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MCW Energy Group Ltd
Symbol MCW
Shares Issued 49,932,355
Close 2014-11-05 C$ 0.91
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MCW to acquire Temple Mountain lease for $10M (U.S.)

2014-11-06 04:09 ET - News Release

Mr. Paul Davey reports

MCW ENERGY GROUP ANNOUNCES CONVERTIBLE NOTE FINANCING, DETAILS OF AGREEMENT TO ACQUIRE SECOND PROPERTY IN UTAH, AND MANAGEMENT SHARE COMPENSATION ISSUANCE

MCW Energy Group Ltd. has provided the following update to shareholders:

Convertible note financing

MCW has issued today a convertible secured note to an institutional arm's-length lender for an aggregate principal amount of $555,556 (U.S.) in accordance with the terms of a securities purchase agreement pursuant to which the lender has agreed to loan up to $1,111,112 (U.S.). The note bears interest at a rate of 5 per cent per annum, is payable quarterly and matures on May 5, 2016. At the option of the lender, principal under the note is convertible into units of MCW at a conversion price of 90 cents per unit. Each unit would consist of one common share in the capital of MCW and one common share purchase warrant of MCW. Each warrant would entitle the lender to acquire one common share at an exercise price of 94.5 cents per common share until Nov. 5, 2019. MCW has granted a security interest to the holder under a general security agreement covering all of the assets of MCW. All securities issued pursuant to the financing will be subject to a four-month hold period. The proceeds will be used by MCW on capital expenditures on its oil sands plant facility in Asphalt Ridge, Utah, as well as for working capital. The financing is subject to final approval of the TSX Venture Exchange.

Agreement to acquire second property in Utah

MCW also announces that it has entered into an asset purchase and sale agreement with TMC Capital LLC, for the acquisition of the lease and assets related to an oil sands project (the Temple Mountain project) in the Asphalt Ridge area in Utah. The primary purpose of the acquisition is: (i) to acquire the bituminous sands/oil sands deposits located at the property for processing in MCW's existing oil sands extraction plant at its first field in Asphalt Ridge, Utah, and (ii) for a location for MCW's planned second, much larger, oil sands extraction plant to be built at the acquired property.

The Temple Mountain project is composed of approximately 2,230 acres located in Uintah county, Utah, the United States, which is located southwest of the town of Vernal, Utah, and northeast of Provo, Utah. There are extensive oil and gas operations in the area. The total bitumen initially in place for the Temple Mountain project has been determined to be 139,541,000 stock tank barrels, which represent the total discovered bitumen initially in place. The total minable bitumen in place has been determined to be 119.64 million stock tank barrels. These figures were determined by the independent resource evaluation of minable bitumen property for the Temple Mountain project as of June 30, 2014, prepared by Chapman Petroleum Engineering in accordance with Canadian oil and gas evaluation handbook standards.

Pursuant to the terms of the agreement, MCW shall invest no less than $1-million (U.S.) per year for each of the three years immediately following closing in the development, mining and production of the mineral from the lands associated with the lease.

The consideration for the acquisition of the lease is $10-million (U.S.) payable as follows: (i) on July 15, 2013, MCW loaned TMC $1-million (U.S.) pursuant to a 5.25-per-cent-per-annum two-year loan with principal and accrued interest due on maturity, (ii) upon completion of MCW's due diligence, MCW shall have an option to convert the loan into a first non-refundable good faith deposit, (iii) within 60 days of completion of due diligence, MCW shall pay TMC an additional deposit of $1-million (U.S.) as a second non-refundable good faith deposit, (iv) on closing, MCW shall pay TMC $8-million (U.S.), and (v) on closing, MCW would assume TMC's obligation to a 1.6-per-cent gross royalty held by the owner of the property. MCW has until Jan. 5, 2015, to complete its due diligence. In addition, on closing, MCW shall issue 10 million common shares to TMC, which, as at the date hereof, would result in TMC holding approximately 16.7 per cent of the issued and outstanding common shares thereby making TMC an insider of MCW.

Closing of the acquisition contemplated in the agreement is conditional upon all necessary director, shareholder and regulatory approvals, including the approval of the exchange, and other conditions which are typical for a transaction of this type.

Management share compensation issuance

Pursuant to an independent contractor agreement, MCW has agreed to issue its new chief financial officer, Mark Korb, up to 100,000 common shares (40,000 of which have been issued). The proposed share issuance is part of Mr. Korb's compensation package. The common shares vested 25,000 immediately and will vest 7,500 per month for 10 months.

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