Investors

Vancouver, B.C. – May 12, 2021 – Regal Resources Inc. (“Regal”) is pleased to announce it has entered into a definitive agreement with Barksdale Resources Corp. (TSXV: BRO) (OTCQX: BRKCF) (“Barksdale”), whereby Barksdale will acquire Regal’s remaining indirect interest in the Sunnyside project, located in Santa Cruz County, Arizona, USA (the “Transaction”). 

Transaction Highlights

• The Transaction values Regal shares at $0.37 per share, which includes repayment of all of Regal’s outstanding debt and a partial payment of taxes owing on the Transaction.
• Barksdale to acquire the balance of the highly prospective Sunnyside copper-zinc-lead-silver project in Arizona, providing it with full control of the project moving forward.
• The Transaction allows Regal shareholders to participate in a larger, more liquid company that not only holds the consolidated Sunnyside project, but also the 100% owned San Antonio, Goat Canyon, and Canelo copper porphyry exploration projects near Sunnyside as well as the San Javier copper-gold project in Sonora, Mexico.

“We are pleased to announce that we have been able to negotiate and present this Transaction to the Regal shareholders in the short time that this new Board of Directors has been involved with the Company. Regal has been in a difficult financial situation for many years with no cash reserves, expensive and matured debt obligations, a cease trade order resulting in no trading liquidity for shareholders, and no prospects for a resolution to the situation. The Board’s belief is that the Transaction provides Regal shareholders with an opportunity to continue to participate in the value at Sunnyside by joining with Barksdale who have the financial and management resources to monetize the value in this asset,” stated Matthew Sauder, Chief Executive Officer and Chairman of Regal. 

Benefits to Regal Shareholders

• The Transaction accelerates the timeline of value delivery to Regal and its shareholders while allowing the company to satisfy its significant debt burden.
• Regal expects to distribute Barksdale shares to its shareholders in several tranches, providing them with direct exposure to a larger company with increased liquidity and a dedicated management team.
• Regal shareholders gain exposure to Barksdale’s broad portfolio of exploration assets, including the San Javier copper-gold project, where drilling will be commencing early in the third quarter.

Transaction Details

The Transaction for Barksdale to acquire the remaining interest in the Sunnyside project has been agreed to with Regal through a definitive purchase agreement dated May 11, 2021 (“Purchase Agreement”) whereby Barksdale will acquire the shares of Regal Resources USA, Inc. (“Regal USA”), a wholly owned subsidiary of Regal.

Total consideration for the Transaction consists of the following:

1. issuance of up to 18,150,000 common shares of Barksdale (“Consideration Shares”);
2. release of 3,850,000 common shares of Barksdale (“Escrow Shares”) that have been held in escrow per the 2017 Contribution Agreement between Regal and Barksdale;
3. acquisition and set-off of up to $4,000,000 of Regal’s existing debt facilities (“Debt Acquisition”); and
4. future payments of a portion of US Federal FIRPTA taxes on behalf of Regal incurred in connection with the Transaction.

Debt Acquisition

Upon signing of the Purchase Agreement, Barksdale will (i) acquire an existing $1.73 million secured demand loan from DIC Ltd., (“Demand Loan”) which has registered security over all Regal assets; and (ii) enter into a new bridge loan facility (“Bridge Loan”) with Regal for $1.43 million.  Following approval of the transaction by Regal shareholders, Barksdale will acquire all remaining debts of Regal and will offset the debts against the transaction cost, including the Bridge Loan and Demand Loan.  Repayment of the debts will be funded through cash on hand, issuance of Barksdale common shares, or a combination thereof.  Overall, Barksdale has entered into various agreements with Regal and certain holders of Regal debt obligations, totaling approximately $3.2 million.

Barksdale will acquire the Demand Loan in exchange for $1,000,000 in cash and 1,345,310 common shares of the Company at the five-day volume weighted average price of $0.54 per share, subject to TSX Venture Exchange approval.  The Demand Loan bears an interest rate of 8% per annum, compounded annually, and is due on October 27, 2021.  The common shares issued related to the Demand Loan will be subject to a four month and one day hold period from the date of issuance.

The Bridge Loan will be secured over Regal’s assets, bear an interest rate of 8% per annum and is due on October 27, 2021.  The proceeds of this loan will be utilized for the expressed purpose of repaying an existing third-party debt obligation of Regal’s that has defaulted.  Following acquisition of the Demand Loan and the issuance of the Bridge Loan, Barksdale will become Regal’s largest secured creditor.

Consideration Shares

Upon completion of the Transaction, Barksdale will release the Escrow Shares that are currently held in Regal’s name but escrowed pursuant to the Contribution Agreement.

Additionally, Barksdale will issue the Consideration Shares to Regal in three tranches, as follows:

1. 3,483,333 common shares to be issued upon completion of the Transaction (the “First Tranche Shares”);
2. 7,333,333 common shares to be issued 4 months after completion of the Transaction (the “Second Tranche Shares”); and
3. 7,333,334 common shares to be issued 8 months after completion of the Transaction (the “Third Tranche Shares”).
4. The issuance of the Second Tranche Shares and the Third Tranche Shares will be conditional upon Regal having distributed the First Tranche Shares and Escrow Shares, by way of a dividend, a return of capital, or otherwise, to the shareholders of Regal.  These issuances shall be in accordance with applicable securities laws and policies of the TSX Venture Exchange, such that no recipient will hold more than 20% of the shares of Barksdale, which would require the Company to seek shareholder approval.  Each of the three tranches of Consideration Shares will be subject to four month and one day hold periods from the date of issuance.  Barksdale may hold back a certain number of Consideration Shares to partially offset taxes that may be owed on the Transaction and not otherwise for the account of Barksdale under the Transaction. 

Approvals and Timing

The Transaction is subject to regulatory approval as well as approval by Regal shareholders.  The board of directors of Regal has determined that the proposed Transaction is in the best interests of Regal, is fair to its shareholders and is recommending that shareholders of Regal vote in favor of the proposed Transaction. 

The Transaction is subject to other conditions customary for a public transaction of this nature including a reciprocal break fee of $250,000.  If the Transaction is not approved by Regal shareholders, Barksdale’s costs related to the Transaction will be offset against future payments associated with the existing Contribution Agreement. 

The terms and conditions of the proposed Transaction will be summarized in Regal’s management information circular, which will be filed and mailed to its shareholders in May 2021.  If the Transaction is approved by the shareholders of Regal, it is anticipated that closing of the Transaction would occur in late 2nd Quarter or early 3rd Quarter, 2021.

Advisors

Borden Ladner Gervais LLP is acting as legal counsel to Barksdale in connection to the Transaction.  MLT Aikins LLP is acting as legal counsel to Regal.

Regal Resources Inc. is a junior mineral exploration and development company based in Vancouver, Canada. The Company has an interest in the Sunnyside project, located in Santa Cruz County, Arizona, USA.

ON BEHALF OF REGAL RESOURCES INC.

Matthew Sauder
CEO and Chairman
For more information, please visit www.regalres.com

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 news release.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes “forward-looking information” under applicable Canadian securities legislation. Such forward-looking information reflects management’s current beliefs and are based on a number of estimates and assumptions made by and information currently available to the Company that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking information. Readers are cautioned that such forward-looking information are neither promises nor guarantees, and are subject to known and unknown risks and uncertainties including, but not limited to, general business, economic, competitive, political and social uncertainties, uncertain and volatile equity and capital markets, lack of available capital, actual results of exploration activities, environmental risks, future prices of base and other metals, operating risks, accidents, labor issues, delays in obtaining governmental approvals and permits, and other risks in the mining industry.  In addition, there is uncertainty about the spread of COVID-19 and the impact it will have on the Company’s operations, supply chains, ability to access mineral properties, conduct due diligence or procure equipment, contractors and other personnel on a timely basis or at all and economic activity in general. All forward-looking information contained in this news release is qualified by these cautionary statements and those in our continuous disclosure filings available on SEDAR at www.sedar.com.  Accordingly, readers should not place undue reliance on forward-looking information. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.