Strathmore secures key investment with Korean Electric Power for Gas Hills uranium project

Strathmore Minerals Corp (TSE:STM) announced Friday it entered a binding "Heads of Agreement" with Korea Electric Power Corp (KEPCO), which will see KEPCO help finance and earn an interest in Strathmore's wholly owned Gas Hills uranium project in Wyoming.

KEPCO and Strathmore must complete a Share Subscription Agreement and a Definitive Agreement before the end of September.

After completing the share subscription agreement, KEPCO will pay Strathmore US $10 million - $2 million as a project development allowance for the Gas Hills project, and $8 million as a subscription for new common shares of Strathmore, at a price of 66-cents each, subject to market conditions.

Strathmore will use these funds to determine the potential, quantity, quality and commercial value of the uranium deposits in the Beaver Rim area, located south of the property's main deposit.

The funds with also enable Strathmore to undertake a prefeasibility study and to generally advance the program at Gas Hills.

During this phase one portion of the agreement, Strathmore must also commit to $10 million in expenditures to move the project toward the mutually agreed upon milestones.

"We are very pleased that KEPCO has agreed to invest in Strathmore and partner with us in the development of the Gas Hills Uranium Properties," said Strathmore CEO, David Miller.

"KEPCO's vision in the future of nuclear power and international presence in uranium development is widely recognized, and . . . is expected to form a dynamic and capable partnership with the resources necessary to advance the Gas Hills project to production."

Strathmore has over 35,000 acres in mineral claims covering the Gas Hills property, located in central Wyoming.

At the end of July, Strathmore submitted a resource estimate on the property, which included over 5.5 million tonnes grading 0.097% triuranium octoxide, the naturally occurring form of uranium, for a total of more than 10.7 million pounds of the element in the measured and indicated category.

Historical resources have been estimated at approximately seven million pounds grading 0.72% triuranium octoxide, for a total of 10.1 million pounds.

Pending the successful completion of phase one, KEPCO has the option to enter into an operating agreement with Strathmore to establish a limited liability company (LLC) for the Gas Hills property.

By the end of the first year of the phase two portion of the project, KEPCO must contribute $10 million - $8 million to fund various activities on the site as agreed upon by Strathmore and KEPCO, and the remaining $2 million paid to Strathmore as a project development fee.

Once KEPCO has contributed the full $10 million, it will acquire an 11.42% interest in the LLC. It may earn an additional 11.42% interest by offering $10 million to fund the second year of the project. An additional $10 million to fund the third year of the phase two portion of the project will earn KEPCO an additional 11.42% interest, bringing its possible interest in the LLC to 34.26% for $30 million.

Still, once the LLC obtains all required permits, licenses and approvals for the mining, milling and exploration of the uranium deposits on the property, KEPCO may earn another 5.74% in the LLC - bringing its total to 40% - by contributing an additional $5 million.

Throughout the project's development, Strathmore will remain the operator of the Gas Hills property and will receive a management fee.

The yet-to-be-formed LLC will have a management committee, which will be comprised of both Strathmore and KEPCO members, and will oversee and determine policies, objectives, procedures, actions and budgets.

The news sent Strathmore's stock on the Toronto Stock Exchange up 3.64% to trade at $0.57 per share as of 12:03 pm EDT, despite the mining sector's 4% drop.