Red Eagle Mining Corp RDEMF

News out

[Chucklee]

Red Eagle Mining Corporation (TSX: R, BVL: R, OTCQX: RDEMF) announces a comprehensive restructuring. As of June 30, 2018, Red Eagle Mining had a negative working capital of approximately US $100 million, had been accruing interest on its US $60 million credit facility with Orion Mine Finance ("Orion") and Liberty Metals & Mining Holdings, LLC ("LMM") at the default rate of LIBOR + 14% and been operating under a forbearance agreement since April 2018. The situation was unsustainable, so a comprehensive restructuring is being implemented including a private placement, retirement of the credit facility, writing off all accrued interest, writing off supplier account payables, appointing a new independent Chairman and a share consolidation. Write offs of the credit facility, accrued interest and supplier account payables total US $44 million and capitalization of the credit facility and supplier account payables total US $18 million. Upon closing there will be approximately 81 million common shares outstanding, no debt or accrued interest, positive working capital and near term cash flow positive operations. Going forward, Red Eagle Mining will be on sound financial footing with a solid balance sheet, all stakeholders aligned and sufficient working capital to support the mining operations to succeed. Private Placement Red Eagle Mining announces a private placement ("Private Placement") for gross proceeds of approximately C $50 million (US $38 million), consisting of approximately 250 million common shares ("Share") at a price of C $0.20 per Share. Annibale SAC ("Annibale") currently owns approximately 9.5% of Red Eagle Mining and has agreed to backstop the Private Placement ("Backstop"). Shareholders of Red Eagle Mining that meet available exemptions will be able to participate in the Private Placement. Proceeds will be used for repayment of long term debt and working capital at the Santa Rosa Gold Project. The Shares are subject to a four month hold period from the date of issuance. Credit Agreement Red Eagle Mining has agreed to retire its US $60 million credit facility with Orion and LMM. Red Eagle Mining will settle the credit facility, including all accrued interest, for US $28 million cash and approximately US $15 million in equity (99 million Shares) on the same terms as the Private Placement ("Debt Retirement Transaction"). Mining Contractor Stracon, mining contractor for the San Ramon Gold Mine, has agreed to convert approximately US $3 million in accounts receivable into equity (20 million Shares) on the same terms as the Private Placement. Board of Directors Fernando Palazuelo, Founder and Chief Executive Officer of Annibale, will replace Jeffrey Mason on Red Eagle Mining's Board of Directors upon closing of the Private Placement. Mr. Palazuelo will also assume the role of independent Chairman. The Board of Directors thanks Mr. Mason for his service over the last eight years, since inception, and wishes him all the best in his future endeavours. Share Consolidation After closing of the above-mentioned transactions, Red Eagle Mining's Shares will be consolidated (the "Consolidation") on the basis of one post-consolidation Share for every ten pre-consolidation Shares. The approximately 812 million Shares outstanding upon closing will be reduced to approximately 81 million Shares. No fractional Shares will be issued. Any fractions of a share will be rounded down to the nearest number of Shares that is a multiple of ten. The exercise or conversion price and the number of Shares issuable under any of Red Eagle Mining's outstanding stock options, restricted share units and warrants will be proportionately adjusted upon Consolidation. A letter of transmittal will be sent to registered shareholders providing instructions to surrender the certificates evidencing their Shares for replacement certificates. Until surrendered, each certificate representing Shares prior to the Consolidation will be deemed for all purposes to represent the number of Sha res to which the holder thereof is entitled as a result of the Consolidation. The Shares and warrants will continue to be traded on the TSX under the symbols "R" and "R.WT" on a post-consolidation basis.