Breaking News: NRG Completes Agreements with Chemphys for Strategic Alliance Raises a Total of CAD$1,215,000 by Private Placement

NRG Metals Inc.  (OTCQB: NRGMF) (TSX-V: NGZ), is pleased to announce that, further to its news release of October 17, 2017, the Company has completed various agreements to give effect to its strategic alliance with Chengdu Chemphys Chemical Industry Co., Ltd. (“Chemphys”) to advance the exploration and development of the Company’s Hombre Muerto North Lithium Project (“HMN Project”) located in the Salta and Catamarca Province area where most of the lithium production occurs in, Argentina.

Adrian Hobkirk, President and CEO of the Company quoted, “We are very pleased with the investment in NRG by Chemphys and establishing a relationship with a high purity lithium manufacturer in China that supplies its products to the battery and energy markets.  With the completion of this private placement, and the financial support of warrant and option holders, the Company is now fully funded to carry out its planned work program on the HMN Project.”

Ms. Alison Dai, of Chemphys is quoted, “We are pleased to have formalized our strategic partnership with NRG and are committed to working with NRG’s team to expedite the development of the HMN Project.”

Private Placement and Shareholder Approval

The Company completed the first tranche of a non-brokered private placement with an affiliate of Chemphys for gross proceeds of CAD$980,000 million. A second tranche of the placement is expected to be completed in coming weeks, which will bring the total amount subscribed by Chemphys to CAD$1.6 million.  The Company had previously announced that Chemphys would be subscribing for gross proceeds of CAD$1.4 million, which at that time would have represented approximately 15% of the Company’s outstanding shares.  The placement was increased to a total of 16,000,000 units for gross proceeds of CAD$1.6 million. Upon completion of the second tranche of the placement, Chemphys will hold approximately 15% of the shares of the Company that are expected to be outstanding after giving effect to the second tranche and assuming no other shares are issued.  The increase in the placement reflects the increase in the outstanding share capital of the Company upon numerous option and warrant exercises since the placement was initially discussed between the parties.  Each unit is comprised of one common share and one transferable common share purchase warrant exercisable for a period of three years from the date of issue at an exercise price of CAD$0.20 per share. The securities issued to Chemphys are subject to a four-month hold period as required under applicable securities laws.

The subscriber (the “Placee”) is owned by one of the principal shareholders of Chemphys, and is therefore an affiliate of Chemphys.  Pending the approval of the TSX Venture Exchange of a personal information form filed in respect of the principal of the Placee, the Placee will agree not to exercise any warrants if to do so would result in it acquiring more than 10% of the outstanding common shares of the Company, calculated on an undiluted basis.  The second tranche of the placement will only be completed if either: (i) the disinterested shareholders of the Company (being shareholders other than the Placee and its affiliates) have approved the issuance to the Placee of common shares underlying the warrants where to do so would result in the Placee holding more than 20% of the issued and outstanding common shares of the Company (calculated on a non-diluted basis), or (ii) the Placee shall have entered into a warrant exercise agreement with the Company restricting the exercise of any warrants by the Placee if to do so would result in the Placee owning or controlling 20% or more of the then issued and outstanding common shares of the Company (calculated on a non-diluted basis).

The second tranche of the private placement will consist of 6,200,000 units for gross proceeds of CAD $620,000.  A further news release will be issued once the second tranche has been completed.

Offtake Agreement

Concurrently with the completion of the first tranche of the private placement, the Company entered into an offtake agreement with Chemphys covering all lithium products produced from the HMN Project.  The offtake provides for the sale of lithium at prices related to market prices. The HMN offtake agreement is subject to the Company (i) establishing the necessary mineral reserves in commercial quantities and quality, (ii) building the necessary mining and processing facilities to extract and process lithium products, and (iii) obtaining sufficient financing on commercially reasonable terms in order to finance the achievement of each of the foregoing (i) and (ii) sufficient to achieve commencement of commercial production.  If the Company is unable to satisfy these conditions within three years, the offtake agreement shall automatically terminate, (unless the parties otherwise agree in writing).

Chemphys will have a right of first offer to negotiate in good faith (with no obligation of the Company to accept) the right of Chemphys to acquire a portion of the Company’s entitlement to annual production of lithium products from any other lithium project from which the Company is entitled to acquire or sell lithium products, such right on terms and conditions as the Parties may agree.

Ancillary Rights Agreement

The Company and the Placee also entered into an ancillary rights agreement providing for (i) the right of the Placee to at least one Board seat so long as it owns at least 10% of the Company shares or the offtake agreement is in force, (ii) a right to increase the Placee’s Board representation proportionate to its share ownership, (iii) a right to maintain the Placee’s pro rata share ownership, (iv) a right of the Placee to representation on a Project Advisory Board in respect of the HMN Project, and (v) an obligation of the Placee to undertake an orderly distribution of its securities should it determine to dispose of its shareholdings in the Company.

Shareholders’ Meeting

The Issuer has scheduled an annual general and special meeting on December 22, 2017 at 11 am (Vancouver time) and will be seeking disinterested shareholder approval for the transaction as set out above.

Other Subscribers

In addition to the Chemphys placement, the Company completed a private placement with two consultants of the Company by the issuance of a total of 2,350,000 units at $0.10 per unit, raising additional gross proceeds of CAD$235,000.  Each unit is comprised of one common share and one transferable common share purchase warrant exercisable for a period of two years at an exercise price of CAD$0.20 per share.

Together with the first closing on October 6, 2017 of 4,500,000 units for gross proceeds of CAD$450,000, the Chemphys closing of CAD$1,600,000 and CAD$235,000 from the consultants, the Company will issue a total of 22,850,000 units and raise total gross proceeds of CAD$2,285,000.  The proceeds of the private placement will be used for expenditures relating to the HMN Project and for general working capital.  The Company did not pay any finder’s fees.


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