November 16, 2017 / Vancouver, BC / NRG Metals Inc. (“NRG” or the “Company”) (TSX-V: NGZ) (OTCQB: NRGMF) (Frankfurt OGPN), is pleased to announce that, further to its news release of October 17, 2017, the Company has completed various agreements to give effect to its strategic alliance with Chengdu Chemphys Chemical Industry Co., Ltd. (“Chemphys”) to advance the exploration and development of the Company’s Hombre Muerto North Lithium Project (“HMN Project”) located in the Salta and Catamarca Province area where most of the lithium production occurs in, Argentina.
Adrian Hobkirk, President and CEO of the Company quoted, “We are very pleased with the investment in NRG by Chemphys and establishing a relationship with a high purity lithium manufacturer in China that supplies its products to the battery and energy markets. With the completion of this private placement, and the financial support of warrant and option holders, the Company is now fully funded to carry out its planned work program on the HMN Project.”
Ms. Alison Dai, of Chemphys is quoted, “We are pleased to have formalized our strategic partnership with NRG and are committed to working with NRG’s team to expedite the development of the HMN Project.”
Private Placement and Shareholder Approval
The Company completed the first tranche of a non-brokered private placement with an affiliate of Chemphys for gross proceeds of CAD$980,000 million. A second tranche of the placement is expected to be completed in coming weeks, which will bring the total amount subscribed by Chemphys to CAD$1.6 million. The Company had previously announced that Chemphys would be subscribing for gross proceeds of CAD$1.4 million, which at that time would have represented approximately 15% of the Company’s outstanding shares. The placement was increased to a total of 16,000,000 units for gross proceeds of CAD$1.6 million. Upon completion of the second tranche of the placement, Chemphys will hold approximately 15% of the shares of the Company that are expected to be outstanding after giving effect to the second tranche and assuming no other shares are issued. The increase in the placement reflects the increase in the outstanding share capital of the Company upon numerous option and warrant exercises since the placement was initially discussed between the parties. Each unit is comprised of one common share and one transferable common share purchase warrant exercisable for a period of three years from the date of issue at an exercise price of CAD$0.20 per share. The securities issued to Chemphys are subject to a four-month hold period as required under applicable securities laws.
The subscriber (the “Placee”) is owned by one of the principal shareholders of Chemphys, and is therefore an affiliate of Chemphys. Pending the approval of the TSX Venture Exchange of a personal information form filed in respect of the principal of the Placee, the Placee will agree not to exercise any warrants if to do so would result in it acquiring more than 10% of the outstanding common shares of the Company, calculated on an undiluted basis. The second tranche of the placement will only be completed if either: (i) the disinterested shareholders of the Company (being shareholders other than the Placee and its affiliates) have approved the issuance to the Placee of common shares underlying the warrants where to do so would result in the Placee holding more than 20% of the issued and outstanding common shares of the Company (calculated on a non-diluted basis), or (ii) the Placee shall have entered into a warrant exercise agreement with the Company restricting the exercise of any warrants by the Placee if to do so would result in the Placee owning or controlling 20% or more of the then issued and outstanding common shares of the Company (calculated on a non-diluted basis). The second tranche of the private placement will consist of 6,200,000 units for gross proceeds of CAD $620,000. A further news release will be issued once the second tranche has been completed.
Concurrently with the completion of the first tranche of the private placement, the Company entered into an offtake agreement with Chemphys covering all lithium products produced from the HMN Project. The offtake provides for the sale of lithium at prices related to market prices.The HMN offtake agreement is subject to the Company (i) establishing the necessary mineral reserves in commercial quantities and quality, (ii) building the necessary mining and processing facilities to extract and process lithium products, and (iii) obtaining sufficient financing on commercially reasonable terms in order to finance the achievement of each of the foregoing (i) and (ii) sufficient to achieve commencement of commercial production. If the Company is unable to satisfy these conditions within three years, the offtake agreement shall automatically terminate, (unless the parties otherwise agree in writing).
Chemphys will have a right of first offer to negotiate in good faith (with no obligation of the Company to accept) the right of Chemphys to acquire a portion of the Company’s entitlement to annual production of lithium products from any other lithium project from which the Company is entitled to acquire or sell lithium products, such right on terms and conditions as the Parties may agree.
Ancillary Rights Agreement
The Company and the Placee also entered into an ancillary rights agreement providing for (i) the right of the Placee to at least one Board seat so long as it owns at least 10% of the Company shares or the offtake agreement is in force, (ii) a right to increase the Placee’s Board representation proportionate to its share ownership, (iii) a right to maintain the Placee’s pro rata share ownership, (iv) a right of the Placee to representation on a Project Advisory Board in respect of the HMN Project, and (v) an obligation of the Placee to undertake a orderly distribution of its securities should it determine to dispose of its shareholdings in the Company.
The Issuer has scheduled an annual general and special meeting on December 22, 2017 at 11 am (Vancouver time) and will be seeking disinterested shareholder approval for the transaction as set out above.
In addition to the Chemphys placement, the Company completed a private placement with two consultants of the Company by the issuance of a total of 2,350,000 units at $0.10 per unit, raising additional gross proceeds of CAD$235,000. Each unit is comprised of one common share and one transferable common share purchase warrant exercisable for a period of two years at an exercise price of CAD$0.20 per share.
Together with the first closing on October 6, 2017 of 4,500,000 units for gross proceeds of CAD$450,000, the Chemphys closing of CAD$1,600,000 and CAD$235,000 from the consultants, the Company will issue a total of 22,850,000 units and raise total gross proceeds of CAD$2,285,000. The proceeds of the private placement will be used for expenditures relating to the HMN Project and for general working capital. The Company did not pay any finder’s fees.
About the Company
NRG Metals Inc. is an exploration stage company evaluating two lithium brine projects, located in Argentina. Phase One exploration drilling is currently underway at the 29,000 hectare Salar Escondido lithium project, Catamarca Province, Argentina. Results are expected in November. In addition, the Company is awaiting exploration permits at the HMNLP, located in Salta Province, Argentina. Additional projects are currently under negotiation.
NRG Metals Inc. currently has 101,429,135 common shares issued and outstanding after giving effect to the first tranche issued to the Placee and the other subscribers referred to above. NRG Metals Inc. trades on the TSX Venture Exchange under symbol NGZ, on the OTCQB Market under symbol NRGMF, and on the Frankfurt Stock Exchange under symbol OGPN.
Chemphys was established in 1998, and has since grown into a high-tech enterprise, both ISO9001 and ISO14001 certified. The company specialises in the production of high purity (99.99%) Lithium Carbonate and battery grade Lithium Hydroxide for the manufacturing of cathode materials and electrolytes of lithium ion batteries. Chemphys was one of the first Chinese suppliers to export high purity Lithium Carbonate and battery grade Lithium Hydroxide to leading cathode materials and lithium hexafluorphosphate manufacturers in Japan and South Korea. Chemphys also produces 99.995% Lithium Carbonate which is used to manufacture single crystal substrates for surface acoustic wave and integrated optic devices. In addition, the company produces high purity Lithium Carbonate and Boric Acid for the production of fusion fluxes, Lithium Borates for XRF analysis, and numerous other specialized materials. Chemphys has a strong research and development capability and works closely with customers to develop new materials. Chemphys product is recognized by all major lithium ion battery materials manufacturers and is an integral part of the electric vehicle supply chain.
On behalf of the board of directors of NRG Metals Inc.,
Adrian F.C. Hobkirk
President and CEO
The TSX Venture Exchange has not reviewed the content of this news release and therefore does not accept responsibility or liability for the adequacy or accuracy of the contents of this news release. This news release contains certain “forward- looking statements” within the meaning of Section 21E of the United States Securities and Exchange Act of 1934, as amended. Except for statements of historical fact relating to the Company, certain information contained herein constitutes forward- looking statements. Forward-looking statements are based upon opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors which could cause actual results to differ materially from those projected in the forward looking statements. The reader is cautioned not to place undue reliance on forward-looking statements. The transaction described in this news release is subject to a variety of conditions and risks which include but are not limited to: regulatory approval, shareholder approval, market conditions, legal due diligence for claim validity, financing, political risk, security risks at the property locations and other risks. As such, the reader is cautioned that there can be no guarantee that this transaction will complete as described in this news release. We seek safe harbour.