Press Release
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$1.25M USD CONVERTIBLE NOTE FINANCING
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FEASIBILITY STUDY ON BILBAO PROJECT STARTS
Toronto, April 14, 2009, Xtierra
Inc. (TSXV ? XAG) (?Xtierra? or the ?Company?),
Xtierra and the Pacific Road Resources Funds (?PRRF?) are pleased to announce that they have reached
agreement, subject to regulatory and other approvals, for the sale to PRRF of a
USD$1.25 million convertible note financing arranged through Xtierra?s
wholly-owned subsidiary, Orca Minerals Limited.
Xtierra is also pleased to announce that it has
initiated the first phase of an independent Feasibility Study on its
wholly-owned Bilbao Silver-Zinc-Lead-Copper Project in Zacatecas,
Mexico. Proceeds
from this financing will be used to fund this next phase of the Feasibility
Study.
Financing
PRRF will subscribe for an aggregate principal amount
of USD$1.25 million in non-interest bearing notes (the ?Notes?) issued by Orca
Minerals Limited (?Orca Minerals?), an Ontario
corporation wholly-owned by the Company. The Notes have a term of five
years and are convertible, at the holders? option, into a number of common
shares of Orca Minerals which will equal ten percent (10%) of the issued shares
of Orca Minerals. PRRF has a further right to exchange their holdings in Orca
Minerals into either: (i) a number of shares of Bilbao Resources, S.A. de C.V.
(?Bilbao Resources?), an indirectly-owned Mexican subsidiary of Orca Minerals
which holds the Company?s interest in the Bilbao project, which will equal ten
percent (10%) of the issued shares of Bilbao Resources or (ii) a number of
common shares of Xtierra equal to the value of PRRF?s equity interest in Orca
Minerals at the time of exchange divided by the volume-weighted average trading
price of Xtierra?s shares during a 30-day period prior to such exchange. If
exchanged into shares of Bilbao Resources, the Bilbao Resources shares are
further exchangeable into a number of common shares of Xtierra equal to the
value of PRRF?s equity interest in Bilbao Resources at the time of exchange
divided by the volume-weighted average trading price of Xtierra?s shares during
a 30-day period prior to such exchange. PRRF also has a put right, exercisable
at its option at any time prior to maturity to require Xtierra to purchase the
Notes for a number of common shares equal to the principal amount of the Notes
divided by the volume weighted average trading price of Xtierra?s common shares
during the 30 day period prior to the exercise of such right. The Notes
provide for a minimum conversion price of $0.10 per Xtierra common share.
PRRF purchased the securities for investment purposes
and may or may not purchase or sell securities of Xtierra or its subsidiaries
in the future on the open market or in private transactions, depending on
market conditions and other factors material to PRRF?s investment decisions.
Related Party Transaction
PRRF is a related party to Xtierra and accordingly,
this financing is subject to the rules contained in Multilateral Instrument
61-101 of the Canadian Securities Administrators (?MI 61-101?) and Policy 5.9
of the TSX Venture Exchange. PRRF currently holds 11,240,000 common
shares (or approximately 22.5% of the issued shares of Xtierra) and warrants to
purchase a further 5,620,000 common share for $0.75 per share until September
3, 2009 and thereafter for $1.00 per share until September 3, 2010.
As the number of shares of Xtierra issuable to PRRF is
contingent, in part, upon future values and share prices, the number of such
shares which PRRF may acquire should it exercise its exchange rights, cannot be
determined at this time. However, in respect of the Notes, due to the
minimum exchange price noted above, PRRF will not likely acquire more than
15,537,500 additional shares (based on a conversion rate of $1.243 for
USD$1.00, being the Bank of Canada?s noon-day rate on April 6, 2009) increasing
its potential holdings in Xtierra to 26,777,500 shares or approximately 40.9%
of the issued and outstanding shares. Minco plc (?Minco?) of London,
England currently
holds 30,000,003 shares of Xtierra amounting to 60.2% of the common shares of
Xtierra. If PRRF were to increase its holdings to 26,777,500 as noted
above, Minco?s holdings would be reduced to approximately 45.9%. Minco
concurs with and supports the issue of the Notes to PRRF.
The issue of the Notes to PRRF was considered and
approved by the Board of Directors of Xtierra, two of the five members of which
are neither officers nor employees of Xtierra. Mr. Lee Graber, a director
of Xtierra and an Investment Director with Pacific Road Capital Management Pty.
Limited, which acts as investment manager or advisor to PRRF declared an interest
in the transaction and neither voted on nor participated in the Board?s
deliberations concerning the issue of the Notes.
Xtierra does not intend to complete a formal valuation
in accordance with section 5.4 of MI 61-101 based upon Xtierra being a TSX-V
listed company and the support of the transaction by Minco plc. Xtierra
consequently relies on the exemptions contained in subsections 5.5(b) and (c)
of MI 61-101. Minority shareholder approval of the issue of the Notes
will not be sought based upon the exemption contained in subsection 5.7(c)
which is applicable in these circumstances.
Feasibility Study
The first phase of the Feasibility Study will comprise
metallurgical testwork and process optimization of the oxide, mixed
oxide/sulphide and sulphide ores. Environmental baseline studies, hydrological
studies, geotechnical analyses (rock mechanics) for both open pit and
underground design purposes and mine design for both open pit and underground
extraction methods will also be completed. The second phase of the Feasibility
Study, to be completed by the end of the first quarter 2010, would include all
the required drilling, any pilot plant testwork if deemed required, all permits
and engineering design.
Comment
by CEO
Commenting
on the financing, Xtierra?s President & CEO, Terence McKillen, said, ?We
are very pleased that the Pacific Road Resources Funds share our optimism for
the Bilbao project and have agreed to provide additional financing to support
the proposed Feasibility Study at a time when capital and equity markets are
not particularly receptive to junior resource developers. We anticipate
completion of the first phase of the feasibility study in the Fourth Quarter of
2009.?
About Xtierra Inc.
Xtierra Inc. is a Toronto
based exploration and development company listed on the TSX Venture Exchange.
Xtierra?s shares trade under the symbol ?XAG?. Xtierra has 49,862,003 shares
issued and outstanding.
Xtierra?s objective is to become a mid-tier producer of silver and
base metals through the development of its Bilbao
and Laguna projects, both located in the Central Mexican Silver Belt in the
State of Zacatecas,
as well as through organic growth and M & A opportunities.
About Pacific
Road Resources Funds
PRRF is a private equity fund
investing in the global mining industry. PRRF provides expansion and buyout
capital for mining projects, mining-related infrastructure and mining services
businesses located throughout resource-rich regions of the world. PRRF is
managed or advised by Pacific Road Capital Management Pty. Limited (?PRCM?).
The PRCM team, located in Sydney, Australia and San Francisco, USA, is
comprised of experienced investment and mining professionals. For further
information about PRRF and PRCM, please go to their website at www.pacroad.com.au.
ON BEHALF OF THE BOARD
OF DIRECTORS OF XTIERRA INC.
Terence N. McKillen
President and CEO
Cautionary Notes:
This press release may
contain ?forward-looking information? within the meaning of applicable Canadian
securities legislation. The TSX Venture Exchange has not reviewed and does not
accept responsibility for the adequacy or accuracy of the content of this
release.
For further information visit www.xtierra.ca or contact:
Terence N. McKillen,
President & Chief
Executive
+1 (416) 362-8243
Tim Gallagher,
Director
+1 (416) 925-0090
Alejandro Alaniz,
Director Finance & Administration (Mexico)
+ 52 (492) 925-0804
Brett
Whitelaw
(778) 836-5891