TORONTO,
Oct. 20, 2014 /PRNewswire/ - Cerro
Grande Mining Corporation (the "Company" or "CEG")
(CEG: CNSX) (CEGMF: OTGQX) announces that it has agreed in
principle to (i) complete a private placement of units of the
Company with two of its directors (or holding companies of such
directors) (the "Directors") for cash proceeds of
US$700,000 (the "Placement"),
and (ii) extinguish certain outstanding indebtedness owed to the
Directors by issuing common shares of the Company (each, a
"Common Share") in settlement of such debt (the "Debt
Settlement"). The Placement and Debt Settlement are being
completed in order to immediately improve the financial position of
the Company given the serious financial difficulties it is
currently facing, and with a view of setting the Company on firm
financial ground to carry out its mining business in Chile in the future.
Pursuant to the Placement the Company will issue
an aggregate of 15,743,000 units of securities of the Company
(each, a "Unit") at CDN$0.05
per Unit, with each Unit comprising one Common Share and one Common
Share purchase warrant (each, a "Warrant"), with each
Warrant exercisable for a period of 5 years to purchase one Common
Share at CDN$0.07. Proceeds of
the Placement are expected to be used for general working capital
purposes, including, but not limited to, corporate and
administrative purposes.
Pursuant to the Debt Settlement, the Company
will extinguish outstanding indebtedness in the aggregate amount of
US$2,162,972 owed to the Directors,
such indebtedness being made up of accrued but unpaid royalty
payments and service fees owed to the Directors and cash advances
made to the Company by the Directors and interest thereon, by
issuing an aggregate of 48,645,220 Common Shares (representing an
issue price of CDN$0.05 per share) in
full and final settlement thereof. All dollar amounts have
been converted at an exchange rate of CND$1.1245 per US$1.00.
The participation of each Director in the
Placement and the Debt Settlement constitutes a "related party
transaction" under Multilateral Instrument 61-101- Protection of
Minority Security Holders in Special Transactions ("MI
61-101"). The Company intends to rely on the "financial
hardship" exemptions from both the formal valuation and minority
shareholder approval requirements of MI 61-101 in connection with
the Placement and Debt Settlement. In reliance thereon, the
Board of Directors of the Company (other than the Directors who
abstained from voting), including all of its independent members,
has unanimously concluded that the Company is in serious financial
difficulty and the contemplated transactions, the terms of which
are reasonable in the circumstances, will improve the financial
position of the Company. There is no requirement, corporate
or otherwise (including pursuant to the rules of the Canadian
Securities Settlement), to hold a meeting to obtain any approval of
the holders of Common Shares in connection with the Placement and
the Debt Settlement.
Upon completion of the Placement and the Debt
Settlement, the Directors will hold 107,641,130 Common Shares
representing approximately 61.5% of the issued and outstanding
Common Shares. On a fully-diluted basis, the Directors would
hold approximately 62.70% of the Common Shares.
The Company anticipates closing the Placement
and the Debt Settlement on or about October
24, 2014.
The Company is a minerals producing, exploration
and development company with properties and activities currently
focused in Chile.
Forward-Looking Information
This news release contains certain "forward-looking information"
as such term is defined under applicable Canadian securities
laws. All disclosure herein, other than information regarding
historical fact, regarding possible events, conditions or financial
performance that is based on assumptions about future economic
conditions or courses of action, including any future-oriented
financial information with respect to prospective financial
performance, financial position or cash flows that is presented
either as a forecast or a projection, is forward-looking
information. Forward-looking information contained in this
news release includes, but may not be limited to, the anticipated
closing of the Placement and the Debt Settlement and the timing
thereof, and the expected use of proceeds from the Placement. The
forward-looking information contained in this news release reflects
the current expectations, assumptions and/or beliefs of the Company
based on information currently available to the Company. With
respect to the forward-looking information contained in this news
release, the Company has made assumptions regarding, among other
things, the Company's working capital requirements and its ability
to complete the Placement and Debt Settlement in a timely manner.
The forward-looking information contained in this news release is
subject to a number of risks and uncertainties that may cause
actual results or events to differ materially from current
expectations, including the inability of the Company to use the
proceeds of the Placement as intended and the inability of the
Company to improve its financial position beyond the near term. Any
forward-looking information speaks only as of the date on which it
is made and, except as may be required by applicable law, the
Company disclaims any obligation to update or modify such
forward-looking information, either because of new information,
future events or for any other reason.
SOURCE Cerro Grande Mining Corporation