CASTILLIAN RESOURCES’ PROPOSED MERGER WITH RIDGEMONT


TORONTO, April 11, 2013 – Castillian Resources Corp. (“Castillian”) (TSXV – CT; OTCQX – CTIIF) and Ridgemont Iron Ore Corp. (“Ridgemont”) (TSXV – RDG; OTCQX – RIOOF) have entered into a binding letter of intent (the “Letter of Intent”) pursuant to which Castillian and Ridgemont will enter into a plan of arrangement whereby Castillian will acquire all of the outstanding shares of Ridgemont and Ridgemont will become a wholly owned subsidiary of Castillian (the “Transaction”).

Under the terms of the Transaction, shareholders of Ridgemont will receive 0.574 of a Castillian common share for each common share of Ridgemont held. The board of directors of each company has unanimously approved the Transaction. Upon completion of the Transaction, existing Castillian and Ridgemont shareholders will own approximately 57.8% and 42.2% of the combined company, respectively, on a basic shares outstanding basis (assuming the issuance by Castillian of (a) 8,000,000 common shares to Ryan Gold Corp. to repurchase Ryan Gold’s 10% interest in the Hope Brook gold project (see news release dated February 6, 2013) and (b) the Severance Shares (as defined below)).

Based on the 20-day volume weighted average price (“VWAP”) of Castillian’s common shares on the TSX Venture Exchange (the “TSXV”) of $0.0590 and the 20-day VWAP of Ridgemont’s common shares on the TSXV of $0.0209, the Transaction represents a premium of approximately 62% to Ridgemont. On April 10, 2013, the closing prices of the Castillian common shares and the Ridgemont common shares were $0.05 and $0.025, respectively.

Highlights of the Transaction:

  •   The merger will result in a more strongly funded advanced stage gold exploration company focused on Castillian’s Hope Brook project in Newfoundland;
  •   Flow through commitments from Ridgemont’s balance sheet will be used to fund 5,100 meters of additional diamond drilling, designed to expand the existing mineral resource and conduct technical and engineering work required for a preliminary economic assessment (PEA) at the Hope Brook project;

 

  •   Based on the results of this work, the merged entity anticipates being in a position to deliver a Hope Brook PEA by early 2014;
  •   Hope Brook has significant indicated and inferred mineral resources in a politically favourable jurisdiction with significant upside potential and access to existing infrastructure; and
  •   The proposed share exchange ratio provides Ridgemont shareholders with a 42.2% ownership stake in an asset with significant potential.

    Management and Directors:

    Following the completion of the Transaction, it is anticipated that Mr. Adrian Bray, P.Geo., will join Castillian’s board of directors and that the current executive management team of Castillian will be unchanged.

    Mr. Brian Penney is a director of both of Castillian and Ridgemont and the President and Chief Executive Officer of Ridgemont and, therefore, Castillian and Ridgemont are non-arm’s length parties with respect to each other under the policies of the TSX Venture Exchange.

    Dr. Bill Pearson, President and Chief Executive Officer of Castillian, states: “This transaction will allow the merged company to continue to advance its Hope Brook Gold project towards a production decision. We have identified areas within and adjacent to the existing mineral resource that have potential to expand the resource and increase the grade. In addition, drilling in late 2012 identified a major near surface target area in the 240 Connector Zone that extends for 1.2 km along strike that has the potential to substantially expand resources. We anticipate being able to continue to advance the technical and engineering work with the aim of completing a PEA by early 2014.”

    Mark Morabito, Chairman of Ridgemont, adds: “This transaction represents an opportunity for Ridgemont shareholders to gain access to an advanced asset with real upside potential. I am happy that we have found another opportunity in Newfoundland and Labrador which I view as a very favourable jurisdiction for mineral resource exploration and development.”

    Transaction Details

    Pursuant to the terms of the Letter of Intent, it is anticipated that the Transaction will be conducted by way of a court-approved plan of arrangement (under the Business Corporations Act (British Columbia)), resulting in Ridgemont becoming a direct or indirect wholly-owned subsidiary of Castillian. Each Ridgemont common share issued and outstanding immediately prior to closing of the Transaction will be exchanged for 0.574 of a Castillian common share.

    All options and warrants of Ridgemont outstanding immediately prior to closing of the Transaction will, following closing and subject to regulatory approval, be exercisable for that number of shares of Castillian using the same exchange ratio applicable to the common shares of

 

Ridgemont under the Transaction, with corresponding adjustment to the exercise prices on the basis of such exchange ratio.

Subject to the approval of the TSXV, and Ridgemont and Castillian entering into a loan agreement satisfactory to each of the parties, Ridgemont will advance to Castillian $250,000 in immediately available funds (the “Loan”). The Loan will accrue interest at the rate of 10% per annum and will mature on the earlier of the completion of the Transaction and the date that is twelve months following the termination of either the Letter of Intent or the Definitive Agreement (as defined below) (the “Maturity Date”). In the event of the termination of the Letter of Intent or the Definitive Agreement, Ridgemont will have the option to convert the Loan and all interest accrued thereon into Castillian Shares at a deemed price of $0.10 per Castillian Share at any time prior to the Maturity Date, and Castillian will have the option to prepay the Loan and all interest accrued thereon in full or in part from time to time at any time prior to the Maturity Date.

Certain officers of Ridgemont are contractually entitled to severance payments that could be triggered by the Transaction. Except for Mr. Mark Morabito, these officers have agreed to accept, in aggregate, $125,000 in lieu of such severance payments, payable in Castillian Shares at a deemed price per Castillian Share of $0.0590 (the “Severance Shares”), subject to the approval of the TSXV. Mr. Mark Morabito has agreed to waive any entitlement to any severance payment.

The Transaction is subject to customary conditions, including:

  •   the parties entering into a definitive agreement (the “Definitive Agreement”) and completing satisfactory due diligence on or before April 30, 2013;
  •   approval by a minimum of 66 2/3% of the votes cast by Ridgemont shareholders at a duly called special shareholders’ meeting;
  •   approval/acceptance of the TSXV of the Transaction, the Loan and the issuance of the Severance Shares; and
  •   Ridgemont having working capital upon the closing of the Transaction of not less than $2,900,000, less expenses incurred by Ridgemont in connection with the Transaction up to a maximum of $100,000.

    The Letter of Intent includes a commitment by each of Castillian and Ridgemont not to solicit alternative transactions to the proposed Transaction. If a party terminates in certain circumstances, the Letter of Intent provides that such party is obligated to pay to the other party a payment in cash of $250,000 on account of costs and expenses in connection with the Transaction. Each party has also been provided with certain other rights, representations and warranties and covenants customary for a transaction of this nature, and each party has the right to match any competing offers made to the other party.

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