South Star Mining Closes $4.19 Million in Brokered Financing and Announces a $1,000,000 Non-brokered Financing

(TheNewswire)

Vancouver, B.C. / TheNewswire / May 16, 2018 - South Star Mining Corp. (“South Star” or the “Company”) (TSXV: STS.H) is pleased to announce that, further to its announcement of a brokered private placement (the “Brokered Placement”) on February 28th, 2018, the Company has closed a total of C$4,190,000 in which Company insiders invested a total of C$635,000.

South Star entered into an agreement with a syndicate of agents led by Echelon Wealth Partners Inc. (the “Lead Agent”), which included Haywood Securities Inc., PI Financial Corp. and Eight Capital Inc. (collectively referred to as, the “Agents”) to sell subscription receipts (the “Subscription Receipts”) at a price of C$0.45 per Subscription Receipt. A total of 9,312,442 Subscription Receipts were placed in the Brokered Placement.

Each Subscription Receipt shall be automatically converted, without any further action by the holder of such Subscription Receipt, and for no additional consideration, into one unit of the Company (each a “Unit” and collectively the “Units”) upon receipt by the escrow agent, prior to the date that is three months from the closing date of a release notice from the Company and the Lead Agent, on behalf of the Agents, confirming (collectively, the “Escrow Release Conditions”): (a) the completion, satisfaction or waiver of all conditions precedent to the acquisition of the Santa Cruz Graphite Project (the “Transaction”) in accordance with the definitive agreement respecting the Transaction, to the satisfaction of the Agents; (b) the receipt of all required shareholder and regulatory approvals, including, without limitation, the conditional approval of the TSX Venture Exchange for the Brokered Placement and the Transaction; (c) receipt by the Agents of an opinion of counsel of the Company that upon the conversion of the Subscription Receipts and completion of the Transaction, the Common Shares issued as part of the Units, will not be subject to any statutory or other hold period in Canada which extends beyond 4 months and one day after the closing date; (d) the representations and warranties of the Company contained in the agency agreement entered into in connection with the Brokered Placement to be true and accurate in all material respects, as if made on and as of the Escrow Release Date; and (e) the reorganization of Brasil Grafite S.A. ("BGSA”) as contemplated in the agency agreement, pursuant to which Brasil Graphite Corp. (“Brasil Graphite”) will become the owner of 100% of the outstanding shares of BGSA and certain existing liabilities of BGSA to a third party will become an inter-company debt of BGSA and Brasil Graphite, has been completed.

Each Unit consists of one common share of the Company and one common share purchase warrant (a “Warrant”). Each Warrant entitles the holder thereof to purchase one common share of the Company for a period of 24 months from the date of issuance at a price of C$0.75 per common share.

The Company will pay a cash commission to the Agents for the Brokered Placement of $293,657.43, and has issued  698,433 compensation options to the Agents (the “Compensation Options”) with each Compensation Option entitling the holder to acquire one Unit at the offering price of $0.45 until the date that is 24 months from the closing date.  A total of 60% of the cash commission ($176,194.46) was deducted from the proceeds of the Subscription Receipts paid to the Company on closing.  The remaining 40% of the cash commission ($117,462.97) will be paid to the Agents on satisfaction of the Escrow Release Conditions.

Certain insiders of the Company participated in the Brokered Placement and contributed aggregate proceeds of $635,000.  The participation of the insiders is considered to be a “related party transaction” pursuant to Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transaction (“MI 61-101”). The Company determined that exemptions from the formal valuation and minority shareholder approval requirements of MI 61-101 were available for the related party transaction pursuant to Section 5.5(a) and Section 5.7(1)(a) of MI 61-101 on the basis that the fair market value of the transaction involving insiders was not more than 25% of the Company’s market capitalization.

All of the securities issued in the Brokered Placement will be subject to resale restrictions in accordance with applicable securities laws, pursuant to which they may not be sold or transferred until September 16, 2018.

South Star intends to use the net proceeds of the Brokered Placement to complete the previously announced Transaction with Brasil Graphite , and to fund drilling, environmental studies, engineering, metallurgical studies, permitting etc. with the intent of producing a bankable feasibility study within the next 12-18 months. It is currently anticipated that the completion of the Transaction will occur within the next 30 days.

Company CEO Eric Allison stated “We are pleased to close this tranche of financing that will provide the Company with the necessary funds to advance our Santa Cruz Graphite Project toward a feasibility study. A number of activities will get underway in the coming weeks including drilling, engineering, metallurgical studies, permitting and marketing that will assist us in more fully unlocking the significant potential of Santa Cruz.  The graphite markets are beginning to respond to the global Electric Vehicle revolution and we plan to position South Star to be a significant player in this growth market”

Non-Brokered Private Placement

The Company is also pleased to announce it has arranged a non-brokered private placement of units at C$0.45 per unit to raise up to C$1,000,000. Each unit will consist of one common share of the Company and one common share purchase warrant. Each warrant will entitle the holder thereof to purchase one common share of the Company for a period of 24 months from the date of issuance at a price of C$0.75 per common share. Finders fees may be payable in connection with the Placement. South Star intends to use the net proceeds of the Placement for additional drilling, engineering, concentrate marketing and general corporate and working capital purposes. Subsequent to the closing of the acquisition and the previously mentioned brokered private placement, this additional financing is expected to close in the next 30 days, subject to Exchange approvals.

ABOUT SOUTH STAR MINING CORP.

South Star Mining Corp. is focused on the acquisition and development of near-term mine production projects in Brazil to maximize shareholder value. The company is currently working towards completing the acquisition of the Santa-Cruz Graphite Project in the Bahia State, Brazil. To learn more, please visit the Company website at www.southstarmining.com.

On behalf of the Board,

Mr. Eric Allison

Chief Executive Officer

Ph:      +1 (203) 918-3098

Email: [email protected]  

For additional information, please contact:

Dave McMillan

Chairman

+1 (778) 773-4560

Email:[email protected]

Mr. Kris Kottmeier

VP Corp Development

Ph:      +1 (604) 506-2502

Email:  [email protected]  

CAUTIONARY STATEMENT

Completion of the Transaction is subject to a number of other conditions. There can be no assurances that the Transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the Company’s news releases, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of the Company should be considered highly speculative.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this press release.

Neither the TSXV nor its Regulation Services Provider has in any way passed upon the merits of the proposed Transaction and associated transactions and neither of the foregoing entities has in any way approved or disapproved of the contents of this press release.

Forward-Looking Information

This news release contains "forward-looking information" within the meaning of applicable securities laws. Generally, any statements that are not historical facts may contain forward-looking information, and forward-looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or indicates that certain actions, events or results "may", "could", "would", "might" or "will be" taken, "occur" or "be achieved". Forward-looking information includes, the Company may abandon the Transaction; Escrow Release Conditions may not be satisfied; the Transaction may involve unexpected costs, unexpected liabilities or unexpected delays; the Private Placement may not close; the TSXV Venture Exchange may not approve the Private Placement or the Transaction; and the Company or Brasil Graphite may be adversely affected by other economic, business, and/or competitive factors. Although the Company believes in light of the experience of its officers and directors, current conditions and expected future developments and other factors that have been considered appropriate, that the expectations reflected in this forward-looking information are reasonable, undue reliance should not be placed on them because the Company can give no assurance that they will prove to be correct. Readers are cautioned to not place undue reliance on forward-looking information. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the proposed Transaction and the Offering; that the ultimate terms of the proposed Transaction and the Offering will differ from those that currently are contemplated; and that the proposed Transaction and the Offering will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The terms and conditions of the proposed Transaction may change based on the Company’s due diligence and the receipt of tax, corporate and securities law advice for both the Company and Brasil Graphite. The statements in this press release are made as of the date of this release and the Company undertakes no obligation to comment on analyses, expectations or statements made by third-parties in respect of the Company, Brasil Graphite their securities, or their respective financial or operating results (as applicable).

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