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Sparton
Resources Inc. (SRI:TSX-V) ( the "Company") is
pleased to announce that its wholly-owned subsidiary, Sparton
Energy Inc. (" SEI ") has entered
into an engagement letter with Quam Securities Company Limited
of Hong Kong (" Quam Securities ")
whereby Quam Securities has agreed to raise up to US$10 million
in convertible debentures of SEI (the " Convertible Debenture s")
on a "best efforts", private placement basis (the " Financing ").
A portion of the proceeds of the Financing will be used to
complete SEI's previously announced acquisition of 85% of
the shares of Linxing 306 Huajun Coal Co. Ltd. Lincang City
(" Huajun "), which owns the Huajun
coal and germanium producing operations in Yunnan, China,
and completion of a pilot plant and uranium extraction testing
facility in the area. As well, proceeds will be used for
upgrading the Huajun operations, and construction of a commercial
uranium extraction plant for Lincang coal ash. Funds will
also support the Company's international secondary uranium
recovery programs. Completion of the Financing is subject
to satisfaction of a number of conditions precedent, including
receipt of all required regulatory and corporate approvals,
and completion of independent due diligence reviews
FINANCING TERMS
Convertible Debentures
The full US$10 million in Convertible Debentures will be
convertible into a 35% interest in SEI, calculated as at
the closing date of the Financing, subject to adjustment
based upon certain milestone requirements of SEI. The Convertible
Debentures will mature on September 30, 2011 and pay simple
interest at 10% per annum. If SEI does not complete an initial
public offering by maturity, the conversion of the Convertible
Debentures will be into shares of the Company at an ascribed
value of Cdn$0.22 per share.
Security
SEI and the Company are providing security for the Convertible
Debentures to both Quam and the debenture holders in the
form of a guarantee backed by the Huajun shares, SEI's interest
in the agreements and operating vehicles related to the secondary
uranium recovery programs in Yunnan, and the Company's estimated
6% working interest in the Chebucto gas field offshore of
Nova Scotia, Canada.
Commissions and Warrants
In consideration for marketing
the Convertible Debentures Quam Securities will receive a
5% commission on the gross proceeds of the Financing, and
warrants to purchase shares of SEI equal to 2.5% of the gross
proceeds of the Financing.
QUAM LIMITED
Quam Limited is a listed Hong
Kong (952 SEHK) based financial services group comprised
of several renowned Hong Kong businesses, including Quam
Securities, Quam Capital, Quam Asset Management, Quam Wealth
Management, Quamnet.com and Quam Investor Relations. Utilizing
both its online and offline resources, Quam offers one-stop
financial services in Hong Kong and China for corporations
and individual investors alike. It also provides capital
markets assistance in Tokyo , Bangkok , Dubai , Hong Kong
and through its representative offices or wholly-owned foreign
enterprises in Shenzhen, Shanghai , Shenyang of China. The
Company has been associated with Quam as its financial advisor
in Hong Kong for more than two years.
DISCUSSION
The proceeds of the Financing will further the Company's
goal of becoming a profitable operating company through its
subsidiaries. The medium term objectives are to upgrade the
Huajun operations and enhance their profitability by increasing
output and upgrading the current production of concentrate
to germanium metal. Additionally, utilizing its proprietary
technology, the Company has strong government support for
uranium extraction from Lincang ash and through its joint
venture with China National Nuclear Corporation plans to
complete a bulk test plant, a feasibility study, and ongoing
construction of a commercial production facility in the Lincang
area. Initial design and permitting for this work is currently
underway.
Experienced operating staff has been engaged to oversee
the Lincang operations and organize the design and implementation
of the new germanium metal production plant. Lyntek Inc.,
the Company's process engineering consultants, has completed
an initial design for the uranium extraction bulk test plant
and this has been submitted to the PRC environmental permitting
authorities for review.
Sparton's international exploration and evaluation programs
are being carried out under the direct supervision of A.
Lee Barker, P. Eng., P Geol., the Company's President and
CEO who is a Qualified Person under National Instrument 43-101.
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