LEXAM EXPLORATIONS INC.
TSX VENTURE : LEX

LEXAM EXPLORATIONS INC.

April 28, 2010 21:18 ET

Lexam Explorations Inc.: Fourth Quarter 2009 Results

(All amounts expressed in Canadian dollars)

TORONTO, ONTARIO--(Marketwire - April 28, 2010) - LEXAM EXPLORATIONS INC. (TSX VENTURE:LEX) reports financial results for the Fourth Quarter and twelve months, 2009. The Company recorded net earnings of $6,225,543 ($0.13 per share) and $14,573,538 ($0.30 per share) for the three and twelve month periods versus a net loss of $3,440,742 ($0.07 per share) and $2,705,730 ($0.06 per share) for the respective periods, 2008. The market value of securities, cash and other monetary assets minus liabilities was approximately $35.5 million at the end of the Fourth Quarter, 2009 versus $10.3 million in the respective period, 2008 and $36 million at the end of the Third Quarter, 2009.

FINANCIAL RESULTS

For the three and twelve months ending December 31, 2009, Lexam reported a profit of $6,225,543 ($0.13 per share) and $14,573,538 ($0.30 per share). This compares with a loss of $3,440,742 ($0.07 per share) and a loss of $2,705,730 ($0.06 per share) in the respective periods, 2008. Net profit (or loss), due to accounting standards, will fluctuate from quarter-to-quarter. Lexam anticipates this to continue in future.

The market value of securities, cash and other monetary assets minus liabilities increased to approximately $35.5 million during the Fourth Quarter 2009 versus $10.3 million in the respective period 2008 and $36 million at the end of the Third Quarter 2009. As of April 28, 2010 this figure was approximately $26.4 million. Lexam believes this figure provides the best overview of the Company's financial health. For a quarter- over-quarter comparison, please see Table 1.

Table 1.

  Q4 Q1 Q2 Q3 Q4 April 28
  2008 2009 2009 2009 2009 2010
Total Assets minus Total Liabilities (in millions) $10.3 $12.6 $16.5 $36 $35.5 $26.4
Per Share Basis $.21 $0.26 $0.34 $0.74 $0.73 $0.54

The profit during the Fourth Quarter was due to the combination of Lexam recognizing a $3.6 million unrealized gain on the VG Gold warrants treated as derivative instruments for accounting purposes, selling certain securities at a price that exceeded book value, which resulted in a $3 million gain. This amount was offset by operating losses at VG Gold ($0.2 million) and administrative expenses ($0.1 million).

Unlike the shares Lexam holds in Rubicon, which are held on the Company's Balance Sheet at fair market value, the VG Gold shares are equity accounted and held at cost, subject to quarterly adjustments based on Lexam's share of VG Gold's operating losses (or gains). Lexam's share of operating losses is determined by its percentage ownership in VG Gold. Lexam also recognized an unrealized gain on the warrants, which relates to the warrants being treated as derivative instruments for accounting purposes. The unrealized gain is included as a component of the investment cost.

For example, if Lexam owns 40% of VG Gold it will assume 40% of VG Gold's operating losses. Assuming VG Gold reports a loss, Lexam will lower its cost of investment by this amount and record the same amount against its earnings. These losses have no direct impact on Lexam's cash balances or the value of its security holdings.

Lexam's working capital at December 31, 2009 was approximately $10.7 million compared to $9.6 million at December 31, 2008. The Company's cash balance at December 31, 2009 increased to $7.9 from $2.0 million at December 31, 2008. The Company has no significant contractual obligations. At December 31, 2009 and December 31, 2008, Lexam's outstanding common shares remained unchanged at 48,499,287.

The complete Fourth Quarter and Annual Report, including management's discussion and analysis, financial statements, and notes can be found on the Company's website at www.lexamexplorations.com and on SEDAR at www.sedar.com.

VG GOLD CORP INVESTMENT
Timmins, Ontario, Canada

VG Gold is an exploration company focused on the Timmins mining camp in Ontario, Canada.

During the Fourth Quarter Lexam exercised its right to nominate a director. Mr. John Drake's nomination was submitted by Lexam and accepted by the VG Gold board on October 5, 2009. In addition, Lexam exercised 37.5 million warrants on October 21, 2009 for total consideration of $5.6 million in order to help fund VG Gold's ongoing exploration. The warrant exercise increased Lexam's ownership from 27% (37.5 million common shares) to 42% (75 million common shares) of VG Gold's outstanding common shares.

At December 31, 2009 Lexam's investment in VG Gold had a market value of $27.8 million. As of April 28, 2010 Lexam's investment in VG Gold has a current market value of $18.4 million.

Table 1 – Change in VG Gold Investment

  VG Gold Investment VG Gold Investment VG Gold Investment
  (Q3-Sep 30, 2009) (Q4-Dec 31, 2009) (Apr 28, 2010)
Number of Shares 37.5 million 75.0 million 75.0 million
Number of Warrants 37.5 million - -
Market Value $23.6 million $27.8 million $18.4 million

Early results from VG Gold's drilling have intersected favourable gold mineralization (Table 2). Drilling to date has been focused on the Paymaster West Project, where VG Gold has an option to earn 60% from Goldcorp Inc., by making $6.0 million in exploration expenditures by June 2012. Once VG Gold has given notice that it has earned its 60%, Goldcorp has six months to decide if it wishes to increase its ownership from 40% to 70% by paying VG Gold $710,000 and spending $8.25 million on the property within two years and also completing a feasibility study by the end of year three.

Table 2 – Paymaster West
Significant Drill Results

  Grade Interval Length Grade Interval Length
Hole Number (gpt) (m) (opt) (ft)
 
VGP-09-07 14.31 2.7 0.42 8.9
VGP-09-10 41.67 1.8 1.22 5.9
And 5.25 10.6 0.15 34.8
VGP-09-19 11.6 2.0 0.34 6.6
VGP-09-20 1,390.0 0.9 40.54 3.0
VGP-09-23 9.4 4.6 0.27 15.1
VGP-09-36 32.0 1.5 0.93 5.0
VGP-09-37 52.8 0.8 1.54 2.7
VGP-09-45 2.29 37.3 0.07 122.4
VGP-09-58 129.50 0.9 3.78 3.0

In addition to the Paymaster West Project, VG Gold has identified a number of prospective gold targets on other projects that it controls. Drilling has now commenced on the Davidson-Tisdale property, which is 68.5% owned by VG Gold and 31.5% by San Gold Corporation. Deeper drilling is scheduled to occur on Buffalo Ankerite and Paymaster West during the second quarter.

All exploration work is conducted under Kenneth Guy, P. Geo., designated Qualified Person for VG Gold, who has reviewed and approved this section of the news release pertaining to VG Gold's exploration results. VG Gold has instituted a Quality Control and Assurance program (QA/QC), using control samples such as Blanks and duplicate checks. In addition, duplicate analyses of 10% of the samples are corroborated by check assays on sample performed at a third party Laboratory. For additional information regarding VG Gold's exploration results and disclosure, please visit www.vggoldcorp.com.

RUBICON MINERALS INVESTMENT
Red Lake, Ontario, Canada

Rubicon Minerals is an exploration company focused on the Red Lake Mining Camp in Ontario, Canada.

As of December 31, 2009 and April 28, 2010 Lexam owned approximately 0.6 million shares of Rubicon. It is important to note that Lexam has net taxes receivable in relation to these shares based on Rubicon's share price at the time they were received (US$2.00 per share). Therefore, Lexam is only required to pay capital gains on sales that exceed US$2.00 per share (For example, if a share is sold for $4.50 capital gains would only be applied to amount that exceeded $2.00. In this example the taxable amount would be $2.50).

Table 3 – Change in Rubicon Investment

  Rubicon Investment Rubicon Investment Rubicon Investment
  (Q3-Sept 30, 2009) (Q4-Dec 31, 2009) (Apr 28, 2010)
Number of Shares 2.3 million 0.7 million 0.7 million
Market Value $10.2 million $3.2 million $2.6 million

BACA OIL & GAS PROJECT
Colorado, USA

The Baca Oil and Gas Project is located in south-central Colorado, USA. The Company owns 75% of the oil and gas rights. The remaining 25% is owned by ConocoPhillips.

During the Fourth Quarter of 2008, the Company announced that the United States Fish and Wildlife Service ("USFWS") had issued a Finding of No Significant Impact ("FONSI"). The USFWS' decision was reached based on the results of an Environmental Assessment ("EA") conducted by the Service under the National Environmental Policy Act ("NEPA"). The USFWS environmental review process lasted 15 months and involved extensive public meetings, participation, and comment by all interested parties.

This decision by the USFWS was the final approval required before the Company could move forward with its planned exploration for oil and gas.

The Baca Project has been consistently challenged by opposition groups and on November 3, 2008 the San Luis Valley Ecosystem Council ("SLVEC") made a motion to reopen litigation against the USFWS.

The SLVEC maintains that USFWS decision to issue a FONSI based on the EA does not comply with NEPA.

During the First Quarter of 2009, the District Court of Colorado ordered that the motion to reopen litigation against the USFWS be allowed to proceed. A Preliminary Injunction Hearing was held on May 20, 2009.

On September 4, 2009 the Company announced that the Federal District Court granted the SLVEC Motion for a Preliminary Injunction against the USFWS. This decision prohibits any exploration drilling by the Company until a final ruling is reached in the litigation.

On November 17, 2009 the parties to the litigation attended a court mandated Settlement Conference. On January 15, 2010 a second Settlement Conference was held to discuss a potential settlement terms and to set a briefing schedule should the settlement be unsuccessful.

The Company has extended an offer to sell its mineral interests underlying the Baca Wildlife Refuge and surrounding areas for cash consideration of US$8,400,000. If a signed agreement of purchase and sale has not been executed by June 11, 2010, the Company will proceed with litigation. The plaintiffs' first brief is due July 16, 2010, and the Company's brief is due on August 20, 2010. The purchase price offered by the Company represents a settlement proposal to resolve pending litigation and does not represent management's valuation of the Company's mineral interest on the Baca property.

OTISH URANIUM PROJECT
Québec, Canada

The Otish Uranium Project is located in north-central Québec, Canada. Lexam owns 50% of the project with the remaining 50% owned by Golden Valley Mines. No exploration is currently planned for this project.

During the Fourth Quarter Lexam received a provincial rebate totaling approximately $897,220 from the Québec government, in connection with 2008 exploration activities. At December 31, 2009 Lexam has an outstanding receivable balance of $22,730 owing from the Quebec government regarding 2009 exploration expenditures.

About Lexam

Lexam is a North American exploration company. The Company holds a significant equity stake in VG Gold Corp along with shares in Rubicon Minerals Corp. Lexam also owns 75% of the Baca Oil & Gas Project in south-central Colorado, USA and it has a 50% joint venture interest in the Otish Basin uranium project located in Quebec, Canada with Golden Valley Mines.

CAUTIONARY STATEMENT

Some of the statements contained in this release are "forward-looking statements". Such forward- looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: ability to raise financing for further exploration and development activities; risks relating to estimates of reserves, deposits and production costs; extraction and development risks; the risk of commodity price fluctuations; political, regulatory and environmental risks; outcome of on-going or pending litigation and other risks and uncertainties in the reports and disclosure documents filed by Lexam from time-to-time with Canadian securities regulatory authorities. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The complete Fourth Quarter and Annual report including management's discussion and analysis, financial statements and notes can be found on our Company's website at www.lexamexplorations.com and on SEDAR at www.sedar.com.

Contact Information

  • Lexam Explorations Inc.
    Ian J. Ball
    VP, Corporate Development
    (647) 258-0395 or Toll Free: (866) 441-0690
    (647) 258-0408 (FAX)
    info@lexamexplorations.com
    www.lexamexplorations.com
    or
    Corporate Head Office
    Lexam Explorations Inc.
    99 George Street, 3rd Floor
    Toronto, ON M5A 2N4