VANCOUVER, British Columbia, Aug. 24, 2018 (GLOBE NEWSWIRE) -- 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 Shares 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.
Financial Hardship Exemption
The Debt Retirement Transaction requires disinterested shareholder approval pursuant to the requirements of the
Toronto Stock Exchange (“TSX”), unless an exemption is obtained, as the Debt Retirement Transaction will involve
the issuance of more than 10 percent of the outstanding shares of the Company to insiders of Red Eagle Mining, namely Orion and
LMM, each of whom currently hold over 10% of the outstanding shares of Red Eagle Mining. Further, in the event that Annibale
acquires in excess of 20% of the Company’s issued and outstanding shares pursuant to the Backstop, TSX policies would deem that to
be a change of control requiring shareholder approval, absent an exemption. The Debt Retirement Transaction is also a related party
transaction within the meaning of Multilateral Instrument 61-101 – Protection of minority Security Holders in Special Transactions
(MI 61-101), such that minority shareholder approval would also be required pursuant to MI 61-101, unless an exemption is
available.
Red Eagle Mining is applying to the TSX for an exemption from the requirement to obtain shareholder approval for
the Debt Retirement Transaction and potential change of control to Annibale, based on the financial hardship exemption in Section
604(e) of the TSX Company Manual, and Red Eagle Mining plans to rely on a similar exemption from the requirements of MI
61-101. Red Eagle Mining is applying for the exemption from the shareholder approval requirement on the basis of financial
hardship given that the immediacy of Red Eagle Mining’s need to address its financial difficulties through the Debt Retirement
Transaction does not afford it sufficient time to hold a meeting of shareholders and on the basis that the Debt Retirement
Transaction is designed to address Red Eagle Mining’s financial difficulties by retiring all of the outstanding indebtedness under
its existing credit facility. Management and the Board of Directors believe that the terms of the Debt Retirement Transaction
are reasonable in the circumstances.
As a consequence of Red Eagle Mining’s reliance on the financial hardship exemption under Section 604(e) of the
TSX Company Manual, Red Eagle Mining expects that the TSX will commence a remedial delisting review, which is normal practice when
a listed issuer seeks to rely on this exemption. Although Red Eagle Mining believes that it will be in compliance with all of
the TSX listing requirements following completion of the Debt Retirement Transaction, no assurance can be provided as to the
outcome of such review and, therefore, Red Eagle Mining’s continued qualification for listing on the TSX.
Closing is expected to occur during October 2018, subject to TSX approval.
About Red Eagle Mining
Red Eagle Mining is a gold producer focused on building shareholder value through acquiring, developing and
operating gold and silver projects in Colombia, a jurisdiction with prolific historic production but until recently limited modern
exploration. Red Eagle Mining owns 100% of the Santa Rosa Gold, Vetas Gold, California Gold and Santa Ana Silver
Projects. The Santa Rosa Gold Project commenced production in January 2018.
Additional Information
Patrick Balit
Vice President Corporate Development
+1 778 372 2558
balit@redeaglemining.com
www.redeaglemining.com
This news release includes forward-looking statements that are subject to risks and uncertainties. All
statements within, other than statements of historical fact, are to be considered forward looking. Although Red Eagle Mining
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 or developments may differ materially from those in forward-looking
statements. Factors that could cause actual results to differ materially from those in forward-looking statements include
market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic,
market or business conditions. There can be no assurances that such statements will prove accurate and, therefore, readers
are advised to rely on their own evaluation of such uncertainties. We do not assume any obligation to update any
forward-looking statements. This news release does not constitute an offer to sell or a solicitation of an offer to sell any
securities in the United States. The securities have not been and will not be registered under the United States Securities
Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws and may not be offered or sold within the United
States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from
such registration is available.
