Red Star Announces Transaction with Electra Gold
Vancouver, B.C., October 6, 2014 – Red Star Capital Ventures Inc. (NEX: RSM.H) (“Red Star” or the “Company”), a capital pool company under the rules of the TSX Venture Exchange (the “Exchange”) is pleased to announce that it has entered into a letter of intent dated October 3, 2014 (the “LOI”) with Electra Gold Ltd. ( “Electra”), for the participation by Red Star in a private placement announced by Electra in a news release dated October 1, 2014 (the “Private Placement”).
Pursuant to the terms of the LOI, Red Star will subscribe by way of private placement subscription agreement for units of Electra (the “Units”) at $0.05 per Unit, each Unit consisting of one common share of Electra (an “Electra Share”) and one common share purchase warrant (a “Warrant”). Each Warrant will be exercisable at a price of $0.10 per Electra Share for a period of two years from the date of closing of the Private Placement. Red Star anticipates that it will invest all of its available cash reserves in the purchase of the Units, except for such amounts as are necessary to pay current and anticipated payables and the costs of the dissolution described below.
Following the completion of the Private Placement, Red Star will undertake the necessary steps to allow it to distribute the Units pro rata to its shareholders (the “Distribution”) and thereafter to be delisted from the Exchange and dissolved (the “Dissolution”). Any Units distributed to the shareholders of Red Star who are currently holding their shares of Red Star in escrow, will continue to be held in escrow. It is anticipated that all Units distributed to shareholders of Red Star will be subject to a statutory four month hold period.
The effect of the Private Placement, the Distribution and the Dissolution (together, the “Transaction”) will be that the shareholders of Red Star will become shareholders of Electra, and Red Star will cease to exist.
Red Star is a “capital pool company” under the policies of the Exchange and intends to make the Transaction its proposed “Qualifying Transaction” pursuant to Policy 2.4 of the Exchange. Red Star is advised that Electra does not anticipate that any new Control Person (as such term is defined in Exchange policies) will be created in connection with participation of Red Star in the Private Placement.
The Transaction is a non-arm’s length transaction for the purposes of the Exchange as the parties have a common Control Person (as such term is defined in Exchange policies), being Zimtu Capital Corp.
The net proceeds of the Private Placement are expected to be used to advance Electra’s operations and for general corporate purposes.
The closing of the proposed Transaction is subject to a number of conditions, including but not limited to, execution by the parties of a form of subscription agreement for the Private Placement, the receipt of all requisite regulatory approvals, including final Exchange acceptance, and the approval of the shareholders of Red Star. The Exchange’s final acceptance of the Transaction will be conditional, among other things, upon receipt of the majority of minority shareholder approval for Red Star of the Transaction and shareholder approval of the Distribution and Dissolution. For this purpose, Red Star will schedule a special meeting of its shareholders in due course, details of which will be disclosed in a subsequent news release. The proposed 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.
Red Star and Electra anticipate completing the Private Placement following receipt of the necessary shareholder approval, after which Red Star will commence the Distribution and the Dissolution.
In accordance with Exchange policies, Red Star’s common shares are currently halted for trading and will remain so until they are delisted on completion of the Transaction.
Electra is an Exchange-listed company specializing in the development of and exploration for industrial minerals used in the cement industry. Electra has leased and acquired mineral rights to properties located near Port Hardy on Vancouver Island and near Powell River and is currently mining Chalky Geyserite on northern Vancouver Island which is generating revenues. These properties are industrial mineral properties containing cement feedstock materials and Kaolin as well as a strong potential for development of base and precious metal deposits optioned to Lumina Copper Corp. Electra has been continuously shipping product to a Seattle cement plant since October 2003. In addition, Electra has a portfolio of promising gold properties in BC, Ontario and Quebec.
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.
Neither the TSX Venture Exchange nor its Regulations Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
For further information, please contact:
Red Star Capital Ventures Inc.