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Otterburn to Acquire the Kainantu Gold-Copper Mine in Papua New Guinea
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 25, 2014) -
NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE, PUBLICATION, DISTRIBUTION OR DISSEMINATION DIRECTLY, OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES.
Otterburn Resources Corp. (TSX VENTURE:OBN) ("Otterburn") is pleased to announce that it has signed a Share Exchange Agreement (the "SEA") with K92 Holdings International Limited, a private British Virgin Islands corporation ("Target"), and the shareholders of Target (the "Sellers"), whereby Otterburn will acquire all of the outstanding shares of Target in exchange for common shares (the "Payment Shares") of Otterburn on the basis of one Payment Share for each share of Target outstanding, at a deemed price of $0.50 per Payment Share (the "Transaction"). The Target will own, on completion of the Transaction, 100% of the former operating Kainantu Gold-Copper Mine in Papua New Guinea ("PNG"), currently owned by a subsidiary of Barrick Gold Corporation ("Barrick").
About the Target
The Target is a private, widely held, BVI company, with approximately 44,000,000 shares outstanding. The Target is arm's length to Otterburn, except that Mr. Brian Lueck, a director of Otterburn, is a minority shareholder of the Target.
The Target wholly owns all of the outstanding shares of K92 Holdings (PNG) Limited ("K92PNG"), a private company incorporated under the laws of PNG. K92PNG is party to a Share Sale Agreement dated June 11, 2014 (the "BLK Purchase Agreement") pursuant to which it has agreed to acquire all of the outstanding shares of Barrick (Kainantu) Limited ("BKL"; a private PNG company). BKL holds the following mineral rights and interests in PNG:
Mining Lease 150 ("ML 150");
Mining Easement 80;
Mining Easement 81;
Lease for Mining Purposes 78,
Exploration Licence 470, ("EL 470");
Exploration Licence 693;
Exploration Licence 1277; and
Exploration Licence 1341,
as well as a full mining processing plant, camp, infrastructure (both surface and underground), tailings facility and partial mobile fleet, all of which was previously or is operational, and which has been under care and maintenance for the past five years.
The Kainantu property covers a total area of 500 km2 and is located in the Eastern Highlands Province of Papua New Guinea, approximately 180 km west-northwest of the town of Lae, PNG.
To view accompanying map, visit the following link: http://media3.marketwire.com/docs/KainantuProjectLocation.jpg
Mineralization on the property includes gold, silver & copper occurring in epithermal gold telluride veins; copper/gold/silver sulphide veins and related porphyry copper/gold systems; and alluvial gold. The Irumafimpa-Kora vein deposit is the most advanced project at Kainantu with current defined resources and past modern mining activity in the Irumafimpa area. The Irumafimpa-Kora deposit occupies a broad NW trending mineralized zone more than 2.5 km long and up to 60 m wide.
The deposit occurs in the centre of a large mineralized system approximately 5 km x 5 km in area that has been partly delineated by drilling and comprises several individual zones of low sulphidation, intermediate sulphidation, possible high sulphidation veins and porphyry style mineralization. Other less advanced prospects on the property include epithermal veins similar to Irumafimpa-Kora, porphyry copper-gold and minor skarn mineralization.
To view accompanying figure, visit the following link: http://media3.marketwire.com/docs/KainantuLongSection.jpg
Current resources at the Irumafimpa-Kora Vein System have been estimated by the Target from the original drill database, and are shown in the table below, totaling 1.5 million ounces of gold, with recoverable copper and silver credits, for a gold equivalent* resource of 2.2 million ounces. Mined-out areas have been excluded.
2014 Irumafimpa-Kora Resource Estimates | |||||||||
Resource by category | |||||||||
Resource | Tonnes | Gold | Silver | Copper | Gold Equivalent | ||||
M t | g/t | M Oz | g/t | M Oz | % | M lb | g/t | M Oz | |
Measured | 0.045 | 10.6 | 0.015 | 6.6 | 0.009 | 0.3 | 0.3 | 11.3 | 0.016 |
Indicated | 0.60 | 16.3 | 0.32 | 14.5 | 0.28 | 0.6 | 8.6 | 17.7 | 0.34 |
Total M&I | 0.65 | 15.9 | 0.33 | 14.0 | 0.29 | 0.6 | 8.9 | 17.3 | 0.36 |
Inferred | 4.8 | 7.9 | 1.2 | 31.1 | 4.8 | 2.0 | 208.7 | 11.8 | 1.8 |
Notes - M in Figures and Tables is millions. Reported tonnage and grade figures have been rounded from raw estimates to reflect the order of accuracy of the estimate. Minor variations may occur during the addition of rounded numbers. There have been no assumptions made as to metal prices or recoveries in this mineral resource estimate other than gold equivalents that are calculated for AuEq = Au g/t + Cu%*1.7308 + Ag g/t*0.0185. |
This vein system was previously mined by Highlands Pacific and Barrick from 2006 to 2009. After Highlands invested in excess of $60 million USD into exploration and development of the project, Barrick purchased the project from Highlands Pacific in December 2007 for $141 million USD and spent $26.5 million USD on exploration and $8 million USD on development work since its acquisition.
The project is being purchased from Barrick by K92PNG for a purchase price of $62 million USD comprising of a $2 million deposit and a maximum of $60 million in potential earn out payments. These earn out payments are subject to a term of ten years and depend on future exploration success for indicated resources and/or ounces mined, contingent on a million ounce gold equivalent threshold to activate payment, which includes the current 0.36 million ounce gold equivalent measured and indicated resource. If K92PNG exceeds the threshold of 1 million ounces gold equivalent within 10 years, Barrick will receive $20 million USD. Additional amounts will be paid at the same rate of $20 USD per gold ounce up to a maximum of $60 million USD or 3 million ounces.
K92PNG have committed to Barrick that it will honour all obligations and commitments made by previous owners Barrick and Highlands Pacific including the commitment under the 2003 Memorandum of Understanding to divest on commercial terms a 5% interest in ML 150 to landowners, subject to the Land Titles Commission's determination of the customary landowners of ML150.
Handover of the minesite to K92PNG is contingent on the renewal of the mining leases, which are currently under application, while the underlying exploration licences are current. This condition can be waived at K92PNG's discretion. The Target expects but does not warrant that the leases will be renewed in Q3 or Q4 of 2014. Provided that the leases are renewed in a timely fashion, the Target plans to refurbish the existing mill and mine and commence production from the Irumafimpa Lode in the third quarter of 2015 at an estimated all in capital cost of $7.0 million USD. The Target plans to proceed with development work to open up the Kora Lode concurrent with mining at Irumafimpa, with the initial projected mining and milling rate of Irumafimpa being 180,000 tpa.
The Kainantu project is located in a world class province. Based on review of the historical exploration and property mineralization, there remain a number of untested and early stage targets in addition to untested continuation of extents of existing advanced prospects and drill tested deposits. Within ML150 this includes the Kora lodes which are mineralized at the limit of drilling and open in three directions, as well as the Judd, Karempe and other unnamed mineralized lodes which have each received limited drilling. Outside the mining lease there are continuations of the lodes listed above, as well as the mineralized Mati, Mesoan, Arakompa and Maniape lodes proximal to the mining lease and within the exploration licenses. Further away there is substantial mineralization at the Aifunka and Kathnel deposits, and there is strong evidence of numerous high tenor porphyry targets.
To view accompanying figure, visit the following link: http://media3.marketwire.com/docs/KainantuProjectGeologyandExplorationTargets.jpg
Further historic resources reported on the property of an additional 1.5 million ounces Au in both open pit and underground targets outside of ML150 are based on drilling and surface sampling by previous explorers for which the original records have not as yet been found. These areas are available for immediate testing. A qualified person has not done sufficient work to classify the historical estimates as current mineral resource or mineral reserves. The Company is not treating the historical estimate as current mineral resources or mineral reserves as defined in NI 43-101. The Company cautions the reader that the historical estimates disclosed in this news release should not be relied upon.
Additional Historical Resources reported for the Arakompe, Maniape and Aifunka deposits, outside of ML150 | ||||||
Deposit | Category | Type | Historical Resource | Contained metal | ||
Method | cut-off | Mt | Au g/t | Au M Oz | ||
Maniape | Unclassified | OC | 1 | 8.0 | 2.2 | 0.6 |
Arakompa | Unclassified | UG | 5 | 2.8 | 9.0 | 0.8 |
Aifunka | Unclassified | OC | - | 1.0 | 3.3 | 0.1 |
Total | 11.7 | 3.9 | 1.5 | |||
The mine infrastructure is largely intact but will require refurbishment and modification, including the addition of a gravity recovery circuit, underground rehabilitation and purchase of mobile equipment and underground fleet. A fully functional camp, tailings dam, road system, power and fuel systems, clinic, etc are in place. The mine site currently has over 100 Barrick employees on site for care and maintenance operations with the majority undertaking general site security roles.
The Proposed Transaction
Otterburn proposes to acquire all of the issued and outstanding shares of Target in exchange for issuing the Payment Shares to the Sellers. It is expected that there will be approximately 44,000,000 shares of the Target outstanding on closing; such that the Sellers will receive 44,000,000 Payment Shares and hold approximately 58% of the common shares of Otterburn on closing (the "Resulting Issuer") assuming completion of the private placement referred to below.
The Transaction was negotiated at arm's length (Mr. Lueck abstaining). As the Transaction will constitute a reverse take-over under the policies of the TSX Venture Exchange, (the "Exchange"), (i) the Transaction will require approval of the Exchange and Otterburn's shareholders; (ii) the Payment Shares held by new "principals" will be subject to such escrow requirements as may be imposed by the Exchange (expected to be three years pursuant to a Value Security Escrow Agreement); (iii) Otterburn may be required to engage a sponsor; and (iv) Otterburn's common shares will remain halted on the Exchange until the Transaction has closed. In addition, all the Payment Share will be subject to a four month hold period imposed by the Exchange and the Securities Act (British Columbia).
Certain Conditions to Transaction
The completion of the Transaction will be subject to the satisfaction of certain conditions prior to closing, including the following:
completion of the BKL Purchase Agreement in accordance with its terms, including that ML 150 and EL 470 are both granted extensions, and K92PNG acquires all of the shares of BKL;
on Closing, the resignation of Darren Devine and Darryl Cardey as officers and directors of Otterburn, and the appointment of replacement officers and directors as appointed by the Sellers;
Otterburn completing the Private Placement referred to below;
receipt of Exchange approval;
receipt of Otterburn shareholders' approval to the purchase of Target (if required);
completion of a technical report on the Property in compliance with Canadian Securities Administrators National Instrument 43-101, to the satisfaction of Otterburn;
receipt by Otterburn of a favourable legal opinion as to the title of the Property;
Change in Management
Upon completion of the Transaction, it is anticipated that the board of directors and management of the Resulting Issuer will include the following:
R. Stuart (Tookie) Angus, Chairman & Director
Mr. R. Stuart "Tookie" Angus is an independent business advisor to the mining industry. For the past 30 years, Mr. Angus has focused on structuring and financing significant international exploration, development and mining ventures. Mr. Angus is the former Chairman of the Board of BC Sugar Refinery Limited, he was a Director of First Quantum Minerals until June 2005, a Director of Canico Resources Corporation until its takeover by CVRD in 2005, and a Director of Bema Gold until its takeover by Kinross Gold in 2007. More recently, he was Managing Director of Mergers & Acquisitions for Endeavour Financial, a Director of Ventana Gold until its takeover by AUX Canada Acquisition in 2011 and a Director of Plutonic Power until its merger with Magma Energy in 2011. He is presently Chairman of Nevsun Resources Ltd., which operates one of the highest grade open pit copper mines in the world.
Ian Stalker, CEO, Director
Mr. Stalker is an international mining executive with 40 years of experience in mine development and operations in Europe, Africa and Australia. Mr. Stalker was the Chief Executive Officer of UraMin Inc., a London- and Toronto-listed uranium company from July 2005 until its $2.5 billion acquisition by Areva in August 2007. Mr. Stalker was a Vice President of Gold Fields Ltd., the world's fourth largest gold producer, where he spent considerable time on the ground on their International operations. He has worked his way up from operational roles in the base and precious metals arenas to executive positions in some of the largest mining companies in the world and has successfully managed eight mining projects through feasibility study, development and construction phases. In recent years, Mr. Stalker has been involved in raising in excess of $500 million for various exploration and development projects worldwide.
Bryan Slusarchuck, President, Director
Mr. Slusarchuk has significant international experience structuring, funding and operating companies involved in mineral exploration, development and production. In addition to experience operationally and in the conducting of equity raises, Mr. Slusarchuk has structured complex debt financing transactions in the United States, Canada and Europe with multiple top tier banks. This includes negotiating and securing the first ever funding of a mineral exploration company by the European Bank for Reconstruction and Development (EBRD). Mr. Slusarchuk is a past TEDx speaker on the topic of capital markets, was as senior advisor at a top tier Canadian brokerage firm, and is a member of multiple mining industry advocacy associations in emerging markets; through which he has regularly advised various governments on the formation of mining policy. He has experience on the Board of and as an officer of multiple publicly traded and private companies in Europe, the United States and Canada.
Brian Lueck, Chief Operating Officer, Director
Mr. Lueck has over 25 years' experience as an officer and director of Canadian and London public companies involved in mineral exploration, resource definition and feasibility studies. He is a practicing member of the Association of Professional Engineers and Geoscientists of British Columbia and a Member of the Society of Economic Geologists.
Justin Blanchet, Chief Financial Officer
Mr. Blanchet has acquired considerable experience in the areas of financial reporting, regulatory compliance, treasury, and audit for both Canadian and U.S. publicly listed companies, primarily in the mining industry. He has international experience working on projects throughout the world and is well versed in the requirements of complex regulatory environments and the requirements of International Financial Reporting Standards. Mr. Blanchet is a Canadian Chartered Accountant and a U.S. Certified Public Accountant (Illinois).
Andrew J. Vigar - Advisor
Mr. Vigar has 38 years' experience in the minerals industry covering areas from regional exploration to mining, corporate and finance. He is a geologist and later studied Geostatistics at the University of Queensland where he still lectures. He founded and ASX listed Drummond Gold in 2007 and assisted with the restructuring and ASX listing of Alligator Energy in 2010. He is a current Director of ASX listed Alligator Energy and Krucible Metals. He moved to Hong Kong in 2011 to establish Mining Associates Limited, a global minerals advisory firm, and also works privately in project sourcing and restructuring.
Mr. Vigar has extensive experience in PNG. He was Technical Services Manager for CRAE (PNG) responsible for the Wafi Golpu and Hidden Valley projects in 1995/96 and continued in a consulting role. He was the Bank appointed auditor on the Lihir Gold project 2002/03 and was the competent person on the Ramu Nickel Project and Kainantu Project 2000 to 2004. In 2005 he undertook a project review, resource estimates and grade control systems for the Tolokuma Project. He is currently an advisor to a number of PNG companies. He has been a member of the PNG Chamber of Mines and Energy since 2004. He has been involved as a consultant on the Kainantu Mine since it was initially discovered.
Mr. Vigar is a founder, officer, director and shareholder of the Target.
Alex Davidson, Advisor
Mr. Davidson previously served as Executive Vice President, Exploration and Corporate Development, Barrick Gold, responsible for Barrick Gold Corporation's international exploration programs and corporate development activities. Mr. Davidson is currently a director of multiple companies including gold producer, Yamana Gold Inc. Mr. Davidson was presented the 2005 A.O. Dufresne Award by the Canadian Institute of Mining, Metallurgy and Petroleum to recognize exceptional achievement and distinguished contributions to mining exploration in Canada. In 2003, Mr. Davidson was named the Prospector of the Year by the Prospectors and Developers Association of Canada.
Private Placement
In conjunction with the Transaction, Otterburn has negotiated, subject to the acceptance of the Exchange, a private placement totaling $10,000,000. These funds will be raised by Otterburn issuing up to 20,000,000 shares at a price of $0.50 per share. The funds will be used to refurbish the mine and mill, prepare for the re-commencement of mining and milling at a rate of 180,000tpa and undertake exploration required to keep the exploration tenement package in good standing.
Change of Name
Otterburn proposes to change its name on closing to "K2 Gold Corp." or such other name as is acceptable to the Registrar of Companies and the Exchange.
Sponsorship
Otterburn has not yet engaged a sponsor. Otterburn has made application to the Exchange for waiver of the requirement to have a sponsor in connection with this transaction, however there is no assurance this waiver will be granted.
In accordance with Exchange policy, the Company's shares are currently halted from trading. Trading will resume upon the Company having made adequate filing with the Exchange.
Brian Lueck, B.Sc. Geo., a "qualified person" within the meaning of NI 43-101, reviewed and participated in the preparation of the technical information disclosed in this news release.
ON BEHALF OF THE BOARD
"Brian Lueck", President & CEO
Completion of this transaction is subject to a number of conditions, including but not limited to, Exchange acceptance and disinterested shareholder approval. The transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the Filing Statement or Management Information Circular to be prepared in connection with the transaction, any information released or received with respect to the reverse take-over may not be accurate or complete and should not be relied upon. Trading in the securities of Otterburn Resources Corp. should be considered highly speculative.
The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.
Neither the 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.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Financing and private placement; future exploration and testing; use of funds; and the business and operations of the Resulting Issuer after the proposed transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; delay or failure to receive board, shareholder or regulatory approvals; and the results of current exploration and testing. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Otterburn disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
