CANADA GAS TO PARTICIPATE IN TWO BAKKEN OIL PROJECTS ANNOUNCES $300,000 PRIVATE PLACEMENT & SHARES FOR DEBT SETTLEMENT
Vancouver, British Columbia, Canada - May 26, 2009 - Canada Gas Corp. ("Canada Gas" or the "Company") is pleased to announce Letters of Intent ("LOI") to acquire and participate in two Bakken and Nisku/Birdbear Formation oil projects in the province of Saskatchewan. The Company also announces a $300,000 private placement financing and a $272,000 share for debt settlement, all executable at a price of $0.10 per share.
In the first transaction, Canada Gas has signed an LOI acquire 100% of a licensed copy of approximately 450 miles of 2D seismic data in Southwestern Saskatchewan from an individual resident in the province of Alberta (the "Vendor"). The Company will process and interpret this data in search of Bakken Formation light oil prospects, and reserves the right to pursue 100% ownership of any prospective lands within the seismic area. In consideration, Canada Gas will pay the Vendor $25,000 cash and $125,000 in shares of the Company, to be issued at a deemed price of $0.10 per share (aggregate 1,250,000 shares), subject to the approval of the TSX Venture Exchange (the "Exchange"). These shares shall be subject to a four month hold.
In the second transaction, Canada Gas has signed an LOI with Kinetex Multi Component Services Inc., an Alberta based oil and gas service company (collectively "Kinetex") to participate, with Kinetex or one of its affiliate or subsidiary companies, in approximately 84 square miles of 3D seismic survey over prospective Bakken and Nisku/Birdbear Formation targets in Southwestern Saskatchewan. The Company will pay 25% of the agreed upon turnkey cost to earn a 25% interest in the data, receive a licensed copy of the data, and earn the right to participate for a 50% participation interest in any land acquisitions within the 84 square mile seismic area for a period of two years.
Within this 84 square mile area, Kinetex already controls approximately 10 square miles of acreage upon which Kinetex has already shot 2D seismic and identified three Nisku/Birdbear Formation structures. After completing the 3D seismic program, Canada Gas will also have the option to drill an approximately 2000 meter test well targeting these prospective Bakken and Nisku/Birdbear Formation targets. Within this 10 square miles of existing acreage, Canada Gas will pay 90% and an affiliated company will pay 10% of the cost of this well, where, upon drilling to a depth sufficient to penetrate the Nisku/Birdbear Formation, Canada Gas will earn a 75% working interest before payout and a 50% working interest after payout in the drilled lease block. There are four earning lease blocks within these 10 square miles, and upon completion of the test well, Canada Gas will have 60 day rolling options to drill additional earning wells on this acreage on the same terms.
These projects offer year round access and as such the Company looks to commence the 3D seismic program in the 3rd Quarter of 2009 and spud the test well no later than October 1st, 2009. Under the terms of the agreement, it is anticipated Canada Gas will be the Operator of both projects.
Canada Gas will prepare formal agreements for these transactions containing conventional industry terms, including a satisfactory due diligence condition and approval of the Company’s Board of Directors as well as Exchange and other regulatory approvals as required. The transactions are subject to a finders fee of $20,000 payable in shares of the Company at an ascribed price of $0.10 per share (aggregate 200,000 shares), such shares being subject to exchange approval and a four month hold period following the date of issuance.
Canada Gas also announces that it is cancelling the previously announced private placement financing (April 15th, 2009), and instead announces a private placement financing for 3,000,000 units priced at $0.10 per unit for gross proceeds of $300,000. The Vendor has agreed to personally subscribe for a minimum of $150,000 of this private placement, and will arrange for his associates and/or affiliated companies to participate for up to $100,000 at a price of $0.10 per unit. Each unit will consist of one share and one share purchase warrant, each warrant being exercisable into one common share at a price of $0.15 in the first year and $0.26 in the second year. Proceeds of the private placement will be used for working capital purposes and finders fees may be payable on this transaction, subject to Exchange approval.
In addition, the Company announces shares for debt arrangements with a majority of its existing debt holders. Creditors holding payables of $272,000 have agreed to convert their debt into shares of the Company at a conversion price of $0.10 per share (aggregate 2,720,000), subject to Exchange approval. These shares will be subject to a 4 month hold period from the date of closing.
President and CEO Chad McMillan comments that "Management is excited about these developments, as together they strengthen the Company, enhance its existing holdings, and offer new opportunities to shareholders. These projects offer affordable entry, scalable potential, alluring targets and multiple unique leverage characteristics while also positioning the Company to enhance its management team and pursue other opportunities in the near term."
The private placement is subject to exchange and regulatory approval and finders fees may be payable in accordance with TSX Venture Exchange policy.
About Canada Rare Earths
Canada Rare Earths is a growth company focused on the exploration and development of rare earth elements at its 100% owned Goeland Rare Earths Project within the Montviel carbonatite complex, Montviel Township Quebec, immediately adjacent to Geomega's (TSX-V: GMA) recent rare earth discovery. The Goeland property located 215 km north of Val-d'Or, is road accessible and consists of 47 claims totaling approximately 2,600 hectares. Since the acquisition of the Goeland Project, the Company, in a short period of time, has successfully established itself in one of the largest Carbonatite complexes in North America. Worldwide, carbonatite-related deposits are a major host for rare earths elements ("REE"). The world's most advanced and prolific REE deposits in production or development, Bayan Obo (China), Molycorp's Mountain Pass (USA), Lynas's Mount Weld (Aus), and Rare Earth Element Resource's Bear Lodge project, are all hosted by carbonatites.
For more information on Canada Rare Earths, please contact our Head Office.
On Behalf of the Board of Canada Rare Earths Inc.
Chad McMillan
President & CEO
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. All of the above is subject to TSX.V and regulatory acceptance.
FORWARD LOOKING STATEMENTS
Cautionary Note Regarding Forward-Looking Statements: Certain disclosure in this release, including statements regarding the Company's Pre-Development Agreement and the exploration of the Goeland Project, constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities legislation. In making the forward-looking statements in this release, the Company has applied certain factors and assumptions that the Company believes are reasonable, including that the Company is able to obtain any required government or other regulatory approvals and any required financing to complete the Company's obligations pursuant to the Pre-Development Agreement and planned exploration activities, that the Company is able to procure equipment and supplies in sufficient quantities and on a timely basis and that actual results of exploration activities are consistent with management's expectations. However, the forward-looking statements in this release are subject to numerous risks, uncertainties and other factors relating to Canada Rare Earth's operation as a mineral exploration company that may cause future results to differ materially from those expressed or implied in such forward-looking statements. Such uncertainties and risks may include, among others, actual results of the Company's exploration activities being different than those expected by management, uncertainties involved in the interpretation of drilling results and geological tests, delays in obtaining required government or other regulatory approvals or financing, inability to procure equipment and supplies in sufficient quantities and on a timely basis, equipment breakdowns and bad weather. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Readers are cautioned not to place undue reliance on forward-looking statements. Canada Rare Earths does not intend, and expressly disclaims any intention or obligation to, update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by law.
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