Vancouver, B.C., November 27, 2012. Confederation Minerals Ltd. (“Confederation”, or the “Company”) is pleased to announce that it intends to distribute a majority of its approximate 56% interest ( the “Magna Shares”) in the share capital of Magna Resources Ltd. (“Magna”) on pro rata basis to the holders of record as of November 27, 2012 (the “Confederation Shareholders”) of common shares (the “Confederation Shares”) of Confederation. The proposed distribution of the Magna Shares will occur by way of a reduction of capital (the “Proposed Distribution”) pursuant to Section 74(1) of the British Columbia Business Corporations Act (the “BCBCA”).
Distribution to Confederation Shareholders
As described in a news release dated January 20, 2012, Confederation acquired the Magna Shares from Magna pursuant to a transaction involving the transfer of Confederation’s 50% interest in American Potash LLC to Magna and a concurrent private placement of Magna Shares. Confederation completed this transaction in order to focus on its Newman-Todd gold exploration project while still maintaining the Company’s major position in the highly-prospective potash holdings in Utah, and did so with the intent to eventually re-distribute the Magna Shares directly to Confederation Shareholders.
After due consideration, Confederation’s board of directors (the “Board”) has approved the Proposed Distribution for the following reasons:
- Potential for Unlocking Value — Confederation believes that the market capitalization and performance of the Confederation Shares reflects an undervaluation of Confederation relative to the fair market value of its assets (including the Magna Shares it holds) due to the complexity of valuing a company that is concurrently engaged in the business of acquiring, developing and exploring gold, copper, zinc and silver properties on the one hand, and the potash business (through its ownership of the Magna Shares) on the other. Confederation believes that each of these industry focuses should ultimately achieve a higher valuation on a stand-alone basis.
- Focused Investment Decision for Shareholders — The Proposed Distribution will provide Confederation Shareholders with two separate investments - one focused on the exploration and development of mineral properties in Ontario seeking gold, silver, copper and zinc, and the other focused on potash. The Proposed Distribution will therefore provide Confederation Shareholders with investment flexibility, as they will hold a direct interest in two companies each of which is focused on different objectives. This will allow Confederation Shareholders to make focused investment decisions with respect to each type of investment.
Petition and Court Order
Pursuant to Section 74(1) of the BCBCA, the Proposed Distribution is required to be approved by the Supreme Court of British Columbia (the “Court”).
The petition (the “Petition”) for an order approving the Proposed Distribution (the “Court Order”) is set for 9:45 a.m. (Vancouver time) on December 19, 2012, or as soon thereafter as counsel may be heard at the Court, located at 800 Smithe Street, Vancouver, British Columbia (the “Hearing”). Any Confederation Shareholder, or any other interested party, who wishes to participate or be represented at the Hearing, or to present arguments or evidence at the Hearing may do so, subject to filing with the Court a response to the Petition (the “Response to Petition”) and delivering a copy of the filed Response to Petition, together with a copy of all materials such person intends to rely upon at the Hearing, including an outline of such person’s proposed submissions, to Kinji C. Bourchier of Lawson Lundell LLP, at 1600 - 925 West Georgia Street, Vancouver, B.C. or by facsimile at (604) 669-1620, on or before 4:00 p.m. (Vancouver time) on December 18, 2012, subject to other direction of the Court.
Confederation has been advised by its counsel that the Court has broad discretion under the BCBCA in considering and making an order with respect to the Proposed Distribution and that the Court will consider, among other things, whether the Proposed Distribution is fair and equitable to the Confederation Shareholders and to any creditors of Confederation. The Court may approve the Proposed Distribution either as proposed or as amended in any manner the Court may direct.
A copy of the Petition and any other documents filed by Confederation with the Court in connection with the Hearing will be furnished to any Confederation Shareholder, or other interested party, requesting the same by mail from Kinji C. Bourchier of Lawson Lundell LLP, at 1600 - 925 West Georgia Street, Vancouver, B.C. or by facsimile at (604) 669-1620.
If the Proposed Distribution is completed, the Magna Shares will be distributed to Confederation Shareholders of record as of November 27, 2012, on a pro rata basis.
Completion of the Proposed Distribution is subject to certain conditions, including the receipt of the Court Order and the approval of the TSX Venture Exchange.
Generally, for Canadian federal income tax purposes a Confederation Shareholder who
is a resident of Canada and whose Confederation Shares constitute capital property will have the adjusted cost base of their Confederation Shares reduced by an amount equal to the fair market value on the effective date of the Proposed Distribution (the “Effective Date”) of the Magna Shares received by such Confederation Shareholder. If the fair market value of the Magna Shares received exceeds the adjusted cost base of the Confederation Shareholder’s Confederation Shares, the Confederation Shareholder will be deemed to have realized a capital gain equal to such excess. The cost of the Magna Shares acquired as a result of the Proposed Distribution will be equal to their fair market value on the Effective Date. Generally, a Confederation Shareholder who is a non-resident of Canada for Canadian federal income tax purposes should not incur any liability for Canadian federal income tax as a result of the Proposed Distribution. Confederation Shareholders should consult with their own tax advisors regarding the tax consequences of the Proposed Distribution having regard to their particular circumstances.
The information contained in this news release is not intended to be, and should not be construed to be, legal, business or tax advice to any particular Confederation Shareholder or any other person, and no representation is made in this news release with respect to the tax consequences to any particular Confederation Shareholder or other person.
About Confederation Minerals
Confederation Minerals Ltd. is a British Columbia based company engaged in the business of acquisition, exploration and development of mineral properties. Its objective is to locate and develop economic precious and base metals properties of merit. Confederation Minerals Ltd. holds an option agreement to acquire up to 70% of the Newman Todd project in the Red Lake Mining District of Northern Ontario as well as 100% ownership in another property in the Red Lake Mining District of Ontario.
On Behalf of the Board:
Brian Bapty, Ph.D.
President and Director
Confederation Minerals Ltd.
Suite 1980, 1075 West Georgia Street
Brian Bapty, President and Director
Neither the TSX Venture Exchange nor its Regulation Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release includes certain statements that may be deemed "forward-looking statements". All statements in this news release, other than statements of historical facts, that address events or developments that the Company expects to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", “proposes”, "project", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. Except as required by applicable securities laws, the Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.