SPITFYRE CAPITAL INC. ENTERS INTO DEFINITIVE AGREEMENT IN RESPECT OF PROPOSED QUALIFYING TRANSACTION

2023-10-05

TSXV - TSX Venture Exchange · Rare Earth Elements · Niobium · Tantalum · Zirconium · Dysprosium · Neodymium · Yttrium · Copper · Tungsten · Nickel · Gold · Silver · Zinc · Magnet Rare Earth Elements · Canada

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TORONTO , Oct. 5, 2023 /CNW/ - Spitfyre Capital Inc. (" Spitfyre ") (TSXV: FYRE.P) a capital pool company as defined under Policy 2.4 – Capital Pool Companies (" CPC ") of the TSX Venture Exchange (the " Exchange "), is pleased to announce that, further to its news release dated June 28, 2023 , it has entered into a definitive amalgamation agreement dated October 4, 2023 (the " Amalgamation Agreement ") with NeoTerrex Corporation (" NeoTerrex "). Pursuant to the Amalgamation Agreement, Spitfyre's wholly-owned subsidiary, 15363497 Canada Inc. (" Subco "), will amalgamate with NeoTerrex (the " Amalgamation ") to complete Spitfyre's qualifying transaction (the " Transaction ") in accordance with the policies of the Exchange.

In connection with the Amalgamation, it is intended that Spitfyre will be renamed to "NeoTerrex Incorporated" (the " Resulting Issuer "). The Transaction is subject to the receipt of all necessary regulatory and shareholder approvals required by applicable corporate law, including the approval of the Exchange, as well as the satisfaction of conditions to closing as set out in the Amalgamation Agreement. It is intended the Resulting Issuer will continue the business of NeoTerrex and be listed on the Exchange as a mining issuer, subject to Exchange approval.

About NeoTerrex

NeoTerrex is a private company incorporated under the _Canada Business Corporations Act _(" CBCA "). It is currently advancing its prospective rare earths and lithium projects located in the province of Quebec , with most of its activities focused on its Mount Discovery project (the " Mount Discovery Project ").

NeoTerrex owns a 100% undivided interest in certain mineral claims located in southwestern Quebec constituting the Mount Discovery Project. The property was acquired due to its rare earth elements potential, which was confirmed in 2022 with the discovery of rare earths occurrences over an area of 900m by 300m . Channel sampling results from the King showing expressed in Total Rare Earths Oxides (TREO) (1) are shown in the table below. NeoTerrex is in the process of completing a NI 43-101F1 Technical Report on the Mount Discovery Project (" Mount Discovery Technical Report ") and will be posting this report under Spitfyre's profile on SEDAR+ at www.sedarplus.ca in connection with the Transaction. NeoTerrex plans to initiate a follow-up exploration program on the Mount Discovery Project based on the recommendations in the Mount Discovery Technical Report. NeoTerrex also has a 100% interest in two other projects deemed prospective for rare earths. No work to date has been undertaken on these properties.

| Channel | TREO % | Length (metres) | | L1 | 3.5 | 27.20 | | W4 | 7.5 | 8.25 | | W3 | 4.81 | 5.25 | | W6 | 2.24 | 6.00 | | W5 | NSV* | 2.00 | | W7 | NSV* | 3.75 | | W8 | 0.36 | 3.00 |

*No Significant Values; May not represent true width

NeoTerrex also owns a 100% undivided interest in three lithium projects also located within the province of Quebec . NeoTerrex has undertaken limited exploration on two of these projects. No work to date has been undertaken on the third project.

NeoTerrex has 59,744,000 common shares (" NeoTerrex Shares ") issued and outstanding. Additionally, NeoTerrex has 3,296,300 broker warrants entitling the holder thereof to purchase NeoTerrex Shares issued and outstanding.

Terms of the Proposed Transaction

The Transaction will be carried out pursuant to the terms of the Amalgamation Agreement, a copy of which is, or shortly will be, filed on Spitfyre's SEDAR+ profile at www.sedarplus.ca . The below description of the terms of the Transaction and the Amalgamation Agreement is qualified in its entirety by reference to the full text of the Amalgamation Agreement.

Pursuant to the terms of the Amalgamation Agreement, at the effective time of the Amalgamation, NeoTerrex will amalgamate with Subco to form an amalgamated entity (" Amalco "), which will continue as a wholly-owned subsidiary of Spitfyre. In connection with the completion of the Amalgamation, each holder of NeoTerrex Shares shall exchange their NeoTerrex Shares for common shares in the capital of the Resulting Issuer (" Resulting Issuer Common Shares ") on the basis of one (1) fully paid and non-assessable Resulting Issuer Common Share for every one (1) NeoTerrex Share held, for a deemed price of $0.25 per NeoTerrex Share.

The Transaction itself is not subject to Spitfyre shareholder approval. Spitfyre intends to hold an annual and special meeting of its shareholders (the " Spitfyre Meeting ") in October 2023 to approve certain matters related to the Transaction, including, among other matters, the:

appointment, subject to the completion of the Transaction, of Raymond Chabot Grant Thornton LLP as the auditors of Spitfyre and the authorization of the board of directors of Spitfyre to fix the remuneration thereof; election of the directors of Spitfyre to hold office from the effective time of the completion of the Transaction; change in the name of Spitfyre from "Spitfyre Capital Inc." to "NeoTerrex Incorporated" or such other name as the board of directors of Spitfyre deems appropriate; and continuance of Spitfyre from a corporation incorporated under the laws of the Province of Ontario to a corporation continued under the CBCA (collectively, the foregoing approvals, the " Required Approvals ").

Additional details regarding the annual and special meeting of the shareholders of Spitfyre will be available in a management information circular that is expected to be delivered to shareholders of Spitfyre. The Amalgamation will be approved by the sole shareholder of Subco by way of a written resolution. The Amalgamation will further require the approval of the shareholders of NeoTerrex.

In connection with the proposed Transaction, it is expected that 59,744,000 Resulting Issuer Common Shares will be issued to the holders of NeoTerrex Shares (not including NeoTerrex Shares issuable upon the conversion of Subscription Receipts (as defined below)). Based on the number of NeoTerrex Shares outstanding as of the date hereof, and assuming the exchange of each Subscription Receipt into underlying securities, it is expected that there would be a minimum of approximately 72,605,111 Resulting Issuer Common Shares and a maximum of approximately 75,494,000 Resulting Issuer Common Shares (assuming the full exercise of the Agent's Option (as defined below)) outstanding upon completion of the Transaction, on a non-diluted basis. On completion of the Transaction, the current shareholders of Spitfyre are expected to hold an aggregate of approximately 5,750,000 Resulting Issuer Common Shares, representing approximately 7.92% of the minimum number of Resulting Issuer Common Shares and approximately 7.62% of the maximum number of Resulting Issuer Common Shares (assuming the full exercise of the Agent's Option), the current shareholders of NeoTerrex would hold an aggregate of 59,744,000 Resulting Issuer Common Shares, representing approximately 82.29% of the minimum number of Resulting Issuer Common Shares and approximately 79.14% of the maximum number of Resulting Issuer Common Shares (assuming the full exercise of the Agent's Option), and investors in the Private Placement (as defined below) would hold an aggregate of a minimum of approximately 7,111,111 Resulting Issuer Common Shares and a maximum of approximately 10,000,000 Resulting Issuer Common Shares (assuming the full exercise of the Agent's Option), representing approximately 9.79% of the minimum number of Resulting Issuer Common Shares and approximately 13.25% of the maximum number of Resulting Issuer Common Shares.

The completion of the Amalgamation is conditional on obtaining all necessary regulatory and shareholder approvals in connection with the matters described above and other conditions customary for a transaction of this type. Spitfyre and NeoTerrex anticipate closing the Transaction in mid to late December 2023 .

Summary Financial Information of NeoTerrex

Based on the audited annual financial statements for NeoTerrex as at and for the years ended December 31, 2022 and 2021, and the unaudited interim financial statements for NeoTerrex for the six months ended June 30, 2023 :

| | June 30, 2023 | December 31, 2022 | December 31, 2021 | | | | Assets | | | | | | | Current Assets | | | | | | | Cash and cash equivalents | $3,274,877 | $3,310,980 | $4,961,024 | | | | Sales tax receivable | $44,272 | $80,618 | $31,815 | | | | Tax credits and mining rights receivable | $129,118 | $368,373 | $15,143 | | | | Prepaid expenses | $24,038 | $8,778 | $1,040 | | | | Total Assets | $3,472,305 | $3,768,749 | $5,009,022 | | | | Liabilities | | | | | | | Current Liabilities | | | | | | | Trade payables and accrued liabilities | $135,068 | $64,121 | $135,910 | | | | Liability related to the premium on flow-through shares | - | - | $140,000 | | | | Total Liabilities | $135,068 | $64,121 | $275,910 | | | | | | | | | | | Expenses | Six-months

ended June 30, 2022 | For the year ended December 31,

2022 | For the 178-day period ended December 31, 2021 | | | | Exploration and evaluation expenditures, net of tax credits and mining rights | $272,335 | $910,072 | $154,712 | | | | Salaries | $94,529 | $133,334 | - | | | | Professional and consulting fees | $104,903 | $156,540 | $56,954 | | | | Conference and promotion | $8,672 | $7,779 | $1,872 | | | | Insurance, taxes and permits | $12,080 | $20,628 | - | | | | Other | $11,184 | $20,215 | $5,235 | | | | Total Expenses | $503,703 | $1,248,568 | $218,773 | | | | | | | | | | | Other Items | | | | | | | Flow-through shares premium | - | $140,000 | - | | | | Finance income | $71,312 | $80,084 | $595 | | | | Total other items | $71,312 | $220,084 | $595 | | | | | | | | | | | Net Loss and comprehensive loss | ($432,391) | ($1,028,484) | ($218,178) | | | | | | | | | |

The financial information provided as at and for the period ended June 30, 2023 is derived from the unaudited interim financial statements of NeoTerrex for the six months ended June 30, 2023 , which have not been reviewed by the auditors of NeoTerrex, and accordingly is subject to change.

Further financial information will be included in the filing statement to be prepared in connection with the Transaction.

Private Placement of Subscription Receipts of NeoTerrex and Spitfyre

Prior to the completion of the Transaction, NeoTerrex and Spitfyre are expected to complete a brokered private placement (the " Private Placement "), through iA Private Wealth Inc. as lead agent (the " Agent ") with a syndicate of agents including Canaccord Genuity Corp., for aggregate gross proceeds of a minimum of $2,000,000 and a maximum of $2,000,000 , subject to the Agent's Option, of (a) subscription receipts of NeoTerrex and/or Spitfyre (the " NeoTerrex CS Subscription Receipts " and the " Spitfyre CS Subscription Receipts ", respectively, hereafter collectively referred to as the " CS Subscription Receipts "), at a price of $0.25 per CS Subscription Receipt, and (b) flow-through subscription receipts of NeoTerrex (the " NeoTerrex FT Subscription Receipts " and, together with the CS Subscription Receipts, the " Subscription Receipts "), at a price of $0.30 per NeoTerrex FT Subscription Receipt, provided that the aggregate gross proceeds from the sale of the NeoTerrex FT Subscription Receipts may not be greater than two times the aggregate gross proceeds from the sale of the CS Subscription Receipts. It is anticipated that the Agent will be granted an option, exercisable in whole or in part at the closing of the Private Placement, to increase the size of the Private Placement by up to an aggregate of $500,000 (the " Agent's Option ").

The Subscription Receipts will be created and issued pursuant to the terms of subscription receipt agreements (the " Subscription Receipt Agreements ") to be entered into among Computershare Trust Company of Canada , as subscription receipt agent (the " Subscription Receipt Agent "), NeoTerrex, Spitfyre and the Agent.

Each CS Subscription Receipt will be automatically converted, without payment of additional consideration or further action by the holder thereof, into one unit comprised of, as applicable, (a) one NeoTerrex Share and one-half of one common share purchase warrant of NeoTerrex (each whole warrant, a " NeoTerrex Warrant ") or (b) one common share in the capital of Spitfyre (" Spitfyre Share ") and one-half of one common share purchase warrant of Spitfyre (each whole warrant, a " Spitfyre Warrant "), subject to adjustment in certain events, immediately before the completion of the Transaction upon the satisfaction or waiver of the Escrow Release Conditions (as to be defined in the Subscription Receipt Agreements) on or before December 31, 2023 (the " Escrow Release Deadline "). Each NeoTerrex Warrant will entitle the holder thereof to acquire one NeoTerrex Share at a price of $0.40 per NeoTerrex Share for a period of 24 months following the date of issuance thereof, subject to adjustment in certain events. Each Spitfyre Warrant will entitle the holder thereof to acquire one Spitfyre Share at a price of $0.40 per Spitfyre Share for a period of 24 months following the date of issuance thereof, subject to adjustment in certain events.

Each NeoTerrex FT Subscription Receipt will be automatically converted, without payment of additional consideration or further action by the holder thereof, into one NeoTerrex Share issued on a flow-through basis under the _Income Tax Act _( Canada ), subject to adjustment in certain events, immediately before the completion of the Transaction upon the satisfaction or waiver of the Escrow Release Conditions on or before the Escrow Release Deadline.

In consideration for their services in connection with the Private Placement, NeoTerrex will pay to the Agent a cash commission equal to 7.5% of the aggregate gross proceeds from the sale of the Subscription Receipts (including Subscription Receipts issued pursuant to the exercise of the Agent's Option), 50% of which commission will be paid on the closing date of the Private Placement with proceeds from the sale of NeoTerrex CS Subscription Receipts and NeoTerrex FT Subscription Receipts. The remaining 50% of the commission will be deposited in escrow. As additional consideration for the services of the Agent, concurrently with the exchange of the Subscription Receipts into underlying securities (if and when), NeoTerrex and Spitfyre will issue to the Agent warrants to purchase NeoTerrex Shares and/or Spitfyre Shares, as applicable, in an amount equal to 7.5% of the number of issued CS Subscription Receipts (including CS Subscription Receipts issued pursuant to the exercise of the Agent's Option), which warrants shall be exercisable at any time up to 24 months following the date of issuance thereof at a price of $0.25 per share (the " CS Broker Warrants "), and in an amount equal to 7.5% of the number of issued NeoTerrex FT Subscription Receipts (including NeoTerrex FT Subscription Receipts issued pursuant to the exercise of the Agent's Option), which warrants shall be exercisable at any time up to 24 months following the date of issuance thereof at a price of $0.30 per share (" NeoTerrex FT Broker Warrants ", and together with the CS Broker Warrants, the " Broker Warrants "). A reduced cash commission equal to 3% is payable and a reduced number equal to 3% of Broker Warrants are issuable in respect of the sale of Subscription Receipts (including Subscription Receipts issued pursuant to the exercise of the Agent's Option) to purchasers identified by NeoTerrex or Spitfyre to the Agent up to a maximum aggregate total of $750,000 of the amount of the Private Placement. As further consideration for the services provided in connection with the Private Placement, NeoTerrex has agreed to pay iA Private Wealth Inc. a non-refundable work fee of $20,000 plus applicable taxes.

Upon closing of the Private Placement, the aggregate gross proceeds of the Private Placement, less 50% of the cash commission and less the full amount of the Agent's reasonable expenses incurred up to and as of the closing date of the Private Placement, will be deposited in escrow with the Subscription Receipt Agent pending satisfaction or waiver of the Escrow Release Conditions, in accordance with the provisions of the Subscription Receipt Agreements. All such reasonable expenses of the Agent will be paid out of proceeds from the sale of NeoTerrex CS Subscription Receipts and NeoTerrex FT Subscription Receipts. If the Escrow Release Conditions are not satisfied at or before the Escrow Release Deadline, each of the then issued and outstanding Subscription Receipts will be cancelled and the Subscription Receipt Agent will return to each holder of Subscription Receipts an amount equal to the aggregate purchase price of the Subscription Receipts held by such holder plus an amount equal to the holder's pro rata share of any interest or other income earned on the escrowed funds (less applicable withholding tax, if any). To the extent that the escrowed funds are insufficient to refund such amounts to each holder of the Subscription Receipts of NeoTerrex, NeoTerrex shall be liable for and will contribute such amounts as are necessary to satisfy the shortfall.

Proceeds of the Private Placement

It is intended that the net proceeds from the Private Placement will be used for the exploration and development of the Mount Discovery Project, claim renewal and maintenance cost, the identification and evaluation of future potential acquisitions of rare earth and lithium projects, the exploration and evaluation of NeoTerrex's other rare earth and lithium projects and general working capital following completion of the Qualifying Transaction.

Sponsorship

Under the policies of the Exchange, the parties to the Transaction will be required to engage a sponsor for the Transaction unless an exemption or waiver from this requirement can be obtained. Spitfyre intends to apply to the Exchange for a waiver from the sponsorship requirements for the Transaction based upon the waivers available in Exchange policies. There is no assurance that a waiver from this requirement can or will be obtained.

Resulting Issuer

Immediately following the completion of the Transaction, the Resulting Issuer is expected to change its name to "NeoTerrex Incorporated", and the Resulting Issuer will be a Mining issuer under the policies of the Exchange.

Conditions to Completion of the Transaction

It is intended that the Transaction, when completed, will constitute Spitfyre's "Qualifying Transaction" in accordance with Policy 2.4 of the Exchange. Completion of the Transaction is subject to a number of conditions precedent, including, but not limited to, (i) acceptance by the Exchange and receipt of other applicable regulatory approvals; (ii) receipt of the Required Approvals at the Spitfyre Meeting, (iii) receipt of the requisite approval of the shareholders of NeoTerrex of the Amalgamation, and (iv) completion of the Private Placement. There can be no assurance that the Transaction will be completed as proposed or at all.

Proposed Management and Board of Directors of Resulting Issuer

Concurrent with the completion of the Transaction, it is expected that all directors and officers of Spitfyre will resign and the directors and officers of the Resulting Issuer will be as follows:

Mathieu Stephens – President, Chief Executive Officer and Director

Mr. Stephens is a professional geologist with over 15 years in the mining industry. He is currently the President, Chief Executive Officer and a director of NeoTerrex. Prior thereto, Mr. Stephens was the President and Chief Executive Officer of UrbanGold Minerals Inc., a precious and base metals exploration company, which was subsequently acquired by Troilus Gold Corp. in 2021, and Vice President of Exploration for Beaufield Resources Inc., a mineral exploration company, which was acquired by Osisko Mining Inc. in 2018. Previous to this, Mr. Stephens worked for Canaccord Capital for over 6 years.