VVC Exploration Corporation ("VVC" or the "Company") (TSX-V:VVC) announces that it has signed a Share Purchase Agreement (“SPA”) with Plateau Helium Corporation (“PHC”) and the shareholders of PHC. PHC is a Wyoming Corporation focused on helium exploration and development, primarily in the western US. The terms of the SPA allow VVC to acquire a 10% minority interest in PHC (the “Minority Interest”) for US$100,000. The SPA gives VVC the right to buy the remaining 90% interest in PHC (the “Majority Interest”) from the shareholders of PHC for twenty-one million shares of VVC (the “VVC Shares”), subject to a voluntary escrow and a number of conditions. The acquisition of the Minority Interest is subject to TSX Venture Exchange (“TSXV”) approval and will close as soon as approval has been obtained. The acquisition of the Majority Interest is subject to completion of due diligence of PHC by VVC and further TSXV approval.
PHC’s initial target project is located in Kansas and currently comprises 69 leases covering 13,760 acres known as the Syracuse Helium Project (the "Project”). The property on which the Project is located (the “Property”) hosts more than 150 potential well sites. Historically, the acreage was explored by 5 wells, all of which either produced or tested natural gas containing helium. Initial work plan in the Project Involves reworking/re-entering and returning the 5 existing wells to production. Produced helium and natural gas will be processed and marketed via an existing pipeline system and processing plant that services the area. PHC owns a 100% working interest in the Property, subject to numerous royalties referred to below. PHC will be entitled to approximately 52.6% of the net proceeds from the first 10 wells on the Property and approximately 66.69% of the net proceeds from all remaining wells from the Project. With the existing funding available to PHC through the limited partnership financing (see below) and forward sales of helium, it is anticipated that further development will be funded without additional capital in the near term.
The Project is subject to a 17% royalty held by three parties (the “17% Overriding Royalty”). PHC completed a limited partnership financing to acquire the Project and commence the rework/re-entry of the 5 existing wells. These limited partners are entitled to a royalty of 21% of the net revenue from the first 10 wells after payment of the 17% Overriding Royalty and deduction of the costs of production (the “LP Interest”). The Project and all helium projects acquired by PHC are also subject to a 15% royalty held by a company controlled by the shareholders of PHC (the “15% Royalty”) as well as a 1% royalty held by a third-party (the “1% Royalty”). The 15% Royalty and the 1% Royalty are payable on the net proceeds received by PHC after deduction of all costs of production and payment of all pre-existing royalties.
One VVC insider holds 9.5% of the LP Interest as a result of investing US$100,000. Another insider of VVC holds a 16.67% interest in the 15% Royalty. The transaction was unanimously approved by the disinterested directors of VVC. The transaction is not a related party transaction as defined in Multilateral Instrument 61 – 101 – Protection of Minority Security Holders in Special Transactions.
Following the closing of the purchase of the Minority Interest, VVC will have 45 business days to complete its due diligence and elect to acquire the Majority Interest. Should VVC proceed with the acquisition of the Majority Interest, on closing, the VVC Shares, the Majority Interest and a transfer of the Syracuse Helium Project will be held in escrow. The VVC Shares will be released from escrow in three tranches of 7 million shares each upon completion of three predetermined benchmarks.
