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EastCoal Announces Shares for Debt Settlement


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© Marketwire 2012
2012-12-21 02:07:01 -

VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 12/21/12 -- Further to a previous news release of December 3, 2012 of EastCoal Inc. (TSX VENTURE:ECX) (the "Company" or "EastCoal") announcing a CDN$2,000,000 loan (the "Salida Loan") received by the Company from Salida Capital LP ("Salida") (on behalf of a fund managed by Salida (the "Fund")), the Company is pleased to announce that Salida (on behalf of the Fund) has agreed, subject to the approval of the TSX Venture Exchange, to convert the Salida Loan, together with all accrued but unpaid interest thereon, into common shares (the "Settlement Shares") in the capital of the Company at a deemed issue price per common share of CDN$0.194 (the "Shares for Debt Settlement") in accordance with Policy 4.3 of the TSX Venture Exchange. The Shares for Debt Settlement will occur concurrently with, and be conditional upon, the closing of the previously announced Admission (as defined and described below) and Placing (as defined and described below), and the issue price per common share pursuant to the Shares for Debt Settlement will be equal to the issue price of common shares under the Placing.



Pursuant to the Shares for Debt Settlement, the Company proposes to issue up to 10,414,848 Settlement Shares to Salida (on behalf of the Fund) in full settlement of the Salida Loan and all accrued but unpaid interest thereon.


On the basis that Salida is an insider of the Company for the purposes of the policies of the TSX Venture Exchange, its participation in the Shares for Debt Settlement may be considered a "related party transaction" within the meaning of Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101") which is incorporated into Policy 5.9 of the TSX Venture Exchange. As the Shares for Debt Settlement may be a related party transaction, the following additional disclosures are provided (following the listing of disclosures in Section 5.2 of MI 61-101).


In conducting their review and approval process with respect to the Shares for Debt Settlement, the board of directors of the Company have determined that the distribution of an information circular to shareholders, the preparation and distribution of a formal valuation and the seeking of shareholder approval for, and in connection with, the Shares for Debt Settlement is not necessary under MI 61-101, which is incorporated into Policy 5.9 of the TSX Venture Exchange, because:


1.  pursuant to Section 5.5(a) of MI 61-101 the board of directors of the
    Company have determined, in good faith, that neither the Settlement
    Shares issued to Salida (on behalf of a fund managed by Salida), nor the
    aggregate deemed value of the Settlement Shares will exceed 25% of the
    market capitalization of the Company on the date hereof, and on that
    basis the Shares for Debt Settlement falls within an exemption from the
    formal valuation requirement of Section 5.4 of MI 61-101; and

2.  for the purposes of Section 5.7(1)(a) of MI 61-101, the board of
    directors of the Company have determined, in good faith, that neither
    the Settlement Shares issued to Salida (on behalf of the Fund), nor the
    aggregate deemed value of the Settlement Shares will exceed 25% of the
    market capitalization of the Company on the date hereof, and on that
    basis the Shares for Debt Settlement falls within an exemption to the
    minority shareholder approval requirement of Section 5.6 of MI 61-101.



The Company has not filed a material change report 21 days prior to the closing of the Shares for Debt Settlement as the agreement to effect the Shares for Debt Settlement has only recently been reached with Salida (on behalf of the Fund).


Further to a previous news release of December 11, 2012, the Company has applied for the admission (the "Admission") to the AIM market of the London Stock Exchange plc of the Company's existing share capital and additional common shares in the capital of the Company to be issued pursuant to a private placement (the "Placing") to be completed concurrently with the Admission. The closing of the Placing and Admission will be subject to certain conditions, including, but not limited to, the receipt of all necessary approvals including the approval of the TSX Venture Exchange and the final approval of the disinterested directors of the Company. The Placing and Admission are still currently expected to close on or about December 28, 2012.


By Order of the Board,


John Byrne, Chairman


About EastCoal Inc.


EastCoal Inc. is currently producing coking coal from the Menzhinsky mine, which is operated by its 100% owned subsidiary Inter-Invest Coal, and developing the Verticalnaya anthracite mine, which is operated by its 100% owned subsidiary East Coal Company.


This press release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance. There are numerous risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking information. These and all subsequent written and oral forward-looking information are based on estimates and opinions on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, EastCoal assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change.


Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.


Contacts:

EastCoal Inc.

Abraham Jonker

President

(604) 681-8069


EastCoal Inc.

George Lawton

CFO

(604) 681-8069

(604) 685-4675 (FAX)


Cenkos Securities plc

6, 7, 8 Tokenhouse Yard

London EC2R 7AS



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