Cardero Resource Corp. and Coalhunter Mining Corporation announced that the companies have entered into a letter of intent whereby Cardero will acquire all of the outstanding securities of Coalhunter not held by Cardero.

Cardero currently holds approximately 45.5% of the common shares of Coalhunter, a private British Columbia company, which holds a 75% interest in the Carbon Creek Metallurgical Coal Deposit, located in northeast British Columbia, Canada and historically estimated to contain 132.8 million short tons (120.47 metric tonnes) of coal.

 

Terms of Acquisition

Pursuant to the terms of the LOI, Cardero will acquire all of the outstanding securities of Coalhunter as follows:

(a) Cardero will issue 0.8 of a common share of Cardero for each outstanding common share of Coalhunter (other than those owned by Cardero), including all Coalhunter common shares issuable on the exercise of the 14,000,000 currently outstanding special warrants, resulting in the issuance of approximately 22,470,147 Cardero shares:

(b) Cardero will acquire all of the 5,820,500 outstanding Coalhunter share purchase warrants and will issue in exchange Cardero warrants to purchase 4,656,400 Cardero shares at a price equal to 125% of the current exercise price, with the Cardero warrants expiring on the earlier of the current expiry date and two years after the completion of the Transaction; and

(c) Coalhunter presently has 2,945,000 outstanding incentive stock options. Coalhunter incentive stock options held by individuals who will continue to be eligible to hold Cardero incentive stock options will be cancelled in exchange for the issuance by Cardero of incentive stock options to acquire 0.8 of the number of Coalhunter shares at 125% of the current exercise prices, with an option term of two years from the closing of the Transaction. Coalhunter options held by individuals who will not be eligible to hold Cardero options will be cancelled in exchange for the payment by Cardero of an amount equal to the difference between the current exercise price and $1.52. Cardero presently assumes that it will issue approximately 976,000 incentive stock options and will pay approximately $2,104,500 to buy out the remainder, but the exact numbers will not be known until completion of the Transaction.

Upon the completion of the Transaction, Michael Hunter, the President and CEO of Coalhunter, will be appointed as the President of Cardero. Hendrik Van Alphen will continue as the CEO of Cardero. No other changes are contemplated in the board of directors or management of Cardero as a result of the completion of the Transaction.

It is anticipated that the Transaction will occur by way of a plan of arrangement among Coalhunter, the security holders of Coalhunter and Cardero under the Business Corporations Act (B.C.). The terms of the Transaction will be described in detail in the Management Information Circulars of Cardero and Coalhunter to be filed with the regulatory authorities and mailed to Cardero and Coalhunter shareholders in accordance with applicable securities laws.

The Transaction is subject to a number of conditions precedent, including:

(a) approval of the plan of arrangement to implement the Transaction by the securityholders of Coalhunter and by the Supreme Court of British Columbia;

(b) approval of the Transaction by the shareholders of Cardero;

(c) receipt of the required regulatory acceptances/approvals on the part of Cardero;

(d) receipt by the board of directors of Coalhunter, on or before March 18, 2011, of a fairness opinion stating that the Transaction is fair, from a financial point of view, to the shareholders of Coalhunter (other than Cardero); and

(e) settlement and execution of appropriate formal documentation on or before March 25, 2011.

It is anticipated that the Transaction will be completed by May 31, 2011, but if the Transaction is not consummated on or before June 30, 2011, or such other date as agreed to by the parties, the LOI shall be of no further force or effect. While the LOI is in force, and subject to the right of Coalhunter, or its board of directors, to take such actions as may be required by their obligations under applicable corporate laws, Coalhunter has agreed to not, directly or indirectly, solicit, discuss, encourage or accept any offer for the purchase (including by merger) of Coalhunter, or any of its business or assets, or for the issuance of any additional securities of Coalhunter.

None of the securities to be issued by Cardero in connection with the Transaction have been, nor will they be, registered under the U.S. Securities Act of 1933, as amended or any applicable state securities laws and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the 1933 Act) or persons in the United States absent registration or an applicable exemption from such registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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