Eureka Announces Proposed Acquisition of Kore Mining
Eureka Announces Proposed Acquisition of Kore Mining
Vancouver, British Columbia--(Newsfile Corp. - February 27, 2018) - Eureka Resources Inc. (TSXV: EUK) ("
Eureka
" or the
"
Company
") is pleased to announce that it has signed an amalgamation agreement dated February 24, 2018 (the
"
Agreement
") with Kore Mining Ltd. ("
Kore
"), a private British Columbia corporation based in Vancouver, BC, pursuant to
which Eureka has agreed to acquire all of the outstanding common shares of Kore (each, a "
Kore Share
") in exchange for
common shares of Eureka (each a, "
Eureka Share
") by way of a three-cornered amalgamation (the "
Transaction
"). Kore,
indirectly through its wholly-owned US subsidiaries, owns 100% interests in the Imperial and Long Valley gold development
projects, located in California, USA (together, the "
Projects
"). The Projects comprise development stage (and historic feasibility
stage) assets with over 141,225 metres of historic drilling.
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 will be required by a Qualified Person before the historical estimates at the Projects can be classified as current
resources.
The Transaction will constitute a reverse takeover (an "
RTO
") of Eureka by Kore under the policies of the TSX Venture
Exchange (the "
Exchange
").
Share Consolidation
As a condition to the closing of the Transaction (the "
Closing
"), Eureka will have completed a consolidation of the issued and
outstanding Eureka Shares on the basis of one post-consolidation Eureka Share for each ten pre-consolidation Eureka Shares
(the "
Consolidation
").
General Terms of the
Transaction
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 subsidiary of Eureka.
As at the date hereof, there are 50,462,402 Eureka Shares outstanding, which will be reduced to 5,046,240 Eureka Shares on a
post-Consolidation basis. Pursuant to the terms of the Agreement, Eureka has agreed to issue 3 post-Consolidation Eureka
Shares in exchange for each Kore Share (the "
Exchange Ratio
"), resulting in the shareholders of Kore being issued a total of
56,121,606 Eureka Shares (on a post-Consolidation basis). The Exchange Ratio has been determined on the basis of there
being this number of Eureka Shares outstanding at the Closing. However, prior to the Closing, Eureka intends to issue Eureka
Shares in settlement of certain outstanding liabilities in accordance with the policies of the Exchange (the "
Debt Settlement
"). If
the actual number of outstanding Eureka Shares and / or Kore Shares immediately prior to the Effective Time (including any
Eureka Shares issued in connection with the Debt Settlement) is greater or less than such amount, then the Exchange Ratio
shall be adjusted so as to ensure that, 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 Private Placement (as defined
herein)).
The Transaction is subject to various closing conditions, including, among other things, receipt of approval of the Exchange and
the conditions described below.
Following the Closing, Eureka will continue on with the business of Kore and remain a Tier 2 mining issuer, with Kore as its
operating subsidiary (with Eureka, after the Closing, being referred to herein as the "
Resulting Issuer
"). 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 Exchange.
Certain Eureka Shares to be issued to Kore shareholders in connection with the Transaction will be subject to escrow under the
policies of the Exchange.
None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States
Securities Act of 1933
, as amended, 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.
Conditions to the Transaction
The Transaction remains subject to a number of terms and conditions, including, among other things:
Eureka and Kore obtaining all necessary consents, orders and regulatory approvals, including the conditional approval of
the Exchange;
completion of the Private Placement for minimum gross proceeds of $2,000,000 and maximum gross proceeds of
$7,000,000;
there being no material change occurring with respect to the business of Eureka or Kore;
the satisfaction of obligations under the 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 Exchange; 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.
Eureka intends to seek a waiver from the Exchange of any requirement for a sponsor in connection with the Transaction.
In connection with the announcement of the Transaction, trading in the Eureka Shares has been halted and is expected to remain
halted until the Closing.
Proposed Officers and Directors
It is expected that, following the Closing, all of the current directors and officers of Eureka will resign and the board of directors of
the Resulting Issuer (the "
Board
") will consist of five directors, four of which will be nominated by Kore and one of which will be
nominated by Eureka. The newly-constituted Board shall be placed before shareholders of the Resulting Issuer for election at the
next occurring shareholders' meeting.
The Resulting Issuer shall initially be managed by Adrian Rothwell, as President and Chief Executive Officer, James W. Hynes,
as Chief Operating Officer, and Alan Ahlgren, as Chief Financial Officer.
The Board s expected to consist of James W. Hynes, Adrian Rothwell, Brendan Cahill and the additional nominees of each of
Kore and Eureka as described above. The following are brief descriptions of the proposed directors and officers of the
Resulting Issuer:
James W. Hynes
Formerly with Lafarge Canada Inc. and Reperio Resources Corp., Mr. Hynes has over 15 years of experience in the mining and
metals sector, and a Bachelor of Science in Engineering (1999), specializing in geological and geotechnical engineering, from
the University of New Brunswick.
Adrian Rothwell
Mr. Rothwell has over 20 years of experience in the mining and metals sector. He is currently a director of Fireweed Zinc Ltd.
Previously, he served as an executive of Goldcorp Inc., and Chief Financial Officer of NuLegacy Gold Corp, Kiska Metals Corp.
and MBMI Resources Inc. He is a British Columbia Chartered Professional Accountant and a member of the Chartered
Accountants of Australia and New Zealand. He previously worked for 10 years at PricewaterhouseCoopers LLP. Mr. Rothwell
holds a BA in Economics from Macquarie University.
Brendan Cahill
Mr. Cahill has over 15 years of experience in the mining and metals sector and in corporate finance, and is currently Chief
Executive Officer of Excellon Resources Inc., and a director of Group Eleven Resources Corp. He was formerly the Vice
President of Corporate Development for Pelangio Exploration Inc. and a lawyer at Davies Ward Phillips & Vineberg LLP.
W.
Alan Ahlgren
Mr. Ahlgren has over 30 years of experience across various industry sectors, including mining. He is currently Chief Financial
Officer of Graphite One Resources Inc., and formerly the Vice President Finance at Kinross Gold Corp. and Chief Financial
Officer at AQM Copper Inc. and First Coal Corp. As a graduate of the University of Manitoba with a Bachelor of Commerce in
Accounting and Finance, he is a British Columbia Chartered Professional Accountant since 1993 and a member of the Institute
of Corporate Directors.
Exclusivity and Break Fees
Eureka and Kore have agreed to exclusivity terms in the Agreement. However, nothing shall prohibit either party from complying
with their duties and/or fiduciary obligations under applicable law, including, without limitation, with respect to any unsolicited
proposal received by either party that may be superior to the Transaction.
Eureka and Kore have each agreed to immediately notify the other party of any information it may receive concerning an actual
or intended offer for any or all of its assets or any of its securities and shall allow the other party the opportunity to match any
actual bona fide offer presented in writing within 3 business days of such notice.
Should the other party elect not to match the
actual or intended offer, and should the recipient accept the offer, the recipient of the accepted offer must pay the other party a
break fee of $50,000.
Private Placement
In connection with the Transaction, it is expected that Eureka will undertake a private placement of subscription receipts for
minimum gross proceeds of $2,000,000 and maximum gross proceeds of $7,000,000 (the "
Private
Placement
"), on terms to
be agreed to by the parties.
At the closing of the Private Placement, the proceeds will be placed in escrow with an escrow agent
and released upon satisfaction of the release condition, which is expected to occur immediately prior to the Closing.
Principal Shareholders
In connection with the Transaction, it is expected that an aggregate of 19,500,300 Eureka Shares will be issued to 1130447
B.C. Ltd. and 15,000,300 Eureka Shares will be issued to Blaxland Pacific Management Corp. (each on a post-Consolidation
basis) in exchange for their Kore Shares, representing approximately 31.9% and 24.5%, respectively of the outstanding Eureka
Shares following the Closing. Each of these Kore shareholders are privately incorporated British Columbia companies under the
direction and control of Skye Marker and Michael D. Tomsett-Ell, respectively. The foregoing percentages have been calculated
based on there being 61,167,846 Eureka Shares issued and outstanding after giving effect to the Transaction but before the
issuance of any Eureka Shares in connection with the Debt Settlement and the Private Placement.
About Kore
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 was incorporated under the provisions of the
Business Corporations Act
(British Columbia) on February 22, 2016. There
are currently 17,907,202 Kore Shares issued and outstanding and there are expected to be 18,707,202 Kore Shares issued
and outstanding at the Closing.
Kore owns 100% of the Projects, which are located in the State of California. 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
1
, 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
2
estimates of Kore Project resources
3
Size
Grade
Au
Source
Au Cutoff
(tonnes)
(g/t)
(oz)
(g/t)
Measured
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
Indicated
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
Inferred
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.
PROJECT HIGHLIGHTS
A LARGE GOLD RESOURCE
Historical estimate of 2,090,200oz M&I, 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
n
ews
r
elease
has been reviewed and approved
by
David S. Smith,
CPG, who is
Kore's designated
i
ndependent
q
ualified
p
erson for
the purposes of this news
release.
About Eureka
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 the Company's profile on SEDAR or on the Company'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.
Nevada, USA
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.
With respect to Eureka technical information contained in this News Release Kristian Whitehead, P.Geo., the
Company's designated Qualified Person for this news release as it relates to Eureka's Properties
within the meaning
of NI 43-101, has reviewed and approved the technical information contained in this news release.
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the Shares in the United States.
The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (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 the Company's website at
www.eurekaresourcesinc.com
and at
www.sedar.com
,
or by contacting Michael Sweatman, President and CEO, by email at
or by telephone at (604)
449-2273.
1
Long Valley Project: Technical Report, February 20, 2003 by Neil Prenn, P.Eng. and Charles V Muerhoff, P. Geo. of Mine Development Associates, and Technical Report, Preliminary
Assessment, January 9, 2008 by Neil Prenn, P.Eng and Thomas Dyer, P.Eng. of Mine Development Associates, Reno Nevada. Prepared for Vista Gold Corp. ("2008 PEA").
Imperial Project: Preliminary Economic Assessment Technical Report October 26, 2012 by Gordon Doerksen, P.Eng. Lois Boxill, P.Eng. et al of SRK Consulting (Canada) Inc. Prepared for
ADR Capital Corp., Vancouver, BC. ("2012 PEA")
2
The reader is cautioned that the above referenced "Historical Resource" is considered historical in nature and as such is based on prior data and reports prepared by previous property
owners. The work necessary to verify the classification of this mineral resource estimate has not been completed and the resource estimate, therefore, cannot be treated as NI 43-101 current
resource verified by a Qualified Person. There can be no assurance that any of the historical resources, in whole or in part, will ever become economically viable.
3
Mineral Resources are not mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral Resource will be converted into
mineral Reserves. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.
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 Adjacent Properties and Forward-Looking Information
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange)
accepts responsibility for the adequacy or accuracy of this release.
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 the Company, 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 the Company, 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 the Company'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 the Company, 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 the Company, Kore, and
the Resulting Issuer. As a result, the Company, 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 the Company, Kore, and the
Resulting Issuer will update or revise publicly any of the included forward-looking statements as expressly required by
Canadian securities law.