Thursday, 24 May 2012

Mountain Lake Resources to be bought by Marathon Gold for $15.1 mln

Mountain Lake Resources (CVE:MOA) (OTC:MLKRF) Thursday said it will be acquired by Marathon Gold (TSE:MOZ) in a  $15.1 million deal that will see Marathon assume 100 per cent control of the two companies' Valentine Lake joint venture in Newfoundland.
The transaction will also see Mountain Lake's remaining projects transferred to Mountain Lake Minerals Inc., a newly incorporated exploration company.
Under the terms of the deal, Mountain Lake shareholders will receive 0.40 of a Marathon common share and 0.40 of a common share of the new entity for each Mountain Lake common share held.
The share consideration values Mountain Lake at 30 cents per share, 20 per cent higher than the junior explorer's closing price yesterday. The deal for 100 per cent of Mountain Lake is valued at $15.1 million, not including the value of Mountain Lake Minerals.
"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 Mountain Lake president and CEO Allen Sheito.
"It positions the Valentine Lake project for rapid development under 100-percent 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."
Mountain Lake said the newly incorporated company enables its shareholders to retain equity exposure to 100 percent of the Glover Island gold property, 100 percent of Little River gold and antimony asset and 100 percent of the Bobby's Pond base metals property, all located in Newfoundland.
These remaining projects will be transferred to the newly formed company, which will be led by the existing management team and board of Mountain Lake.
In April, Mountain Lake reported the completion of an initial NI 43-101 resource estimate for the Lunch Pond area of its 100 percent-owned Glover Island gold property in Newfoundland.
Compared to historical resources, the company said the NI 43-101 resource for Lunch Pond indicates a 27.8 percent decrease in grade, offset by a 57.4 percent increase in tonnage, resulting in a 14.1 percent increase in contained gold ounces.
The transaction will also see Marathon subscribe for units of the new exploration company for a total of $300,000, representing around a 6.2 per cent stake. Directors and officers of Mountain Lake will also subscribe for $360,000 of unit, for a 7.4 per cent stake.
At closing, Mountain Lake said its current shareholders will hold the remaining 86.4 percent of Mountain Lake Minerals, which will include the Glover Island asset.
Marathon Gold is a North American gold resource development company, with projects located in Newfoundland and Labrador, the Coeur d'Alene Mining District of Idaho and the Greenhorn District of Oregon.
"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,” said Marathon president and CEO Phillip Walford.
"With 100 percent ownership of the Valentine Lake project and a 50 percent interest in the Golden Chest Mine [in Idaho], Marathon will now boast 497,500 ounces of gold at a grade of 1.94 grams per tonne (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."
The Valentine Lake property has a 30 kilometre strike length, with the J. Frank Zone and Leprechaun gold deposit situated at the southwestern end of a gold-bearing mineralized corridor that extends for at least 23 kilometres in a northeasterly strike.
Recent drill results showed that step-out drilling in the northeast area of the project’s Leprechaun deposit intersected multiple high-grade intervals up to 60 metres down-dip from the Main Zone.
Hole VL-12-414 returned 9.07 grams per tonne (g/t) gold (Au) over 6.80 metres, including 66.63 g/t Au over 0.85 metres and 7.38 g/t Au over 2.55 metres, including 22.05 g/t Au over 0.85 metres.
At the J. Frank Zone within the project, Mountain Lake said that new near surface high-grade hanging wall mineralization included 6.46 g/t Au over 3.0 metres including 19.14 g/t Au over 1.0 metres in hole VL-12-428.
The Leprechaun deposit of the Valentine Lake project currently has an NI 43-101 compliant measured and indicated resource of 6.4 million tonnes grading 2.05 g/t gold for a total estimated 424,000 ounces of gold and an associated inferred resource of 5.7 million tonnes grading 1.65 g/t gold for an estimated 305,000 ounces of gold.
The mineral resource was estimated using a 0.5 g/t Au minimum cut-off over a three metre minimum width.
"This strategic acquisition exemplifies Marathon's commitment to building shareholder value by moving the company closer to the million ounce resource threshold," said Walford.
The deal, which has been approved unanimously by both boards, is targeted to close in July, subject to two thirds Mountain Lake shareholder approval. A special meeting to approve the transaction is expected to take place in July.
Shareholders of Mountain Lake representing around 7.1 per cent of shares have already agreed to vote in favour of the deal. If the deal does not complete, both parties could get a termination fee of up to $500,000, under certain circumstances.
Marathon has a right to match competing offers.

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