CALLINAN ANNOUNCES A 2,000,000 UNIT PRIVATE PLACEMENT
ROLAND BUTLER APPOINTED A DIRECTOR AND VICE PRESIDENT
VANCOUVER, Oct. 25 /PRNewswire-FirstCall/ - Callinan Mines Limited ("Callinan") today announces its intention to become a royalty company by reorganizing its exploration assets into a separate corporation ("the Spin-Out Proposal"), with a view to enhancing shareholder value.
Callinan, upon becoming the royalty company, will hold a 6⅔% Net Profits Interest royalty and a $0.25 per ton royalty (together the "Royalties") in the 777 Mine at Flin Flon, Manitoba, Canada, which produces copper, gold, zinc and silver and is operated by HudBay Minerals Inc. Callinan will also hold the War Baby mineral property, which covers an area down-trend from the 777 Mine.
The President and CEO of the royalty company will be Roland Butler, a co-founder of Altius Minerals Corporation, where until March 2010 he served as a Director, Vice-President and Chief Operating Officer. He has joined Callinan as interim Vice-President and he has been appointed to its Board of Directors. Mr. Butler has been granted options to purchase 250,000 shares of Callinan at $2.38 per share for a period of five years. Mr. Butler will participate in a private placement in Callinan to become a key shareholder.
The new exploration company will hold Callinan's exploration assets in Canada, including its interests in the Coles Creek polymetallic project in British Columbia, its base metal projects in Manitoba and its Fox River nickel project in Manitoba.
Mike Muzylowski, Chief Executive Officer of Callinan, will be the President and CEO of the exploration company. He stated, "We see this proposal as an excellent opportunity to enhance shareholder value and to give our shareholders the best of both worlds: a well funded royalty company led by an experienced and well regarded executive, and the potential upside of exploration success under the direction of our proven and successful team of explorers."
Roland Butler, commenting on the proposal stated, "I welcome the opportunity to become a shareholder of Callinan as we launch a new royalty company engaging in early stage royalty creation through prospect generation and financing complemented by selective royalty acquisitions. I hope our company will build a reputation for high free cash flow, high return on invested capital and dividends to our shareholders."
Mr. Butler will purchase two million Units of Callinan, pursuant to a private placement, at the price of $2.02 per Unit to raise $4,040,000 to be applied to general working capital. Each Unit will consist of one common share of Callinan and one share purchase warrant. Each warrant will entitle the holder to purchase one additional common share of Callinan for a period of 5 years at the price of $2.74 per common share. Participation by Mr. Butler is considered to be a related party transaction as defined under Multilateral Instrument 61-101. The transaction will be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of any shares issued to or the consideration paid by Mr. Butler will exceed 25 per cent of Callinan's market capitalization. This private placement is subject to acceptance for filing by the TSX Venture Exchange.
The Spin Out Proposal
The Spin Out Proposal is intended to provide Callinan shareholders the opportunity to continue to participate in both aspects of Callinan's present holdings.
Pursuant to the Spin Out Proposal, the assets of Callinan will be separated into two corporations through a plan of arrangement, such that one corporation will hold the Royalties, the outstanding law suit against HudBay and the War Baby mineral claim (the "Royalty Assets") and the other corporation will be seeded with some capital from Callinan's present cash balances and hold Callinan's exploration assets in Canada.
Under the terms of the Spin Out Proposal, existing Callinan shareholders will receive the same percentage interest in a corporation that has yet to be incorporated ("Newco") as they presently hold in Callinan such that, following the implementation of the Spin Out Proposal, the shareholders will hold shares in two corporations, existing Callinan and newly incorporated Newco, with the Royalty Assets being held by one corporation and the Exploration Assets being held by the other corporation.
Callinan will hold a Special Meeting of shareholders to approve the Spin Out Proposal. Further particulars, including the record and meeting dates, will be announced in due course by press release. A complete description of the Spin Out Proposal will be set forth in a management proxy circular to be sent to Callinan's shareholders in connection with the special meeting.
The implementation of the Spin Out Proposal is subject to, among other things: further Board approval of the final structure and terms and the arrangement agreement to be entered into with Newco and shareholder, court and regulatory approvals, including TSX Venture Exchange acceptance of the Spin Out Proposal and the continued listing of Callinan common shares on the TSX Venture Exchange and conditional listing approval of Newco shares. No application for listing has been made and there is no assurance that if made that approval will be granted. The TSX Venture Exchange has not approved or disapproved the Spin Out Proposal and there is no assurance that the TSX Venture Exchange will approve the Spin Out Proposal.
By Order of the Board of Directors
Mike Muzylowski, President and CEO
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.
Some statements in this news release contain forward-looking information. These statements include, but are not limited to, statements with respect to the expected benefits of the proposed Spin Out Proposal, the payment of dividends, the completion of the Spin Out Proposal, the receipt of any shareholder and regulatory approvals for the Spin Out Proposal and the development potential of Callinan's properties. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors and assumptions include, among others, the effects of general economic conditions, the price of gold, silver, copper and other metals, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations and misjudgments in the course of preparing forward-looking information. In addition, there are known and unknown risk factors which could cause the Company's actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements. Known risk factors include risks associated with the ability obtain any necessary approvals, waivers, consents and other requirements necessary or desirable to permit or facilitate the Spin Out Proposal, the risk that any applicable conditions of the proposed transaction may not be satisfied, risks associated with project development; the need for additional financing; operational risks associated with mining and mineral processing; fluctuations in metal prices; title matters; environmental liability claims and insurance; reliance on key personnel; the potential for conflicts of interest among certain officers, directors or promoters of the Company with certain other projects; currency fluctuations; competition; dilution; the volatility of the Company's common share price and volume; tax consequences to U.S. investors; and other risks and uncertainties. Forward-looking statements are made based on management's beliefs, estimates and opinions on the date that statements are made and Callinan undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change, except as required by law.
SOURCE Callinan Mines Ltd.