Jul 27 2010
AROWAY MINERALS INC. (TSX VENTURE:ARW) (the "Company") is pleased to announce that it has entered into a purchase and sale agreement (the "Purchase Agreement") dated July 20, 2010 with Big Earl Resources Ltd. ("Big Earl"), a private company incorporated in Alberta, pursuant to which Big Earl has agreed to assign to the Company (the "Transaction") its farmin interest to acquire a 50% working interest in certain petroleum and natural gas assets (the "Worsley Property") currently owned by a private oil and gas exploration and production Company ("Privco"). Big Earl and Privco are arm's length parties to the Company.
The Transaction
Pursuant to a farmout agreement (the "Farmout Agreement") dated July 2, 2010 between Big Earl, as the Farmee, and Privco as the Farmor, Big Earl has agreed to fund 75% of the costs to drill, case, complete, equip and pipeline interconnect (the "Exploration Program Costs"), in respect of Privco's well program on its Worsley Property, to earn a 50% working interest in the Worsley Property. Big Earl assigned to the Company its entire interest as Farmee under the Farmout Agreement and in consideration, the Company granted to Big Earl a gross overriding royalty of 6% pursuant to terms of a gross overriding royalty agreement dated July 20, 2010 between the Company and Big Earl.
Pursuant to the terms of the Farmout Agreement and as the assigned Farmee under that agreement, the Company expects to contribute an aggregate of $4,000,000 to satisfy its requirement to fund 75% of the Exploration Program Costs. The planned exploration initially consists of a four-well drill program (the "Well Program"). Following the rig release of the first well, the Company has the option to either drill all four wells or drill three wells and complete a $1,000,000 3D seismic program to identify additional prospects.
The Worsley Property is located in the Worsley area in the Peace River Arch region in northwestern Alberta. The Worsley Property is subject to the Alberta Crown royalties and is expected to be eligible to capture the benefit of the Alberta Government's crown royalty modifications announced in May 2010.
The Company proposes to finance the Exploration Program Costs and other costs related to the Transaction by conducting a concurrent brokered private placement offering to raise gross proceeds of up to $5,000,000 from the sale of flow-through units and non-flow-through units, as further described below.
Private Placement Financings
The Company has engaged Byron Securities Ltd. ("Byron Securities" or the "Agent") to act as the lead agent to sell, on a commercially reasonable best efforts basis, up to 20,000,000 "flow-through units" (the "FT Units") at a price (the "FT Unit Offering Price") of $0.20 per FT Unit (the "FT Unit Offering") for gross proceeds of up to $4,000,000. Each FT Unit will consist of one common share in the capital of the Company which will be designated as a flow through share (a "FT Share") for the purposes of the Income Tax Act (Canada) and one-half of one common share purchase warrant (each, a "FT Unit Warrant"). Each whole FT Unit Warrant will entitle the holder thereof to purchase, for a period of 12 months from the date of issuance, one non flow-through common share in the capital of the Company a price of $0.30 per share.
Concurrent with the FT Unit Offering, the Company has engaged Byron Securities to act as the lead agent to sell, on a commercially reasonable best efforts basis, up to 6,250,000 non flow-through units (the "Units") at a price of $0.16 per Unit (the "Unit Offering Price") for gross proceeds of up to $1,000,000 (the "Unit Offering" and together with the FT Unit Offering, the "Offerings"). Each Unit will consist of one common share in the capital of the Company (each a "Share") and one-half of one common share purchase warrant (each, a "Warrant"). Each whole Warrant will entitle the holder thereof to purchase, for a period of 12 months from the date of issuance, one common share in the capital of the Company a price of $0.22 per share.
As consideration for the services of the Agent in connection with the Offerings, the Company will pay to the Agent a cash commission of 8% of the gross proceeds of the Offerings (the "Agent's Fee"). In addition, the Agent will be issued on the closing date of the Offerings, non-transferable agent's compensation warrants (the "Agent's Compensation Warrants"). Each Agent's Compensation Warrant entitles the Agent to purchase, for a period of 12 months from the date of issuance, that number of common shares in the capital of the Company, at the respective FT Unit Offering Price and Unit Offering Price, as is equal in number to 8% of the number of FT Units issued under the FT Unit Offering and Units issued under the Unit Offering, respectively.
The Offerings, together with the payment of the Agent's Fee and the issuance of the Agent's Compensation Warrants, are subject to the acceptance of the Exchange. The proceeds of the Offerings will be used by the Company to fund the Exploration Program Costs, costs and expenses relating to the Transaction, and for general working capital.
The Board of directors will be expanded prior to the closing of the financing to include additional independent directors. The Company will disseminate such information in a subsequent press release once the Company has finalized its arrangements.