CALGARY, ALBERTA--(Marketwire - June 8, 2011) - Cobalt Coal Corp. ("Cobalt" or the "Company") (TSX VENTURE:CBT - News), announces that it has finalized and mailed the Information Circular pertaining to Cobalt's upcoming special meeting of shareholders to be held on June 29, 2011 and that those materials contemplate a significant restructuring of Cobalt. The meeting materials can also be accessed under the Company's SEDAR profile at www.sedar.com. In relation to that mailing, Cobalt announces that further to the previously announced share consolidation on the basis of one post consolidation common share ("Post Consolidation Share") for each ten existing common shares (the "Consolidation"), the Company intends to complete a private placement (the "Private Placement") of up to 66,666,666 Post Consolidated Shares of Cobalt at a price of $0.12 per Post Consolidated Share for gross proceeds of up to $8,000,000 with expected minimum proceeds of approximately $6,000,000.
Cobalt has not yet engaged an agent for the Private Placement, however, does intend to engage an agent for the Private Placement.
As discussed in Cobalt's annual 2010 MD&A as well as in its recent press release dated May 2, 2011, Cobalt continues to face obstacles preventing it from sustaining continuous, profitable mining operations. The key impediments are the lack of electrification, insufficient roadway and bridge infrastructure at the mine, a lack of quality equipment with which to conduct underground mining operations, and a general lack of working capital. The proceeds of the Private Placement will be utilized to rectify those impediments as follows:
-- to install and improve infrastructure to and at the mine site;
-- to secure the equipment necessary to have two fully complete mining
"spreads" such that underground mining can be done on two faces
simultaneously;
-- to repay Cobalt's senior lender which is in forbearance and which debt
is repayable on or before June 30, 2011;
-- to acquire a spare parts inventory and;
-- to fund the current working capital deficit together with providing
additional working capital.
Management has concluded that in order to rectify all impediments to profitability, all of the foregoing funding commitments must be satisfied and therefore a minimum financing condition of approximately $6,000,000 is required, subject to the discretion of management.
The Post Consolidated Shares issued pursuant to the Private Placement will be subject to a four month hold under applicable securities laws and the Private Placement is subject to the approval of the Exchange.
Management is committed to allowing existing stakeholders of Cobalt to participate in this significant restructuring of Cobalt. Participation is limited to persons who qualify as "Accredited Investors" under applicable securities laws and interested parties are referred to the contact information provided below to indicate an expression of interest to participate in the Private Placement.
Rights Offering
In addition to a commitment from Management of Cobalt to allow participation into the Private Placement by existing stakeholders, shareholders of Cobalt will be entitled to participate in a rights offering, which is expected to be conducted by way of a Rights Offering Circular (the "Rights Offering") after completion of the Private Placement. Pursuant to the Rights Offering, each shareholder as of the record date for such offering (the "Record Date") will be issued one right ("Right") for each Post Consolidation Share held on the Record Date, entitling that holder to purchase one (1) Post Consolidation Share for each four (4) Rights held at a price of $0.12 per Post Consolidation Share at or before the expiry time of the Rights Offering, following which all outstanding Rights shall terminate and expire. The number of Post Consolidation Shares to be issued pursuant to the Rights Offering is the maximum permitted by applicable securities laws to be issued pursuant to a Rights Offering Circular. Subscribers under the Private Placement described above will NOT be entitled to participate in the Rights Offering with respect to any securities acquired under the Private Placement. The Rights Offering is subject to applicable regulatory approval, including the Exchange.
About Cobalt
Cobalt is a publicly traded coal exploration and production company headquartered in Calgary, Alberta, Canada with a regional office in Welch, West Virginia USA. Cobalt was created to capitalize on the growth opportunities that exist in the metallurgical coal mining industry.
The securities of Cobalt being offered have not been, nor will be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons absent U.S. registration or an applicable exemption from U.S. registration requirements. This release does not constitute an offer for sale of securities in the United States.
READER ADVISORY
Statements in this news release may contain forward-looking information including the timing of closing of the Private Placement, the Rights Offering and the intended use of proceeds of the Private Placement. The reader is cautioned that assumptions used in the preparation of such information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company. These risks include, but are not limited to, the risks associated with the coal mining industry, commodity prices and exchange rate changes. Industry related risks could include, but are not limited to, operational risks in exploration, development and production, delays or changes in plans, risks associated to the uncertainty of reserve estimates, health and safety risks and the uncertainty of estimates and projections of production, costs and expenses. The reader is cautioned not to place undue reliance on this forward-looking information.
Neither TSX Venture Exchange nor its Regulation Service Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.