Heartwood enters into agreement to acquire China gold

exploration and mining project for qualifying transaction 
/THIS PRESS RELEASE IS NOT INTENDED FOR DISSEMINATION OR DISTRIBUTION IN THE 
UNITED STATES/ 
TSX Venture Exchange Symbol "HWC.P" 
CALGARY, July 15 /CNW/ - Heartwood Capital Corporation (the "Company" or
"Heartwood") (TSX-V:HWC.P), is pleased to announce that it has entered into an
agreement dated July 8, 2005 (the "Agreement") with Neo Alliance Strategic
Holdings Limited ("Neo Alliance Strategic") and Western America Securities
Inc. ("Western America") to acquire all the issued and outstanding shares in
Neo Alliance Holdings Limited ("Neo Alliance"), a BVI company (the "Proposed
Transaction"). The jurisdiction of the Company will remain as an Alberta
incorporated entity which will be the parent of and wholly own Neo Alliance as
its subsidiary. Neo Alliance, through an investment in Kai Yuan Minerals
Company Limited ("Kai Yuan"), a domestic China company incorporated on June 6,
2003, in the province of Gansu in the county of Xihe, owns and controls a
51% interest in the Majiahe gold exploration/mining property (the "Property")
located in the People's Republic of China. Pursuant to the terms of the
agreement, subject to completion of satisfactory due diligence and receipt of
applicable regulatory and shareholder approvals, completion of the Offering as
hereinafter defined and entering into a definitive agreement, Heartwood will
issue 20,000,000 common shares in the capital of Heartwood (the "Heartwood
Shares") at a deemed value of CAD$0.20 per share for an aggregate purchase
price of CAD$4,000,000 to Neo Alliance Strategic as consideration for Neo
Alliance, of which certain of such Heartwood Shares will be subject to escrow
in accordance with the policies of the TSX Venture Exchange. Upon completion
of the Proposed Transaction, the Company's name will be changed to Neo
Alliance Minerals Inc., or such other name as the directors of the Company may
determine, and it is anticipated that the Company will meet the Tier 2 listing
requirements of the TSX Venture Exchange for a Mining Issuer. 
Financing 
The Proposed Transaction will be completed in conjunction with a non-brokered equity offering by Heartwood for a minimum of 5,000,000 units at
CAD$0.20 per unit for gross proceeds of a minimum of CAD$1,000,000 (the
"Offering"). Each unit shall consist of one Heartwood Share and one common
share purchase warrant entitling the holder thereof to acquire an additional
Heartwood Share at a price of $0.50 for a period of one year from the date of
issuance. The Company intends to utilize the net proceeds from the Offering to
fund the recommended work program as more particularly described below and for
general working capital purposes. The Proposed Transaction is expected to
constitute Heartwood's Qualifying Transaction as defined in Policy 2.4 of TSX
Venture Exchange. 
Neo Alliance Holdings Limited 
Neo Alliance is a Hong Kong-based private holding company which was
incorporated under the International Business Companies Law of the British
Virgin Island on May 9, 2005 and currently has ten (10) common shares issued
and outstanding. Neo Alliance is a wholly owned subsidiary of Neo Alliance
Strategic, which in turn is a wholly owned subsidiary of Neo & Thompson Group
Inc. ("NTG"), a BVI company. Teddy M.C. Cheng currently owns and controls
90% of NTG's issued and outstanding shares and is the sole director of NTG,
Neo Alliance Strategic, and Neo Alliance. 
Scope of Business 
Upon completion of the transaction, the Company will be engaged in the
business of exploring and developing natural resources in the People's
Republic of China. 
Neo Alliance aims to establish strong foothold in proven mineral zones
across Mainland China and adopts a clustered geographical expansion with a mix
of exploration and producing projects. Neo Alliance is backed by a management
team with experience in operating in China, exploration and mining expertise
as well as a network of geological knowledge of the country. Neo Alliance is
actively evaluating exploration and mining opportunities in China that it
believes will offer growth potential in mineral resources, reserves and cash
flow. 
Majiahe Property 
Neo Alliance, through an investment in Kai Yuan, owns and controls a
51% interest in the Property. Mr. Wu Quan, a local Chinese businessman and the
founder of Kai Yuan, owns a 32% interest and a nominee shareholder of NTG owns
a 17% interest of Kai Yuan. In addition, Neo Alliance has entered into an
agreement which grants Neo Alliance the option to increase its interest in the
Property to 68% at the market value of the property after the completion of
the pre-feasibility study. 
Neo Alliance, through its control in Kai Yuan, holds the exploration
license (No. 620000310339) of 11.38 km(2) (the "Exploration License"). A
resource estimate prepared by Gansu Province, Nuclear Industry Geological
Brigade 219 and subsequently verified by Associated Mining Consultants Ltd.
("AMCL") of Calgary (a Qualified Person according to NI 43-101) indicates
inferred resources of 3.327 million metric tons grading 1.34 grams per tonne
gold (4,468 kg or 143,650 ounces of contained gold) which is compliant with
CIM definitions. 
The Property is located in the County of Xihe within the administrative
district of Long Nan City (formerly Long Nan Prefecture) of the Gansu
Province, roughly 1,130 km west of Beijing. The Property is about 12 km by
road from Xihe, which has a population of approximately 390,000 with excellent
accommodation and facilities. Sufficient space exists within the Property
boundaries to accommodate a relatively large operation with all of the
associated process facilities and infrastructure on level ground. 
The Property is located in the eastern part of the West Qinlin fold belt,
part of what has been referred to as the Qinlin Gold Triangle, the second
largest gold region of China. A wide variety of sedimentary-hosted gold
deposits has been identified within the fold belt in the Gansu, Shaanxi and
Sichuan Provinces. 
The area is structurally constrained by major fault systems. Two
predominant fault sets are developed, the first trending east-west and the
second trending north-south. East-west structures are better developed and six
faults or shear zones have been identified in the central portion of the
property. All of these structures have been subject to artisanal mining in the
oxide zone and gold grade is reported higher at the intersection of east-west
and north-south structures. Some of these structures may coalesce in a
westerly direction and/or at depth with the possibility of "bonanza" zones.
All of the mineralized structures appear to be open along strike and at depth.
Additionally, there is potential that a sulphide zone exists at depth; however
this has yet to be evaluated. 
Exploration work has been primarily conducted within a 1.21 sq. km of the
11.38 sq. km. area of Kai Yuan's exploration license. Messrs. Keith
McCandlish, P. Geol. and Messrs. Peter Lacroix, P. Eng. of AMCL have been
commissioned to complete an independent, NI 43-101 compliant geological report
on the Qualifying Property. Pending final recommendations, it is the intent of
the Company to undertake a phased exploration program which includes
integration of Landsat and radar imagery, detailed geological mapping and
surveying, re-sampling and logging of the artisanal works, a surface
geophysical program, diamond drilling, RC drilling, and sampling to provide
sufficient data to estimate the oxide mineral resource and identify the
sulphide resource potential at depth. Trial mining will also be carried out
with the aim to test and optimize the metallurgical flowsheet for the
different mineralized zones in preparation for the pre-feasibility study
stage. 
In addition to the acquired 51% interest in the Property which includes
the Exploration License, Neo Alliance has negotiated the entitlement to
receive a mining license with respect to the Property through a staged-payment
to the vendor, Mr. Wu Quan, summarized as follows: 


    <<
    (Exchange Rate: CAD$1 = RMB 6.722)
    -------------------------------------------------------------------------
                                                                    Canadian
                                                        Renminbi     Dollars
                                                            (RMB)      (CAD$)
    -------------------------------------------------------------------------
    1.  Payment to acquire 51% interest                5,000,000     743,826
    -------------------------------------------------------------------------
    2.  Payment upon satisfying all conditions for
         the mining license application
    -------------------------------------------------------------------------
      1st Instalment                                   1,000,000     148,765
    -------------------------------------------------------------------------
      2nd Instalment                                   1,500,000     223,148
    -------------------------------------------------------------------------
    3.  Payment upon issuance of mining licence        2,500,000     371,913
    -------------------------------------------------------------------------
    Total Payment                                     10,000,000   1,487,653
    -------------------------------------------------------------------------


On June 29, 2005, Neo Alliance, through Kai Yuan, has received the
approval from the Ministry of the Land and Resources ("MOLAR") of the Gansu
Province for the mining area for 4.17 km(2). Neo Alliance plans to commence
trial mining and begin additional exploration work on the Property. A pre-feasibility study for the mining area will follow subject to obtaining
satisfactory results. 
In addition to the payment of RMB 5,000,000 (CAD$743,826) to acquire the
51% interest in the Property, as of June 30 2005, the amount of RMB 1,000,000
(CAD$148,765) has been paid in satisfaction of the 1st Instalment of the
second payment. NTG has agreed to capitalize such amounts in Neo Alliance with
respect to the Property. 
NTG expects to pay the 2nd Instalment of the second payment in the amount
of RMB 1,500,000 (CAD$223,148) within the next two months and will treat it as
a convertible debenture to Neo Alliance ("the Debenture") to be repayable in
one year. The terms of the Debenture will allow for a conversion at the option
of the holder to convert to Heartwood Shares at a price of CAD$0.20 per share
at any time during the term plus interest payable at ten (10%) percent per
annum on the principal balance which may also be converted into Heartwood
Shares at CAD$0.20 per share. The Company is expected to finance the third
payment of RMB 2,500,000 (CAD$371,913) when the Mining License is issued. 
Financial Information 
The consolidated Neo Alliance financial statements and budget is
currently being prepared. Kai Yuan has been audited for the year ended
December 31, 2004 and reviewed for the first quarter ended March 31, 2005. A
separate press release will be disseminated regarding the financial statements
and budget when available. 
Directors and Officers 
In conjunction with the completion of the Proposed Transaction, it is
intended that the current directors and officers of Heartwood,
Robert Chittick, Keith Prosser, Kirit Gohill and Rod Mitton, will resign. All
existing options held by the current directors and officers of Heartwood to
purchase Heartwood Shares will be cancelled concurrent with the closing of the
Proposed Transaction. It is further intended that the current directors will
be replaced by certain directors and officers nominated by Neo Alliance
Strategic. Brief biographies for the proposed nominees are as follows: 
Tommy M. K. Cheng - Proposed Director, CFO and Interim CEO 
Tommy M.K. Cheng has over ten years of extensive corporate finance and
operational experience in the PRC. He founded Neo & Thompson Group Inc., a
private equity investment firm focusing on direct investment opportunities in
China. He was formerly an assistant general manager of New World China Land
Limited (HKEx: 0917), a property developer in China and an assistant to
managing director of New World Development Company Limited (HKEx: 0017), a
diversified conglomerate and a constituent stock of the Hang Seng Index of the
Hong Kong Stock Exchange. During his tenure, he has worked with credit rating
agencies including Moody's and Standard and Poor's to secure investment grade
ratings for the conglomerate's bond issuance and has raised capital thru
various equity offerings totalling over US$2 billion for the conglomerate's
China investments. Mr. Cheng also spearheaded the conglomerate's business
development activities in China and integrated ISO standards to its China
property operations. Mr. Cheng received his Bachelor of Commerce in Accounting
from the University of Alberta in Canada. 
Tom C.K. Tang - Proposed Director 
Tom C.K. Tang, P. Eng. has spent more than 30 years in the mining
industry. He is a member of the Association of Professional Engineers of
Ontario, and a certified professional mining engineer with experience, both in
operations and consulting. His experience covers a wide variety of minerals
including gold, silver, potash, base metals, uranium, tungsten, and asbestos. 
He began his career with the Tungsten Mining Corporation in the Northwest
Territories where he spent five years. He subsequently moved on to work for
Denison Mines and PCS Mining for a total of eight years prior to joining the
Kilborn Saskatoon office. After five years with Kilborn Saskatchewan and three
years with Williams Operation Corporation in Ontario, Mr. Tang rejoined
Kilborn as mine engineer in the Vancouver office. He worked as an independent
consultant prior to joining Neo Alliance as a Director of Mining. Mr. Tang
received his Bachelor of Science in Applied Science (Mining Engineering) from
Queen's University in Canada. 
Mr. Tang's experience with Kilborn includes reserve determination and
large mine design to the feasibility stage. His expertise in resource
modelling, pit configuration, ventilation, material handling, rock mechanics,
mine planning, construction of underground facilities, shaft sinking has been
particularly beneficial to the assignments he has undertaken. 
Mr. Tang was welcomed to the Majiahe gold property as the general manager
of the project. He has spent 10 months supervising the operations of the
project. 
Don Caron - Proposed Director 
Don Caron, a resident of Edmonton, Alberta, is the President, Director,
and Partner of Western America Capital Inc. Western America is a private
equity fund that takes an active interest in the management and growth of
diversified companies. Mr. Caron has extensive experience in operational
management, public company compliance, financing and reorganization and is a
director of several publicly listed companies on the TSX Venture Exchange. He
has successfully advised and participated in several mergers and acquisitions.
Prior to his involvement with Western America Capital Inc., Mr. Caron articled
with an international chartered accounting firm in public practice. 
David Tam - Proposed Director and Secretary 
David Tam is a partner in the law firm Parlee McLaws LLP, Alberta, and
has been a member of the Law Society of Alberta since July 1990. His practices
focus on securities and corporate commercial transactions and he is a director
and corporate secretary of several publicly traded companies listed on the
TSX Venture Exchange. Mr. Tam received his Bachelor of Laws and Bachelor of
Science in Pharmacy degrees from the University of Alberta in Canada. 
Terms and Conditions of the Proposed Transaction 
Western America is a private management and corporate buyout firm
specializing in succession, leverage, management and emerging growth
acquisitions. Western America has formed and managed several CPC's from the
IPO stage through to a listing on the Toronto Stock Exchange. Western America
and its nominees have agreed, subject to necessary approvals, to acquire from
the founding shareholders of Heartwood, Robert Chittick, Keith Prosser,
Kirit Gohill and Rod Mitton, 1,050,000 Heartwood Shares for an aggregate
consideration of CAD$63,000 or CAD$0.06 per share, in connection with the
closing of the Proposed Transaction. This will be considered to be a transfer
within escrow and will be subject to Exchange approval. 
Heartwood has reserved a price of CAD$0.20 per share for the grant of
options to acquire up to 5,400,000 Heartwood Shares (the "Options") in the
event that the Proposed Transaction is completed. The grant of the Options is
subject to regulatory approval and Heartwood is required to file a formal
application with the TSX Venture to maintain this price reservation. 
The Proposed Transaction is an arm's length transaction as the directors
and officers of Heartwood have no ownership or other interest in Neo Alliance
Strategic, Neo Alliance or Western America. As part of the regulatory approval
process, Heartwood anticipates convening an annual and special meeting of
shareholders and mailing a management information circular as soon as
practicable. The Heartwood Shares will remain halted until such time as
permission to resume trading has been obtained from the TSX Venture Exchange.
Heartwood is a reporting issuer in Alberta and British Columbia. 
A general policy of the TSX Venture Exchange requires that a sponsor be
retained to prepare a sponsor report in compliance with TSX Venture Exchange
Policy 2.2. Neo Alliance, in its sole discretion, will be retaining a sponsor
who will be required to submit a sponsor report prepared in accordance with
the Policies of the TSX Venture Exchange. 
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. 
All information contained in this news release with respect to Neo
Alliance Strategic, Western America and Neo Alliance was supplied by Neo
Alliance Strategic, Western America and Neo Alliance, respectively, for
inclusion herein, and with respect to such information, Heartwood and its
board of directors and officers have relied on Neo Alliance Strategic, Western
America and Neo Alliance. 
All information contained in this news release with respect to the
Property and related matters was supplied by Neo Alliance, for inclusion
herein, and with respect to such information, Heartwood and its board of
directors and officers have relied on Neo Alliance. 
The TSX Venture Exchange Inc. has in no way passed upon the merits of the
proposed transaction and has neither approved nor disapproved the contents of
this press release. 


     THE TSX VENTURE EXCHANGE INC. HAS NOT REVIEWED AND DOES NOT ACCEPT
         RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE
    >>


For further information: Heartwood Capital Corporation - Robert Chittick, 
President, Phone: (403) 286-2440, Fax: (403) 286-2887; Western America 
Securities Inc. - Don Caron, Email: dcaron@wacapital.com, Phone: (780) 496-
9171, Fax: (780) 496-9172; Neo Alliance Holdings Limited - Ringo Hui, Email: 
ringohui@neo-alliance.com, Phone: (852) 3118-2311, Fax: (852) 3118-2315

CO: Heartwood Capital Corporation
ST: Alberta
NI: MNA COS
-0- Jul/15/2005 21:24 GMT


 
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