LionOre Mining International Ltd.

LionOre Mining International Ltd.

May 14, 2006 19:45 ET

LionOre Sells Non-Strategic Australian Nickel Exploration Assets for A$10.5 Million to ASX-Listed Breakaway Resources

TORONTO, ONTARIO--(CCNMatthews - May 14, 2006) - LionOre Mining International Ltd. ("LionOre"), (TSX:LIM)(ASX:LIM)(LSE:LOR)(BSE:LIONORE) announces the sale of certain non-strategic Australian nickel exploration assets to ASX-listed Breakaway Resources Limited ("Breakaway") for the consideration of A$10.5 million (US$8.1 million).

The assets being sold consist of 'greenfield' nickel exploration tenements located in the Northeastern Goldfields and East Kimberley regions of Western Australia. The divestment of these assets is in line with LionOre's new corporate direction, announced during the fourth quarter of 2005, which is focused on becoming a vertically integrated nickel producer through the commercialization of the Company's Activox® technology. The sale of the assets is the result of a review undertaken to maximize value from these non-strategic nickel tenements. LionOre retains prospective nickel tenements surrounding its own operations, as well as at Forrestania and Honeymoon Well.

The A$10.5 million consideration will be satisfied by the issue of shares in Breakaway to a value of A$1.5 million and the issue to LionOre of a series of new unsecured redeemable converting notes in the amount of A$9 million.

Together with other usual regulatory conditions, the transaction is conditional on Breakaway carrying out a share consolidation on a 1 for 5 basis and undertaking an equity raising of at least A$15 million to fund its increased exploration activities. If required, LionOre will consider participating in this fundraising to a maximum of A$3.5 million. If LionOre does not participate in the equity raising then LionOre will convert a series of existing converting notes with a face value of A$3.5 million that it presently holds with Breakaway. This conversion may result in the issue of up to 77.7 million Breakaway shares to LionOre.

LionOre will be granted a right to toll treat, process and purchase nickel bearing material derived from the assets being sold and a "buy-back right" to purchase an interest in any "major discovery" made on the assets being sold. A "major discovery" is a discovery with a total reserve in excess of 125,000 tonnes of contained nickel. The interest which is able to be purchased by LionOre on the exercise of its buy-back right will be up to 51% of Breakaway's interest in the major discovery. The consideration payable by LionOre to exercise a buy-back right will be 4 times the expenditure incurred on the discovery to reach the reserve status multiplied by the percentage interest being acquired by LionOre.

As part of the transaction Mr. Peter Buck has resigned as the Exploration Director of LionOre's Australian Operations, and has joined Breakaway as the Managing Director. Mr Roger Mason has been appointed as General Manager Geology for LionOre Australia.

Contact Information

  • UK / Europe
    LionOre Mining
    Colin Steyn, President & CEO
    +44 (0)20 7590 8888
    LionOre Mining
    Ted Mayers, Chief Financial Officer
    +1 (416) 777-1670
    LionOre Australia
    Glenn Jardine, Managing Director
    +61 (0)8 9426 0100