Lions Gate Metals Inc.

Lions Gate Metals Inc.

December 18, 2009 14:11 ET

Lions Gate Metals Inc. and Ausnico Limited Announce Business Combination

VANCOUVER, BRITISH COLUMBIA--(Marketwire – Dec. 18, 2009) - Lions Gate Metals Inc. (TSX VENTURE:LGM) ("Lions Gate" or the "Company") and Ausnico Limited ("Ausnico") are pleased to announce that they have entered into a binding letter of intent ("LOI") dated December 17, 2009 containing the principal terms of the business combination transaction disclosed in the Company's news release dated September 3, 2009. Pursuant to the transaction and subject to satisfaction of certain conditions, Lions Gate will acquire from the Ausnico securityholders all of the issued and outstanding shares and options of Ausnico in exchange for the issuance of an aggregate of 10,000,000 common shares of the Company to the Ausnico shareholders and 3,000,000 warrants to the Ausnico optionholders. Each warrant will entitle the holder to purchase one common share of Lions Gate for CDN$1.10 at any time within five years of the date of issuance.

In addition, at the closing Lions Gate will issue the following securities in settlement of certain Ausnico debt: (i) 2,000,000 warrants, having the same terms as the warrants being issued to the Ausnico optionholders, in settlement of AUD$200,000 of fees owing by Ausnico to its directors; and (ii) 261,818 common shares of Lions Gate to settle AUD$300,000 in loans owing by Ausnico to DGR, on the basis of CDN$1.10 per share (using an agreed exchange rate of 1 Australian dollar = 0.96 Canadian dollars). 

At the closing of the transaction, Ausnico will become a wholly owned subsidiary of Lions Gate and the securityholders of Ausnico will become securityholders of Lions Gate.

The Lions Gate shares and warrants to be issued to the Ausnico securityholders under the transaction, and any shares to be issued upon the exercise of the warrants, will be subject to any restrictions on resale, including escrow restrictions, imposed by applicable laws and the TSX Venture Exchange ("TSXV").

The LOI provides that, as a condition to closing the transaction, Lions Gate will carry out a non-brokered private placement of units to raise gross proceeds of not less than CDN$3,500,000 at a purchase price of not less than CDN$1.10 per unit. Each unit will consist of one common share of Lions Gate and a half warrant, with each whole warrant being exercisable for two years from the closing of the private placement at an exercise price of $1.50 per common share. The private placement will be subject to a financing fee which is comprised of a cash fee equal to seven percent (7%) of the proceeds raised and warrants representing seven percent (7%) of the units sold, such warrants having the same terms as the warrants under the private placement. D'Aguilar Gold Ltd. ("DGR"), the largest, controlling shareholder of Ausnico, will use its commercially reasonable best efforts to procure purchasers under the private placement for an aggregate purchase price of at least CDN$2,050,000.

At the closing of the transaction, based on Lions Gate's current issued shares and assuming completion of the $3.5 million private placement and the payment of the finder's fee noted below, Lions Gate is expected to have approximately 24.5 million issued and outstanding shares, approximately 34% of which will be held by DGR and approximately 8% of which will be held by the former Ausnico shareholders. 

On the completion of the transaction, the board of directors of Lions Gate will be composed of five directors. Three of the directors will be nominated by Lions Gate and two of the directors will be nominated by Ausnico. Lions Gate will nominate John Icke, Arni Johannson and Mark Hewett, who are current directors of Lions Gate, and Ausnico will nominate Nick Mather and Brian Moller, who are current directors of Ausnico.

Nicholas Mather, BSc (Hons,Geol) MAusIMM

Mr. Mather's special area of experience and expertise is the generation of and entry into undervalued resource exploration opportunities. He has been involved in the junior resource sector at all levels for more than 25 years. He is currently CEO (and co-founder) of Solomon Gold plc (AIM), a non-executive director of Mount Isa Metals Ltd. (ASX), the Managing Director and co-founder of DGR and, until recently, Non-Executive Chairman and founder of Waratah Coal Inc. (TSXV) which was recently taken over at a value of $120 million.

Brian Moller, LLB (Hons)

Mr. Moller is a corporate partner in the Brisbane based law firm HopgoodGanim. He was admitted as a solicitor in 1981 and has been a partner since 1983. He practices almost exclusively in the corporate area with an emphasis on capital raising, mergers and acquisitions. He acts for many public listed resource and industrial companies.

Following the closing, DGR will have the right to nominate a third director for election at the 2010 annual general meeting of Lions Gate, which must be held within six months following the closing or earlier if requested by DGR. Immediately following the 2010 annual general meeting, the board will appoint a nominee of Lions Gate as Chair of the board who will have a second or casting vote in the case of an equality of votes, subject to shareholder approval of the necessary amendment to Lions Gate's articles.

The parties have agreed that on completion of the transaction, Arni Johannson will continue as the interim Chief Executive Officer of Lions Gate and Darren Tindale will continue as the Chief Financial Officer of Lions Gate.

The business combination is an arm's length transaction under the policies of the TSXV. The TSXV has waived the sponsorship requirement in respect of the transaction.

Lions Gate and DGR have each agreed to pay a finder's fee to Dentex S.A., subject to the prior receipt of any required regulatory approvals. Lions Gate's portion of the finder's fee will be equal to 3.5% of the value of the transaction and will be paid through the issuance of 350,000 common shares at a deemed price of $1.10 per share.

The parties have agreed to begin promptly to negotiate a definitive agreement that incorporates the terms of the LOI.

Lions Gate will seek necessary shareholder approval to the transaction by written consent of shareholders holding a majority of the Company's outstanding shares, following the completion and submission of a filing statement in accordance with applicable TSXV policies.

The closing of the transaction is expected to occur in February 2010, following submission of the filing statement and final acceptance from the TSXV of the transaction, or such other date as the parties may agree pursuant to the terms of the definitive agreement.

About Ausnico

Ausnico is an unlisted Australian company with nickel exploration tenements in South East Queensland, Australia. It is 79% owned by DGR which is listed on the Australian Securities Exchange (symbol: DGR). The merger of the two companies will create a listed base metals specialist with nickel, copper and molybdenum assets in British Columbia, Canada, and Queensland, Australia. Further details of Ausnico's mineral tenements are contained in the Company's news release dated September 3, 2009.

About Lions Gate Metals

Lions Gate is a Canadian based, junior resource company focused on the exploration, development, and acquisition of both advanced and early stage mineral projects. The Company owns 100% of three substantial copper and molybdenum projects located in British Columbia. The Company's flagship project is the Poplar porphyry copper - molybdenum deposit near Houston, BC. The Huckleberry Mine, located approximately 35 kilometers southwest of the Poplar Deposit, produces copper and molybdenum from a deposit of similar age and setting. 

Completion of the transaction is subject to a number of conditions, including TSXV acceptance and disinterested shareholder approval. 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, except as disclosed in the Filing Statement to be prepared in connection with the transaction, any information released or received with respect to the transaction, which TSXV is treating as a Reverse Takeover, may not be accurate or complete and should not be relied upon. Trading in the securities of Lions Gate should be considered highly speculative.

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this press release.

Lions Gate Metals Inc.

Ausnico Limited

Forward-Looking Statements

Statements in this release that are forward-looking statements are subject to various risks and uncertainties concerning the specific factors identified in the Company's periodic filings with Canadian Securities Regulators. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drill results and other exploration data, the potential for delays in exploration or development activities, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters, labor disputes or other unanticipated difficulties with or interruptions in production and operations, fluctuating metal prices, the possibility of project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future including in respect of the Company's proposed $3 million financing, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, regulatory restrictions, including environmental regulatory restrictions and liability, competition, loss of key employees, and other related risks and uncertainties. The Company undertakes no obligation to update forward-looking information except as required by applicable law. Such forward-looking information represents management's best judgment based on information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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