of directors and management of the Resulting Issuer will be nominated by Santacruz, with one member of the Company’s board remaining. Upon completion of the Transaction, it is anticipated that Arturo Préstamo will be appointed as Chief Executive Officer and the board of directors of the Resulting Issuer will include the persons identified below and at least two other persons, with the remaining members of management to be determined.
Arturo Préstamo – Chief Executive Officer and Director
Mr. Préstamo holds a C.P.A. degree from the University of Monterrey, a Master Degree from EGADE University and a PhD from I.P.A.D.E. University. With more than 7 years of executive and operational experience in the mining industry (precious metals), Mr. Préstamo has worked for different major public companies as Director of Planning, Corporate Finance and Investor Relations. Mr. Préstamo is former Country manager for Starcore International Mines, Ltd. where he has direct responsibility for mining, administrative, and corporate operations in Mexico. Mr. Préstamo is member of Mexico´s Mining Chamber, and participates actively in different mining initiatives in the country.
James A. Hutton – Director
Mr. Hutton has spent his career in the financial services industry and for the past 25 years has specialized in structured finance and resource company finance. Mr. Hutton is the President and Chief Executive Officer of Hutton Capital Corporation, a company engaged in investment banking. He is also a director of certain public companies, including Batero Gold Corp. (TSX – BAT). He has a Bachelor of Science degree from the University of British Columbia and an MBA from City University.
Mr. Hutton designed and executed in excess of $1,400,000,000 in flow through share resource financings for the Canadian energy and mining sectors between 1998 and 2006. He was the founder and President of the Canada Dominion Resources Group of companies, one of the largest flow-through share funds in Canada. During Mr. Hutton's tenure, the Canada Dominion Resources Group completed in excess of $800,000,000 in offerings, which subsequently focused their investments on mining and energy issuers actively exploring for resources in Canada. The Canada Dominion Resources Group was acquired from Mr. Hutton by the Dundee/Dynamic Mutual fund organization.
Francisco Ramos – Director
Mr. Ramos is a Mining and Metallurgical Engineer with more than 30 years of experience in the mining industry. Mr. Rámos holds a Master degree in Mining Engineering from the University of Guanajuato. He is one of the cofounders of Great Panther Silver Limited, where he was responsible for the operations of the company in México since 1998 (before merging with GPSL). Mr. Rámos has worked with different senior mining companies such as Peñoles, IMMSA and Minera Autlan. He has consulted for a number of junior to mid-size companies from Canada, Mexico and the United States. In other interesting accomplishments, Mr. Ramos was responsible for the design, supervision and construction of 4 mill plants, all of which were completed on time and on or under budget.
Financing
Pursuant to the letter of intent, it is a condition of the completion of the Transaction that the Company complete a financing generating minimum gross proceeds of $15 million at a price of $1.00 per share on terms to be determined (the “Financing”). Further details concerning the Financing will be announced by way of press release once determined.
Sponsorship
The proposed Transaction is subject to the sponsorship requirements of the TSX-V, unless an exemption from those requirements is granted by the TSX-V. The Company intends to apply for an exemption from the sponsorship requirements; however, there can be no assurance an exemption will be obtained. If an exemption from the sponsorship requirements is not obtained, a sponsor will be identified at a later date. An agreement to act as sponsor in respect of the Transaction should not be construed as any assurance with respect to the merits of the Transaction or the likelihood of its completion.
Forward-looking statements
This news release contains certain “forward looking statements” including, for example, statements relating to the completion of the proposed Transaction, the Resulting Issuer’s anticipated share capital, exploration activities at the Rosario Property. Such forwardlooking statements involve risks and uncertainties, both known and unknown. The results or events depicted in these forward-looking statements may differ materially from actual results or events. In addition to other factors and assumptions which may be identified herein, assumptions have been made regarding and are implicit in, among other things: receipt of government and third party approvals in respect of transferring assets, the state of the capital markets; tax issues associated with doing business internationally, the ability of Santacruz to successfully manage the political and economic risks inherent in pursuing business opportunities in Mexico; and the ability of Santacruz to obtain qualified staff, equipment and services in a timely and cost efficient manner to develop its business. Any forward-looking statement speaks only as of the date of this news release and, except as may be required by applicable securities laws, the Company and Santacruz disclaim any intent or obligation to update any forwardlooking statement, whether as a result of new information, future events or results or otherwise.
For further information contact:
Santacruz Silver Mining, Ltd.
Arturo Préstamo Telephone: 81.8378.5707 Email: [email protected]
On behalf of the Board of Directors
Gunther Roehlig President, Chief Executive Officer and Chief Financial Officer Telephone: 604.683.0911
All information contained in this press release relating to Santacruz was provided by Santacruz to the Company for inclusion herein. Santacruz has not independently verified such information and shall bear no liability for any misrepresentation contained therein.
Qualified Person Statement
Donald Hulse,a "qualified person" as defined in National Instrument 43-101 and an independent consultant of Santacruz, has reviewed and approved the scientific and technical information in this news release as it relates to the Rosario and Gavilanes Properties. Mr. Hulse has verified the technical and scientific information in this news release including sampling, analytical and test data underlying the information or opinions contained in this news release.
Completion of the transaction is subject to a number of conditions, including but not limited to, exchange acceptance and if applicable pursuant to exchange requirements, majority of the minority shareholder approval. 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 TSX-V 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 TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.