December 29, 2011
For Immediate Release
CLARIFICATION REGARDING LOAN AND WRITE-OFF TO RELATED PARTY,
ONTARIOCO
Toronto, Ontario
– Valencia Ventures Inc. (TSXV: VVI) (“Valencia” or the “Company”) isissuing this
release to clarify the terms and write-off of its loan in the principal amount of$700,000
(“Loan”) to a private Ontario company (“OntarioCo”) at the request of the TSX
Venture Exchange (the “TSXV”).
Further to its news releases dated June 23, 2010, March 4, 2011, and June 20, 2011,
the Company wishes to clarify that OntarioCo is a related party to the Company given
that the spouse of Mr. Stan Bharti, Chairman and Director of the Company, is an Insider
given her shareholdings of OntarioCo. Moreover, Mr. Bharti’s adult son has a further
material interest in OntarioCo as he is OntarioCo’s sole director and officer, and a
shareholder. The adult son was also the personal guarantor of the Loan.
The Company’s press release of June 20, 2011 announced OntarioCo had repaid
$127,000 on the principal of the Loan, resulting in an outstanding principal balance of
$573,000. To clarify the $127,000 payment was paid to the Company from a third party
as a result of the termination of the assumption agreements press released on
March 4, 2011. No interest on the loan has been paid to date.
On June 2, 2011 the Company entered into an agreement with OntarioCo to write-off
the outstanding balance on the Loan in return for 500,000 common shares of South
American RareEarth Corp. (“SAREC”), a private company. The 500,000 common
shares of SAREC were valued at $100,000, based upon the valuation conducted by the
third-party agents to the private placement completed by SAREC shortly prior to this agreement. As a result, the Company has recorded the remaining principal balance and interest of $526,890 as an impairment
loss. However, the Company has had discussions with the guarantor regarding payment
of the remaining balance of the loan as well as unpaid interest.
The Company failed to ensure the conflict of interest in respect of the Loan was dealt
with appropriately according to TSX Venture Exchange Policy. Written notification of the
existence and extent of Mr. Bharti’s conflict of interest was not provided to disinterested
directors at the time of the Loan. Moreover, the Company did not ensure that the
documents reviewed and considered for the forgiveness of the Loan by the disinterest
directors disclosed the value of the consideration the Company was to receive in return
for writing off the loan. Finally the Company did not issue proper public dissemination
disclosing the conflict of interest. To address these deficiencies the Company has
implemented a Code of Business Conduct and Ethics and a Corporate Disclosure
Policy.
About Valencia
Valencia is a Canadian resource company traded under the symbol VVI on the TSX Venture
Exchange. For additional information on this press release or Valencia’s projects, please visit
Frederic W.R. Leigh