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Morro Bay Resources Announces Closing of Qualifying Transaction and Private Placement


Morro Bay Resources Announces Closing of Qualifying Transaction and Private Placement

Calgary, Alberta CANADA, January 22, 2014 /FSC/ – Morro Bay Resources Ltd. (MRW.P – TSX Venture), a capital pool company (“Morro Bay”), is pleased to announce that further to its news release of January 17, 2014 it has completed its previously announced qualifying transaction whereby it has acquired from Sierra Madre Developments Inc. (TSXV: SMG) (“Sierra Madre”) an option to earn up to a 65% interest in mining concessions in Mexico comprising the Penoles Project owned by Riverside Resources Inc. (TSXV: RRI) and a drill rig that has been used on the Penoles Project (the “Transaction”). A more detailed description of the Transaction is contained in Morro Bay’s Management Information Circular dated December 18, 2013 (the “Information Circular”) which has been filed on SEDAR. Morro Bay is also pleased to announce that in connection with the Transaction it completed a brokered private placement of common shares (“Common Shares”) for gross proceeds of $633,000, as described further below (the “Private Placement”).

The election of Carl von Einsiedel, Garth Kirkham and Elmer Stewart as directors of Morro Bay, as further described in Morro Bay’s press release dated January 17, 2014, is now effective. As previously announced, Morro Bay changed its name from “Morro Bay Capital Ltd.” to “Morro Bay Resources Ltd.” on January 15, 2014.

Qualifying Transaction

Upon receipt of final acceptance from the TSX Venture Exchange (the “Exchange”), the Transaction will constitute Morro Bay’s “Qualifying Transaction” (as that term is defined in Policy 2.4 – Capital Pool Companies of the Exchange). Morro Bay’s Common Shares will resume trading on the Exchange under ticker symbol MRB after the Exchange issues its final exchange bulletin confirming completion of the Transaction. Trading of the Common Shares on the Exchange is expected to resume at market open on or about January 27, 2014.

As consideration for the Transaction, Morro Bay issued 16,000,000 Common Shares at a deemed price of $0.10 and 8,000,000 common share purchase warrants, each exercisable into one Common Share at a price of $0.15 until June 15, 2014 and thereafter at a price of $0.25 until January 22, 2015 (the “Warrants”). Sierra Madre has agreed that as soon as possible after closing of the Transaction, it intends subject to Exchange acceptance, to distribute all of the 16,000,000 Common Shares and 8,000,000 Warrants to its shareholders as a dividend in kind distribution (the “Dividend in Kind”).

All of the Common Shares and Warrants distributed under the Dividend in Kind will be subject to a four month and one day hold period by Sierra Madre shareholders expiring on May 23, 2014. As more particularly described in the Information Circular, subject to any change in the share ownership of the parties, prior to the record date for the Dividend in Kind, approximately 3,970,000 (25%) of the 16,000,000 Morro Bay Common Shares to be issued to Sierra Madre will be held in escrow until December 31, 2014. Furthermore, all of the directors and officers of Morro Bay who receive Common Shares under the Dividend in Kind distribution will also have their Common Shares held in escrow under Exchange Form 5D Tier 2 Value Security Escrow Agreements (“Exchange Escrow Agreement”) which will result in some of their Common Shares being released from escrow in tranches for a period 36 months following the date of the final Exchange bulletin. There will be approximately 1,300,000 Common Shares held in escrow under the Exchange Escrow Agreement following Closing.

Pending completion of the Dividend in Kind, Sierra Madre has provided an undertaking to hold the Common Shares and Warrants it receives as if they are subject to an Exchange Escrow Agreement and to enter into an Exchange Escrow Agreement and deposit such Common Shares and Warrants into escrow if the Dividend in Kind is not completed within 45 days of completion of closing of the Transaction.

Private Placement

The Corporation raised gross proceeds of $633,000 through the Private Placement of 6,330,000 Common Shares at a price of $0.10 per Common Share. All of the Common Shares issued under the Private Placement are subject to a four month and one day hold period expiring on May 23, 2014.

Richardson GMP Limited (the “Agent”) acted as agent for the Private Placement pursuant to an agency agreement between the Corporation and the Agent dated effective December 12, 2013 (the “Agency Agreement”). Pursuant to the Agency Agreement, Morro Bay paid the Agent certain corporate finance fees and a commission of 10% of the gross proceeds raised under the Private Placement. As additional compensation, Morro Bay issued the Agent warrants (“Agent Warrants”) to purchase 633,000 Common Shares. Each Agent Warrant is exercisable at a price of $0.10 per Common Share until January 22, 2016.

Four directors of Morro Bay subscribed for 510,000 Common Shares under the Private Placement representing an aggregate amount of $51,000. The issuance of Common Shares to directors of Morro Bay pursuant to the Private Placement is a “related party transaction” as defined in Multilateral Instrument 61-101 – Protection of Minority Security holders in Special Transactions, as adopted by TSXV Policy 5.9 (“MI 61-101″). The Private Placement is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as neither the fair market value of the Common Shares being issued to such directors or the consideration paid by such directors exceeded 25% of Morro Bay’s market capitalization.

Option Grants

Morro Bay also announces the grant of an aggregate of 2,900,000 stock options (“Options”) pursuant to its stock option plan of which 2,200,000 were granted to directors and officers and 700,000 were granted to employees and consultants. All of the Options granted have an exercise price of $0.10 per Common Share, expire on January 22, 2018 and vest as to one-third at the end of each of the three anniversary dates following the date of grant and subject to the terms of Morro Bay’s stock option plan.

Further Information

For further information please contact:

Morro Bay Resources Ltd.

John Zang

President and Chief Executive Officer

403 680 9264

The Exchange has in no way passed on the merits of the Transaction and has neither approved nor disapproved the contents of this press release.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This press release contains “forward-looking information” within the meaning of Canadian securities legislation. Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate and similar expressions, or are those, which, by their nature, refer to future events. Such forward-looking information includes, without limitation, approval from the TSX Venture Exchange of the Transaction, the period for which the Common Shares will remain halted and the timing of the Dividend in Kind. Morro Bay cautions investors that any forward-looking information provided by Morro Bay is not a guarantee of future results or performance, and that actual results may differ materially as a result of various factors, including, but not limited to: the state of the financial markets for Morro Bay’s equity securities; the state of the market for gold or other minerals that may be produced generally by Morro Bay; recent market volatility; Morro Bay’s ability to raise the necessary capital to be fully able to implement its business strategies; and other risks and factors that Morro Bay is unaware of at this time. The reader is referred to the Information Circular and Morro Bay’s most recent Management’s Discussion and Analysis for a more complete discussion of such risk factors and their potential effects, copies of which may be accessed on SEDAR at

The forward-looking information contained in this news release is as of the date hereof and Morro Bay does not undertake any obligation to update publicly or to revise any of the included forward looking statements contained herein, except as required by applicable law. The forward-looking statements contained herein are expressly qualified by this cautionary statement.

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any state in the United States in which such offer, solicitation or sale would be unlawful. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

To view this press release as a PDF, please click on the following link:

Source: Morro Bay Capital Ltd. (TSX-V: MRW.P)

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