Vancouver, British Columbia, Canada, 10 December 2009 -- (Marketwire) -- EACOM Timber Corporation (TSX-V:ETR.H
) today announced the company has signed a definitive agreement with Domtar Pulp and Paper Inc, a subsidiary of Domtar Corp, to purchase a sawmill located in Big River, Saskatchewan. The closing of this transaction is subject to approval by the TSX-Venture Exchange and other customary conditions of closing.
"The acquisition of this mill is a first step for Eacom as it pursues its vision of becoming a significant softwood lumber producer. We are pleased that our first asset acquisition is a state of the art sawmill that is ready to start up, but first we need to secure a long-term softwood sawlog supply. We are looking to add more production capacity and continue to review other asset acquisition opportunities," said Rick Doman, president and CEO of Eacom.
The Big River sawmill has been idle since 2006 following the closure of the Prince Albert pulp and paper mill. The sawmill underwent significant capital upgrades in 2000 and currently has an estimated maximum production capacity of 250 million board feet annually.
EACOM has agreed to purchase the sawmill for CAD 3 million on an "as is, where is" basis and has paid CAD 140,000 to date toward the purchase price. Under the terms of the agreement, EACOM also has agreed to assume Domtar's environmental obligations which involves ongoing site monitoring and future site remediation if and when required. EACOM expects that all holding costs related to the sawmill, which include scheduled periodic maintenance, security, and property taxes will average approximately CAD 80,000 per month based on current costs.
EACOM had approximately CAD 4 million in working capital at the end of November and has another CAD 3 million in cash being held in escrow following a nonbrokered private placement announced on 13 November 2009. These funds will be released from escrow upon TSX Venture Exchange approving the purchase of the Big River sawmill.
The start-up of operations at Big River will depend on, among other things, EACOM securing a timber supply on terms acceptable to EACOM. EACOM has not secured a timber supply to operate the mill, and there is no assurance that EACOM will be able to secure a timber supply in the future. EACOM plans to pursue other alternatives for the mill if it cannot negotiate a timber supply, on acceptable terms, in Saskatchewan. If not, other regions in Canada might have timber available and EACOM would have to consider moving the sawmill to a region with available timber.
Escrowed Private Placement Details
EACOM issued 10,000,000 units for gross proceeds of CAD 3 million on the nonbrokered private placement. Each unit consists of one common share and one warrant to purchase a common share. The units were priced at CAD 0.30. Each warrant entitles the holder to acquire one common share for a price of CAD 0.60 up until the third anniversary of the private placement closing. EACOM would issue up to 10,000,000 common shares for proceeds of up to CAD 6 million on the exercise of the warrants. The warrants will not be eligible for listing.