Halifax, Nova Scotia, May 24, 2012 - Mountain Lake Resources Inc. (TSX-V:MOA.V - News) ("Mountain Lake" or the "Company") is pleased to announce the signing of a binding arrangement agreement (the "Arrangement"), whereby Marathon Gold Corporation (TSX:MOZ.TO - News) ("Marathon") will acquire all of the outstanding common shares of Mountain Lake. The transaction will consolidate Mountain Lake and Marathon's respective 50% interests in the Valentine Lake Project in Newfoundland, Canada, resulting in Marathon becoming the 100% owner of the project. Mountain Lake's remaining projects will be transferred to Mountain Lake Minerals Inc. ("Spinco"), a newly incorporated exploration company.
Under the terms of the Arrangement, Mountain Lake shareholders will receive 0.40 of a Marathon common share (the "Share Consideration") and 0.40 of a common share in Spinco (the "Spinco Consideration") for every Mountain Lake share held. The Share Consideration for the purchase of 100% of the fully diluted in-the-money shares of Mountain Lake is valued at approximately $15.1 million, not including the value of Spinco.
> The Share Consideration values Mountain Lake at $0.30 per share, representing a 20% premium to Mountain Lake's pre-announcement closing price on May 23, 2012 and a 20.6% premium based on the 10 day volume weighted average prices of each company, excluding the value of Spinco
> The Arrangement enables Mountain Lake shareholders to participate in the upside potential of a consolidated Valentine Lake Project, as well as Marathon's Golden Chest
> The Spinco Consideration enables Mountain Lake shareholders to retain equity exposure to 100% of the Glover Island (gold), 100% of Little River (gold+/-antimony) and 100% of the Bobby's Pond (base metals) exploration properties through their Spinco shares.
"We are very pleased that the arrangement agreement has been signed and look forward to the Mountain Lake shareholders approving the completion of this transaction. With 100% ownership of the Valentine Lake Project and a 50% interest in the Golden Chest Mine, Marathon will now boast 497,500 ounces of gold at a grade of 1.94 g/t in the Measured and Indicated category and 421,650 ounces of gold at a grade of 1.59 g/t in the Inferred category. This strategic acquisition exemplifies Marathon's commitment to building shareholder value by moving the company closer to the million ounce Resource threshold," said Phillip Walford, President and CEO of Marathon Gold.
"This is an exciting time and we hold the strongest belief that this transaction is in the best interests of the shareholders of both companies," said Allen Sheito, President and CEO of Mountain Lake. "It positions the Valentine Lake Project for rapid development under 100% ownership by Marathon and enables the Mountain Lake team to refocus on building the new, Mountain Lake Minerals through the advancement of our remaining portfolio of highly prospective, Newfoundland exploration projects."
As part of the Arrangement, Mountain Lake will transfer all of its projects, except for its 50% interest in the Valentine Lake Project, to Spinco. Spinco will be led by the existing management team and Board of Directors of Mountain Lake and will focus on developing its promising exploration properties, including the Glover Island, Little River, and Bobby's Pond projects. Based on a preliminary share and financing structure developed by management, it has been agreed that (i) Marathon will subscribe for securities of Spinco for aggregate consideration of $300,000 representing an estimated 6.2% of the outstanding shares of Spinco, and (ii) the directors and officers of Mountain Lake will collectively subscribe for securities of Spinco for aggregate consideration of $360,000 representing an estimated 7.4% of the outstanding shares of Spinco. At the closing of the Arrangement and prior to additional financing, it is estimated that current Mountain Lake shareholders will hold approximately 86.4% of Spinco. Further details with respect to Spinco's future business and financing plans, including details of the securities to be issued by Spinco to Marathon and the directors and officers of Mountain Lake, will be announced upon such plans being finalized.
The Arrangement has been approved unanimously by the Board of Directors of both Marathon and Mountain Lake and the directors and officers of Mountain Lake have entered into lock-up agreements with Marathon Gold under which they have agreed to vote their Mountain Lake shares and options in favour of the Arrangement representing approximately 7.1% of the shares and options entitled to vote at the Mountain Lake special meeting.
The Board of Directors of Mountain Lake has received a fairness opinion from Stephen Semeniuk, CFA, that the Share Consideration is fair, from a financial perspective, to the shareholders of Mountain Lake. Both Boards unanimously recommend to their shareholders to vote in support of the Arrangement.
The acquisition of Mountain Lake by Marathon is expected to be completed by way of a court approved plan of arrangement in British Columbia. All Mountain Lake stock options outstanding on the effective date of the Arrangement will be cancelled. Mountain Lake warrants will be adjusted on their own terms to entitle their holders to acquire common shares of Marathon and Spinco. The transaction is targeted to close in July 2012.
The completion of the Arrangement will be subject to, among other things, (i) the favourable vote of 66 2/3% of the votes cast by Mountain Lake shareholders and option holders voting as a single class at a special meeting called to approve the transaction which is expected to take place in July 2012, and (ii) the favourable vote of a majority of the votes cast by Marathon shareholders at a special meeting called to approve the issuance of the Marathon shares pursuant to the Arrangement. In the event that the Arrangement is not completed, there are certain circumstances under which either Marathon or Mountain Lake may be entitled to receive a termination fee from the other party which can be up to a maximum amount of $500,000. Mountain Lake has also provided Marathon with certain other customary rights, including a right to match competing offers.
Mountain Lake security holders and Marathon shareholders and all other interested parties are advised to read the materials relating to the proposed Arrangement that will be filed by Mountain Lake and Marathon with securities regulatory authorities in Canada when they become available. Anyone may obtain copies of these documents when available free of charge at the Canadian Securities Administrators' website at www.sedar.com.
This announcement is for informational purposes only and does not constitute an offer to purchase, a solicitation of an offer to sell the shares or a solicitation of a proxy.
Mountain Lake's financial advisor is Stephen Semeniuk, CFA and its legal advisors are Salley Bowes Harwardt Law Corp. and Stewart McKelvey. Marathon's financial advisor is Canaccord Genuity Corp. and its legal advisor is Gowling Lafleur Henderson LLP.
About Marathon Gold Corp.
Marathon Gold Corporation is a North American gold resource development company, with projects located in the mining friendly province of Newfoundland and Labrador, the prolific Coeur d'Alene Mining District of Idaho and the historic gold rich Greenhorn District of Oregon, USA. Marathon has a project pipeline consisting of early stage exploration to advanced resource development projects. Marathon is continually evaluating new gold resource development projects of merit that are located within the Americas. Marathon's focused and low-cost approach to exploration and resource development has an established record of delivering rapid growth. For more information visit: www.marathon-gold.com
About Mountain Lake Resources Inc.
Mountain Lake Resources Inc. (TSX-V:MOA.V - News) is a diversified junior exploration company, whose corporate strategy is to build shareholder value through the exploration and development of economically viable mineral properties all located on the pro-mining island of Newfoundland. Mountain Lake's current projects include: a 50% interest in the Valentine Lake gold property under the joint venture with Marathon Gold Corp. (drilling in progress); a 100% interest in the Glover Island gold exploration property; an option to earn a 100% interest in the Little River gold-antimony exploration property; a 100% interest in the Bobby's Pond base metals property. For more information visit: www.mountain-lake.com
For corporate, media, or investor inquiries, please contact:
Greg Lytle, Communications Manager
Mountain Lake Resources
N. America toll-free: (866) 285-5817
International: (902) 542-9773
ON BEHALF OF THE BOARD OF DIRECTORS
President & CEO
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