Lignol announces private placement of up to CAD$2.4 million and acquisition of 11% equity stake in Australian Renewable Fuels

VANCOUVER, Aug. 14, 2012 /CNW/ - Lignol Energy Corporation (TSXV: LEC) ("Lignol", "LEC" or "the Company"), a leading technology company in the advanced biofuels and renewable chemicals sector, today announced a non-brokered private placement of up to 30 million common shares of the Company at CAD$0.08 per common share to raise up to CAD$2.4 million (the "Private Placement"), together with the execution of a Share Purchase Agreement to acquire from Wasabi Energy Limited (ASX/AIM: WAS) ("Wasabi" or "WAS"), 275,000,000 ordinary shares of Australian Renewable Fuels Limited (ASX: ARW) ("ARW"), for a total purchase price of CAD$4,265,770 (the "Share Acquisition").

ARW is the largest biodiesel producer in Australia, owning three plants with a total nameplate capacity of 150 million litres per annum, which were built at an aggregate cost of approximately A$150 million. ARW has made significant changes in recent years to become a cost effective producer of high quality biodiesel to address growing biofuel demand in the Australian market. ARW has recently reported two consecutive quarters ending June 30, 2012 with estimated total receipts from customers of A$43.5 million and net operating cash flows of A$4.3 million, compared to estimated total receipts from customers of A$4.1 million and negative operating cash flows of A$3.9 million in the comparable six-month period in 2011.  More information on ARW can be found at their website; www.arfuels.com.au.

The lead investor in the Private Placement is Difference Capital Funding Inc. (TSXV: DCF) ("DCF"), a growth-oriented Canadian merchant bank, who is making a CAD$1 million direct investment in LEC. "We recognize the inherent upside potential value in each of these two companies and especially with Lignol's value now diversified and underpinned with a meaningful stake in ARW", said DCF's Chief Executive Officer, Michael Wekerle. "To the extent ARW is successful executing on its business plan and ARW chooses to pay dividends or the value of the ARW shares increases, Lignol stands to benefit with access to cash to commercialize its patented technology."

On the closing of the Share Acquisition, Wasabi will hold approximately 19.2% of the issued and outstanding common shares of LEC (approximately 29.1% after giving effect to the conversion of the Debenture (defined below), with interest on the Debenture paid in cash, and the exercise of all currently existing outstanding stock options). Wasabi is listed on the Australian Securities Exchange and the AIM market in London.  Wasabi is an emerging power producer based on the Kalina Cycle® technology which utilizes low grade, waste heat from industrial facilities or geothermal sources to produce electricity. Stephen Morris, an executive director of Wasabi since 2006, will resign from the Wasabi board of directors and join the board of Lignol.

"Lignol has an impressive technology backed by an advanced pilot plant, a strong intellectual property portfolio and capable management team that we feel positions the Company to become a transformative participant in the emerging renewable fuels and chemicals industry," stated WAS Chairman, John Byrne.  "We are excited to become a major shareholder in a company with such significant potential".

"The diversification of the asset base of Lignol, combined with the confidence of a new group of investors to strengthen our balance sheet, is a very positive development for Lignol shareholders," said Ross MacLachlan, Lignol's CEO.  "This transaction will provide Lignol with cash and balance sheet assets with which to leverage new government funding in completing the remaining pilot plant in support of commercializing our technology".

Consideration for the Share Acquisition of ARW shares from Wasabi will be comprised of CAD$500,000 in cash, 19 million LEC common shares issued at CAD$0.08 per share for CAD$1,520,000 and a 10-month secured convertible debenture for CAD$2,245,770 (the "Debenture") convertible into LEC common shares at CAD$0.15 per share.   The provisions of the Debenture will include: (i) forced conversion should LEC's common shares trade at or above CAD$0.20 per share for 7 or more consecutive trading days; (ii) an interest rate of 7%, payable in cash or LEC common shares at the market price on the date of payment; (iii) a provision that if the Debenture is converted and such conversion results in Wasabi beneficially holding or controlling over 19.99% of  the common shares of LEC, Wasabi will not be entitled to vote those common shares in excess of 19.99% until approval from the shareholders of LEC permitting the voting of such shares is obtained; and (iv) as the sole recourse of Wasabi in the event of a default under the Debenture by the Company, the Company will grant a first ranking security interest in 144,777,333 of the ARW shares purchased by the Company as part of the Share Acquisition (subject to the right for LEC to sell such ARW shares to repay the Debenture after six months).

Other investors joining Difference Capital Funding Inc. in the Private Placement include Lignol management and Jace Ltd., a company headed by Stephen Morris.  The Private Placement and the Share Acquisition are expected to close the week of August 20, 2012.

About Lignol

Lignol (TSXV: LEC) is a Canadian company undertaking the development of biorefining technologies for the production of advanced biofuels, including fuel-grade ethanol, and other renewable chemicals from non-food cellulosic biomass feedstocks. Lignol's modified solvent based pre-treatment technology facilitates the rapid, high-yield conversion of cellulose to ethanol and the production of value-added biochemical co-products, including high purity HP-L^TM lignins. HP-L^TM lignin represents a new class of high purity lignin extractives (and their subsequent derivatives) which can be engineered to meet the chemical properties and functional requirements of a range of industrial applications that until now has not been possible with traditional lignin by-products generated from other processes. Lignol is executing on its development plan through strategic partnerships to further develop and integrate its core technologies on a commercial scale. Lignol also intends to invest in, or otherwise obtain, equity interests in energy related projects which have synergies with its biorefining technology. For more information please visit Lignol's website at www.lignol.ca.

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

Caution concerning forward-looking statements:

Certain statements contained in this document may constitute forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include, without limitation, statements or information about our ability to continue as a going concern and to raise additional financing to fund operations, the development status of our fully integrated pilot-scale biorefinery in Burnaby, British Columbia, the planning and development of our proposed commercial plant, our ability to complete project deliverables which are funded in part by government agencies, obtaining strategic partnership investments and government funding for initial commercial projects and the successful closing of the Private Placement and the Share Acquisition. Often, but not always, forward-looking statements or information can be identified by the use of words 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 words and phrases that state or indicate that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements or information reflect Lignol's current views with respect to future events and are subject to certain risks, uncertainties and assumptions including, without limitation, our ability to establish the validity of our technology at the fully integrated biorefinery pilot plant scale, our ability to satisfy the conditions of existing government grants and to obtain new additional grants, our ability to continue to finance our operations and to finance and complete the development of a commercial project, our ability to develop our products and to obtain off-take agreements, our ability to obtain requisite regulatory approvals and our ability to enter into agreements with strategic partners on terms acceptable to us, the inability to influence the strategy, operations and financial performance of ARW, the reliance on publically available information of ARW in LEC's evaluation of the Share Acquisition, the potential inability to divest the ARW ordinary shares due to modest trading volumes, the cost of future ARW capital investment, the fluctuation of biodiesel and feedstock on ARW, the effect on ARW of changes in government policy relating to the environment, and incentives for renewable fuels.  Many factors could cause Lignol's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or information, including among other things, the technological challenges that remain to be surpassed in obtaining the necessary operating data from our fully integrated biorefinery pilot plant that is required prior to completing the next scale-up of the technology, financial market conditions which will impact our ability to finance our operations and to finance the construction and operation of a commercial plant, the price of gasoline and demand for ethanol, the market pricing and demand for renewable chemicals, risks relating to the protection of Lignol's core technology from infringement and those risk factors which are discussed elsewhere in documents that Lignol files from time to time with securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements or information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Except as required by law, the Company expressly disclaims any intention or obligation to update or revise any forward looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

SOURCE: Lignol Energy Corporation

Lignol Energy Corporation
David Turner
Chief Financial Officer
Tel: [phone]
Email: [email protected]