Stem 7 Capital Signs Letter Of Intent to Acquire Advanced-Stage Graphite Project

Stem 7 Capital Signs Letter Of Intent to Acquire
Advanced-Stage Graphite Project

June 29th, 2017 – Vancouver, B.C. – Stem 7 Capital Inc. (“Stem 7” or the “Company”) (TSXV: STS.H) is pleased to announce it has signed a Letter Of Intent (“LOI”) with Brasil Grafite S.A. (“BGSA”) to acquire 100% interest in the advanced-stage Santa Cruz Graphite Project (“Project”) located in the state of Bahia, Brazil (the “Acquisition”). The Company is excited about the Project as management believes that work completed to date is sufficient to support more advanced mining studies.

As part of the deliverables in the LOI, BGSA is near completing an independent NI43-101 Preliminary Economic Assessment Technical Report (“PEA”) on the Project, which is expected to be finalized within 30 days. The Project’s PEA will include an economic analysis, a resource estimate with a description of the project history, geology, mineralization, sampling procedures, and laboratory Quality Assurance/Quality Control procedures. As the Project represents a major acquisition, the Company will provide more details when the final technical report is received. The PEA will be filed on Sedar as part of the Company’s disclosure.

The Project consists of 13 approved exploration licenses covering approximately 13,000 hectares located in a producing graphite district with a history of over 70 years of continuous graphite production. The Project benefits from at surface mineralization containing large and extra large flakes and has significant work completed to date including over 7,000m of drilling and a pilot plant test on over 30 tonnes of mineralized material, which was finalized in late 2015 and produced high quality concentrates.

The Project has excellent infrastructure and logistics. High-tension power is within 3 km of the plant site along with a major natural gas line within 5km. City water and wastewater are within 3-5 km and access to the Project is provided by well-maintained 1.3km long road connecting to a main highway.

Company director Eric Allison stated “Large and extra large flakes as well as spherical graphite are currently in great demand with analysts expecting demand to increase significantly over the next five years. Management anticipates that the acquisition and development of the Project has the potential to provide significant value to the Company.”

LOI Details

Under the terms of the LOI signed with BGSA, Stem 7 will:

• Issue units (the “Consideration Units”) with a value equal to US$5,050,000 (the “Purchase Price”) to the shareholders of BGSA. The Purchase Price will be converted to CDN$ using the Bank of Canada exchange rate for the 10 days preceding the closing of the transaction and the number of Consideration Units will be determined by dividing the CDN$ Purchase Price by the price at which units are sold pursuant to the unit financing (described below) subject to a maximum Conversion Price of CDN$0.50; and

• Pay US$50,000 in cash to BGSA as consideration for the Project.

The Consideration Units will be subject to voluntary pooling restrictions pursuant to which they may not be transferred by the holders until released from pooling. Twenty percent of the Consideration Units will be released from the pooling arrangement on December 1, 2017, and an additional 20% will be released every three months thereafter, with the final release occurring on December 1, 2018.

Closing of the Acquisition and issuance of the Consideration Shares will be subject to:

• Completion of a National Instrument 43-101 compliant PEA by BGSA in a form satisfactory to the TSX Venture Exchange (the “Exchange”) which demonstrates a net present value (discounted at 5%) of greater than CDN$100,000,000 (after Brazilian taxes) and an internal rate of return greater than 35% (after Brazilian taxes);

• Delivery of an acceptable title opinion respecting the Project;

• Completion of a unit financing by the Company for gross proceeds of CDN$3,800,000;

• Negotiation of a formal agreement setting out the terms contemplated in the LOI within 120 days of the date of the LOI; and

• Exchange acceptance.

The Company has agreed, subject to Exchange acceptance, to advance CDN$100,000 to BGSA to be used to initiate permitting on the Project and to commence preparation of a feasibility study respecting the Project. The advance will be treated as a loan and will be repayable within 12 months if the Acquisition does not complete. On closing of the Acquisition, two nominees identified by BGSA will be appointed to the Company’s Board of Directors.

The Company anticipates that the transaction will enable it to meet the Exchange’s initial listing requirements for a Tier 2 issuer, as a result of which the Company will graduate from NEX to Tier 2 of the Exchange.

On behalf of the Board,

Dave McMillan
Chairman & CEO
Ph: +1 (778) 773-4560

For additional information, please contact:
Kris Kottmeier
Ph: +1 (604) 506-2502