April 6, 2018
Eureka Provides Update on Kore Acquisition
EUREKA PROVIDES UPDATE ON KORE ACQUISITION
Including Share Exchange Ratio and Addition of Industry Leaders to the Board at Closing
Vancouver, British Columbia, April 5, 2018 - Eureka Resources, Inc. (TSXV – EUK) (“Eureka”) is pleased to provide an update on its proposed three-cornered amalgamation (the “Transaction”) with Kore Mining Ltd. (“Kore”), as previously announced on February 27, 2018.
Highlights of the update include: Kore shareholders to receive 3.28 common shares of Eureka (each, a “Eureka Share”) following a 1 for 10 consolidation of the Eureka Shares (the “Consolidation”), resulting in the former shareholders of Kore holding 91.8% of the issued and outstanding Eureka Shares following the closing of the Transaction (the “Closing”) Industry leaders, Harry Pokrandt (Sandspring, Macquarie, Lithium X) and Don McDonald (QuadraFNX, NovaGold, DeBeers), to be appointed to the board of directors of the Resulting Issuer (the “Board”) in connection with the Closing
Eureka Consolidation and Transaction Exchange Ratio
At the annual general and special meeting of Eureka shareholders held on March 22, 2018, the shareholders of Eureka authorized the Eureka board of directors to proceed with the Consolidation. It is expected that the Consolidation will be completed immediately prior to the Closing, at which time there are expected to be 5,474,740 Eureka Shares outstanding, after giving effect to the Consolidation and the Debt Settlement (as defined below).
As at the date of this news release, there are 18,707,220 Kore common shares (each, a “Kore Share”) outstanding. Eureka has agreed to issue 3.28 post-Consolidation Eureka Shares in exchange for each Kore Share (the “Exchange Ratio”), resulting in the shareholders of Kore being issued a total of 61,290,384 Eureka Shares (on a post-Consolidation basis). Immediately following the Closing, the former Kore shareholders shall hold no less than 91.8% of the total number of issued and outstanding Eureka Shares, prior to giving effect to the concurrent financing of Eureka subscription receipts to be undertaken in connection with the Transaction, as further described in Eureka’s news release dated February 27, 2018.
It is expected that, in connection with the Closing, all of the current directors and officers of Eureka will resign. The Board is expected to consist of James W. Hynes, Adrian Rothwell, Brendan Cahill, Robert J. (“Don”) MacDonald, and Harry Pokrandt. Details with respect to the backgrounds of Mr. Hynes, Mr. Rothwell and Mr. Cahill were included in Eureka’s news release dated February 27, 2018. The following are brief descriptions of the backgrounds of Mr. Pokrandt and Mr. MacDonald.
Mr. Pokrandt is currently the Chief Executive Officer and a director of Hive Blockchain Technologies Ltd. (formerly Leeta Gold Corp.) and a director of Sandspring Resources Ltd. Mr. Pokrandt previously served as Managing Director of Macquarie Capital Markets Canada Ltd. (formerly, Orion Securities Inc.) from 1985 to 2015, leading its Vancouver Metals & Mining Group where he worked on numerous financing and advisory assignments. He was formerly a director of Lithium X Energy Corp. prior to its sale and was also formerly a director of Fiore Exploration Ltd., and BQ Metals Corp.
Mr. MacDonald served as Chief Financial Officer and then acting Chief Executive Officer at KGHM International (formerly Quadra FNX Mining) from 2010 until March 2017. QuadraFNX was purchased in 2012 for $3 billion by Polish mining company, KGHM. Mr. MacDonald has over 30 years’ experience in mine development, operation and financing and has been involved in the operation or development of over twenty mines in North and South America, the completion of mine financings totaling $5 billion, and multiple M&A transactions. He previously served as Chief Financial Officer for NovaGold, De Beers Canada Mining (formerly Winspear Diamonds) and Dayton Mining. Mr. MacDonald is a Chartered Professional Accountant, CA and holds Bachelor’s and Master’s degrees in Engineering from Oxford University. From 2013 to 2017, he was a director of the Mining Association of Canada.
Eureka Debt Settlement
Eureka is also pleased to announce that it has entered into debt settlement agreements with two arm’s length and seven related party creditors (being Michael Sweatman, Brent Petterson, Christina Boddy, Warren Stanyer, John Kerr, Kristian Whitehead and Gary Vivian), pursuant to which Eureka will issue the creditors an aggregate of 4,285,000 Eureka Shares (on a pre-Consolidation basis) at a deemed price of $0.05 per Eureka Share in satisfaction of aggregate indebtedness of $214,250 (the “Debt Settlement”).
As noted above, seven of the creditors, being MDS Management Ltd. (a company controlled by Michael Sweatman) MBP Management Ltd. (a company controlled by Brent Petterson), Rhodanthe Corporate Services (a Company controlled by Christina Boddy), Warren Stanyer, John Kerr, Kristian Whitehead and Gary Vivian, are each considered to be a “related party” of Eureka within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”) and the issuance of Eureka Shares to them in connection with the Debt Settlement will be a “related party transaction” within the meaning of MI 61-101. However, the Debt Settlement will be exempt from the valuation requirement of MI 61-101 by virtue of the exemption contained in Section 5.5(b) of MI 61-101 as the Eureka Shares are listed on the TSX Venture Exchange (the “TSXV”), and from the minority shareholder approval requirements of MI 61-101 by virtue of the exemption contained in Section 5.7(a) of MI 61-101 in that the fair market value of the Eureka Shares issued to each related party will not exceed 25% of Eureka’s market capitalization.
Completion of the Debt Settlement, which is expected to occur prior to the Consolidation and the Closing, is subject to the approval of the TSXV. Eureka Shares issued in connection with the Debt Settlement will be subject to a statutory hold period of four months and one day from the completion thereof.
The Transaction will be effected by way of a three-cornered amalgamation, without court approval, under the Business Corporations Act (British Columbia), pursuant to which, through the amalgamation of a newly incorporated British Columbia subsidiary of Eureka and Kore, Eureka will acquire all of the issued and outstanding Kore Shares in exchange for the issuance of Eureka Shares (on a post-Consolidation basis) and Kore will become a wholly-owned subsidiary of Eureka.
Following the Closing, the Resulting Issuer will continue on with the business of Kore and remain a Tier 2 mining issuer on the TSXV, with Kore as its operating subsidiary. The Resulting Issuer is anticipated to hold all existing assets of Eureka and Kore as at the Closing. It is expected that, in connection with the Closing, Eureka will change its name to “Kore Mining Ltd.”, or such other name as agreed by the parties, with a corresponding change of the trading symbol for the Eureka Shares on the TSXV.
Certain Eureka Shares to be issued to Kore shareholders in connection with the Transaction will be subject to escrow under the policies of the TSXV.
The Transaction remains subject to a number of terms and conditions, including, among other things: the completion of the Consolidation; Eureka and Kore obtaining all necessary consents, orders and regulatory approvals, including the conditional approval of the TSXV; completion of the concurrent financing for minimum gross proceeds of $2,000,000; there being no material change occurring with respect to the business of Eureka or Kore; the satisfaction of obligations under the amalgamation agreement relating to each of the parties; the delivery by each of the parties of standard closing documents, including legal opinions; approval of the Transaction by the shareholders of Kore and Eureka, as required by applicable corporate law and the policies of the TSXV; and execution of support and voting agreements by all directors and officers of Kore and Eureka and any shareholders holding greater than 10% of the issued and outstanding shares of each of the parties.
None of the securities to be issued pursuant to the Debt Settlement or the Transaction have been or will be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or any state securities laws, and any securities issued pursuant to the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.
Kore is a development stage company that offers exposure to precious metals exploration and development in North America, with a corporate strategy focused on the identification and acquisition of attractive development and advanced exploration stage projects.
Kore, indirectly through wholly-owned subsidiaries, owns 100% interests in the Imperial and Long Valley gold development projects, located in California, USA (together, the “Projects”). Combined, most recent historical estimates of resources specify a total of 2,090,200 measured and indicated and 1,869,500 inferred gold ounces. A Qualified Person has not done sufficient work to classify the historical estimates as current resources and Kore is not treating the historical estimates as current resources. Significant data compilation, re-drilling, re-sampling and data verification may be required by a Qualified Person before the historical estimates at the Projects can be classified as current resources. Kore has no other material financial assets or liabilities.
Each of the Projects has the potential to host near-surface, open pit, heap leachable gold deposits. The Projects combine low technical risk, high advancement potential and a low initial cost.
The Imperial Project has a historical feasibility study and environmental impact study published in 1996 by Glamis Gold. A historical preliminary economic assessment was prepared in 2012 , which stated a pre-tax net present value (“NPV”) of US$215 million (US$1,200/oz gold price) while projecting average production of 120,000 ounces of gold per year over a mine life of 10 years. Long Valley had a historical preliminary economic assessment performed in 2008, which projected an internal pre-tax NPV of US$102 million (US$800/oz gold price) on oxide ounces of gold only (approximately 535,400 ounces of gold).
Table 1: Combined historical estimates of Kore Project resources
Size Grade Au Source Au Cutoff
(tonnes) (g/t) (oz) (g/t)
Long Valley 24,128,309 0.58 452,500 2008 PEA 0.34
Imperial 0 0.00 0 2012 PEA 0.00
Total Measured 24,128,309 0.58 452,500
Long Valley 37,810,382 0.62 758,700 2008 PEA 0.34
Imperial 45,762,947 0.60 879,000 2012 PEA 0.17
Total Indicated 83,573,330 0.61 1,637,700
TOTAL M&I 107,701,638 0.60 2,090,200
Long Valley 29,858,452 0.58 571,500 2008 PEA 0.34
Imperial 76,334,175 0.53 1,298,000 2012 PEA 0.17
TOTAL INFERRED 106,192,627 0.54 1,869,500
The historical mineral resources in this news release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.
Imperial Mineral Historical Resource Estimation Parameters: a) Grade estimation is based on assay samples composited to 20ft intervals. Grade capping thresholds were determined following a detailed statistical analysis of the data for the entire mineralized domains varied from 0.02 to 0.2 ounces per ton (opt) gold (Au). b) Resource model grade blocks were estimated using Gemcom GEMSTM modeling software based on a traditional wireframe interpretation constructed from a sectional interpretation of drilling data. c) The database for the Imperial model consisted of 349 RC holes totalling 190,134 feet of drilling. A total of 36,361 analyses were considered for use in the resource estimate. d) The modelled gold mineralized zone was subdivided into three domains displaying different strike or dip directions with a total length of 3,200 ft, width up to 800ft and average thickness of 85ft in the East area and 1,200ft in length, 1,000ft in width and average thickness of 90ft to 120ft in the West area, dipping from 5 to 35 degrees e) A bulk density value of 0.077 ton per cubic foot was used and derived from 9 core holes consisting of 32 samples collected in a 1994 and 1995 drilling program. f)
Mineral resources were reported within an optimized pit shell using a gold price of US$1,400/oz with a process recovery of 80%. g) Process costs used were US$1.50/ton and G&A was US$0.40/ton. Open pit mining costs were US$1.20/ton and sustaining capex was US$0.50/ton with open pit slopes of 45 degrees.
Long Valley Historical Mineral Resource Estimation Parameters: a) Grade estimation is based on assay samples composited to 10ft intervals. Grade capping thresholds were determined following a detailed statistical analysis of the data for the entire mineralized domains and varied from 0.029 to 0.452 ounces per ton (opt) gold (Au). Capped Au grade in the MDA model was 0.25opt. b) Resource model grade blocks were estimated using Surpac® modeling software based on a traditional wireframe interpretation constructed from a sectional interpretation of drilling data. c) The database for the Long Valley model consisted of 896 holes, including 20 core holes, totalling 268,275 feet of drilling. A total of 47,792 analyses were considered for use in the resource estimate. d) The modelled gold mineralized zone is contained within the Hilton Creek South and Southeast zones with a total length of 7,748ft and widths ranging from 500ft to 1,500ft in a generally flat lying tabular body from 50 to 200ft thickness e) A bulk density value of 0.065 ton per cubic foot was used and derived from 7 core holes consisting of 12 samples collected by Royal Gold, 10 core holes consisting of 93 samples collected by Amax and 10 samples by MDA. f) Mineral resources were reported within an optimized pit shell using a gold price of US$550/oz with a process recovery of 79% less than 150ft from surface and 39% between 150ft and 200ft. g) Process costs used were US$1.96/ton and G&A was US$0.71/ton. Open pit mining costs were US$1.20/ton with open pit slopes of 45 degrees.
A LARGE GOLD RESOURCE Historical estimate of 2,090,200oz Measured and Indicated, 1,869,500oz Inferred with historic 2P reserves. A Qualified Person has not done sufficient work to classify the historical estimates as current resources and Kore is not treating the historical estimates as current resources. Last California exploration completed in 1996 Updated in 2008 (Long Valley), 2012 (Imperial)
OVER 141,225 METRES (468,000 FEET) OF DRILLING Long Valley drilling has consisted of 869 holes totaling 268,275ft Imperial drilling has consisted of 349 RC holes and 9 core holes totalling 200,000ft
LOW COST MINING, HISTORICAL FEASIBILITY, PEA Low strip ratios (Long Valley 1:1, Imperial 2.68:1) Feasibility and draft EIS-EIR completed by Glamis (Goldcorp) in 1996 on Imperial California gold deposits deeply oxidized epithermal systems with broad disseminated zones Excellent metallurgy in oxide zones (Long Valley 79%, Imperial 83% recoveries projected) Low operating cost projects with weakly cemented gravel overburden at Imperial and consolidated pyroclastic and moat sediments at Long Valley
The financial statements of Kore for the fiscal year ended December 31, 2017 and the period from inception to December 31, 2016 are currently being audited. They will be included in the information circular to be prepared by Eureka in connection with the Transaction.
Technical information with respect to the Projects contained in this news release has been reviewed and approved by David S. Smith, CPG, who is Kore’s designated independent qualified person for the purposes of this news release.
Eureka is a mineral exploration company based in Vancouver, British Columbia.
British Columbia, Canada
Eureka’s 100% owned FG Gold property is an advanced-stage gold project located in the Cariboo Mining Division. Historical exploration has established a Measured and Indicated (376,000 ounces) gold resource at an average grade of 0.776 g/t gold, using a cut-off grade of 0.5 g/t, and an Inferred gold resource (634,900 ounces) at an average grade of 0.718 g/t gold, using a cut-off grade of 0.5 g/t. Details of the gold resource can be found in “NI 43-101 Technical Report, Frasergold Exploration Project, Cariboo Mining Division, dated July 27, 2015” available under Eureka’s profile on SEDAR or on Eureka’s website.
Eureka has a 100% interest in the Gold Creek property located in the Cariboo Mining Division.Gold Creek is a grassroots gold project neighbouring, and with similar geology to the Spanish Mountain deposit owned by Spanish Mountain Gold Ltd.
Yukon Territory, Canada
Eureka’s 100% owned Luxor property consists of three non-contiguous claim blocks totalling 360 mining claims. Luxor is located in the Dawson Range Gold Belt, a district of major porphyry, breccia and vein occurrences. Eureka’s 100% owned TAK property is also located in the Dawson Range Gold Belt and consists of 82 mining claims.
Neighbouring projects include Goldcorp’s Coffee project and White Gold’s White Gold project.
Eureka owns a 50% interest in the Gemini lithium brine project located approximately 40 kilometres (26 miles) south of North America’s only producing lithium mine at Silver Peak, Nevada.
Technical information contained in this news release related to Eureka’s properties has been reviewed and approved by Kristian Whitehead, P.Geo., Eureka’s designated Qualified Person.
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the Eureka Shares in the United States. The Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws and may not be offered or sold within the United States or to U.S. persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
Further information on Eureka can be found on Eureka’s website at www.eurekaresourcesinc.com and at www.sedar.com, or by contacting Michael Sweatman, President and CEO, by email at firstname.lastname@example.org or by telephone at (604) 449-2273.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of TSX Venture Exchange) accepts responsibility for the adequacy of accuracy of this release.
Cautionary Statement Regarding Forward-Looking Information
Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. Where applicable, 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 any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.
The Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release.
All information contained in this news release with respect to Eureka and Kore was supplied by the parties, respectively, for inclusion herein, and Eureka and its directors and officers have relied on Kore for any information concerning such party, including information concerning the Projects.
This news release contains forward-looking statements relating to the timing and completion of the Transaction, the future operations of Eureka, Kore, and the Resulting Issuer and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding the Transaction and the future plans and objectives of Eureka, Kore, and the Resulting Issuer are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Eureka’s, Kore’s, and the Resulting Issuer’s expectations include the failure to satisfy the conditions to completion of the Transaction set forth above and other risks detailed from time to time in the filings made by Eureka, Kore, and the Resulting Issuer with securities regulations.
The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of Eureka, Kore, and the Resulting Issuer. As a result, Eureka, Kore, and the Resulting Issuer cannot guarantee that the Transaction will be completed on the terms and within the time disclosed herein or at all. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and Eureka, Kore, and the Resulting Issuer will update or revise publicly any of the included forward-looking statements as expressly required by Canadian securities law.
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