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.
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.
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.
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: firstname.lastname@example.org, Phone: (780) 496- 9171, Fax: (780) 496-9172; Neo Alliance Holdings Limited - Ringo Hui, Email: email@example.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