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JOINT NEWS
RELEASE
RED HILL AND
PROPHECY PROVIDE UPDATE ON CAPITALIZATION
Vancouver,
British Columbia, April 7, 2010: Red Hill Energy Inc. ("Red
Hill") (TSX-V:RH)
and Prophecy Resource Corp. ("Prophecy")(TSX-V:PCY, OTC: PCYRF,
Frankfurt: 3P1) are pleased to announce that on March 31, 2010, each of
Red Hill and Prophecy completed non brokered financings raising
$3,114,000 and $3,344,506 in gross proceeds, respectively, for aggregate
additional proceeds of $6,458,506. As previously disclosed, (see joint
Red Hill / Prophecy news, January 21, 2010), Red Hill and Prophecy have
entered into an Arrangement Agreement for the purposes of combining the
businesses of Red Hill and Prophecy. The merged entity ("New
Prophecy") will have working capital of approximately $7.65 million.
A
total of 6,080,919 Units were placed by Prophecy at a price of $0.55 per
Unit (each a "Prophecy Unit") generating gross proceeds of $3,344,506.
Each Prophecy Unit consisted of one Prophecy common share (a
"Prophecy Share") and one half of one share purchase warrant (a
"Prophecy Placement Warrant"). Each whole Prophecy Placement
Warrant entitles the holder to acquire one additional Prophecy Share at a
price of $0.80 until March 31, 2012. In the event that the closing price
of Prophecy's common shares on the TSX Venture Exchange is at least $1.10
for twenty consecutive trading days at any time following four months
from the date of closing, Prophecy may reduce the remaining exercise
period of the Prophecy Placement Warrants to not less than 30 days from
the date of providing notice of such reduced exercise p eriod.
A
total of 5,463,158 Units were placed by Red Hill at a price of $0.57 per
Unit (each a "Red Hill Unit") generating gross proceeds of
$3,114,000. Each Red Hill Unit consisted of one Red Hill common share (a
"Red Hill Share") and one full share purchase warrant (a
"Red Hill Placement Warrant"). Each Red Hill Placement Warrant
entitles the holder to acquire one additional Red Hill Share at a price
of $0.71 until March 31, 2012. In the event that the closing price of Red
Hill's common shares on the TSX Venture Exchange is at least $1.06 for
ten consecutive trading days at any time following four months from the
date of closing, Red Hill may reduce the remaining exercise period of the
Red Hill Placement Warrants to not less than 30 days from the date of
providing notice of such reduced exercise period.
All
of the securities issued under the aforementioned Red Hill and Prophecy
private placements are subject to a hold period expiring on August 1,
2010.
Pursuant to
the plan of arrangement set forth in the Arrangement Agreement, Red Hill
will create a new class of common shares called "Class A Shares". As the first step in the
Arrangement, Red Hill intends to transfer $1,000,000 and its non-coal
assets, principally the Red Lithium Property near Clayton Valley, Nevada
and the Thor Rare Earth Property in Nevada and the Banbury Property in British
Columbia, to Elissa Resources Ltd., a British
Columbia company ("Elissa") in
exchange for Elissa common shares. As a result
of the recently completed private placements in each of Red Hill and
Prophecy, and the expiry of 3,750,000 warrants of Red Hill on April 3,
2010, it is anticipated that approximately 60,557,189 Class A shares will
be iss ued to the
shareholders of Red Hill and approximately 36,115,785 Class A shares will
be issued to the shareholders of Prophecy. Each one Red Hill share will
be exchanged for 0.92 of a Class A Share and 0.25 of a
Elissa common shares, and each Prophecy share
will be exchanged for one Class A Share. In addition, each Red Hill stock
option and warrant, including the Red Hill Placement Warrants, will
entitle the holder to receive 0.92 Class A Share and each Prophecy stock
option or warrant, including the Placement Warrants, will be exchanged
for an option or warrant to acquire one Class A Share. Following
completion of the Arrangement, Class A shares issued Red Hill shareholders
will represent 63% of the merged entity's issued and outstanding Class A
shares and Class A Shares issued to Prophecy shareholders will represent
37% of the merged entity's issued and outstanding Class A shares.
As a result
of the Arrangement, the Prophecy securityholders
will be Class A securityholders of Red Hill,
Prophecy will be amalgamated with a wholly-owned subsidiary of Red Hill,
and Prophecy will apply for voluntary delisting of its common shares from
the TSX Venture Exchange. Following the Arrangement, Red Hill has agreed
to change its name to "Prophecy Resource Corp." and will have a
total of approximately 96,672,974 shares issued and outstanding, as well
as options and warrants entitling holders to purchase approximately 30,088,865
Red Hill Class A Shares, comprising 6,996,600 options at exercise prices
ranging from $0.25 to $1.03 and having expiry dates ranging from February
14, 2012 to March 24, 2015 and 23,092,265 warrants at exercise prices
ranging from $0.10 to $1.36 and having expiry dates ranging from May 31,
2010 to March 31, 2012.
Elissa
will have 16,455,758 common shares issued and outstanding, all of which
will be held by former Red Hill shareholders and no options or warrants
outstanding.
Over the 12
month period following the merger, New Prophecy will apply its attention
and financial resources to the following:
�
Continue with pre-operations activities to
expedite production from the Ulaan Ovoo Coal Project, Mongolia (see Red Hill news March
18, 2010)
�
Upgrade the resource categories and conduct
expansion drilling on the Chandgana Coal
Projects, Mongolia (see Red Hill news April 1, 2010)
�
Continue with bulk tonnage metallurgical testing
at the Lynn Lake Nickel Sulphide Project, Manitoba in addition to deep IP
surveys in preparation of expansion drill programs (see Prophecy news
March 24, 2010):
New
Prophecy also has plans to conduct advanced exploration activities on the
Titan vanadium property located in Ontario and the Okeover
copper-molybedenum property located in British
Columbia in 2010.
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