Takara Resources Inc.
TSX VENTURE : TKK

Takara Resources Inc.
St. Eugene Mining Corporation Ltd.
TSX VENTURE : SEM

St. Eugene Mining Corporation Ltd.

June 30, 2009 07:48 ET

St. Eugene Mining to Acquire Taraka Resources

Financing Announced to Develop the Tartan Lake Gold Mine, Manitoba

TORONTO, ONTARIO--(Marketwire - June 30, 2009) -

THIS PRESS RELEASE IS NOT FOR DISTRIBUTION IN THE UNITED STATES OR TO U.S. NEWS AGENCIES PRESS RELEASE

Takara Resources Inc. (TSX VENTURE:TKK) ("Takara") and St. Eugene Mining Corporation Ltd. (TSX VENTURE:SEM) ("St. Eugene") are pleased to announced that they have entered into an agreement for a proposed arms-length merger.

St. Eugene holds the rights to acquire a 100% interest in the Tartan Lake Gold Mine and a 35% interest in the Amisk Lake Gold Project in Saskatchewan. The Tartan Mine is a past gold producer located 12 kilometres northeast of Flin Flon, Manitoba. Between 1986-1989 the Tartan Mine produced 48,000 ounces of gold (Trinder and Leroux, 2008). The Tartan Mine assets include a 440 tonne per day mill, surface facilities serviced by road and hydro power, and a decline to a depth of 330 metres, providing ready access to five stoping levels. The Tartan property consists of about 2,700 hectares of mineral claims and leases containing many known gold showings, some discovered after the mine closure, and offers the potential for new discoveries and growth (see www.steugenemining.ca).

"Our proposed business combination provides an augmented team and the new branding necessary to move from exploration to a cash-flow positive gold producer quickly and at minimal cost," says Rolly Trenaman, President of St. Eugene and Pamela Strand, Chair of Takara. "Our longer term regional vision is to align ourselves with other potential producers, as evidenced by Takara's recent alliance with Garson Gold Corp."

Takara has been actively exploring projects in Manitoba, Quebec, Ontario, British Columbia and the United States. Takara holds a large land package (270,000 hectares) prospective for nickel in northern Manitoba, and maintains its strategic alliance with Garson Gold Corp. who is developing the New Britannia Gold Mine located 125 kilometres northeast of the Tartan Lake Mine (see Takara news release dated March 13, 2009).

Terms of the Transaction

The transaction contemplates that St. Eugene shall acquire all of the outstanding securities of Takara in exchange for the issuance of one common share of St. Eugene for each Takara share. Additionally, convertible securities outstanding in Takara at closing, if any, shall be taken up by St. Eugene and paid for by the issuance of convertible securities in St. Eugene having like terms, on a one-for-one basis.

Takara Resources currently has 31,183,030 shares outstanding, pending the issuance of an additional 4,080,000 under current obligations, for an aggregate of 35,513,030. There are no warrants outstanding, and Takara shall use reasonable best efforts to have its optionees amend the expiry of their stock options (2,565,000) to the date prior to closing, in order that no stock options are outstanding at closing.

St. Eugene currently has 23,693,571 shares outstanding, pending the issuance of an additional 11,819,459 under current obligations, for an aggregate of 35,513,030. There are 435,000 warrants outstanding exerciseable at $0.15 until September 29, 2009. St. Eugene has 1,425,000 stock options outstanding, exerciseable at $0.10 per share for periods up to 2013.

The closing of the proposed business combination transaction (merger) is subject to the completion of due diligence satisfactory to both parties (by July 15, 2009) and it is subject to the completion of a minimum $500,000 and maximum $1,000,000 private placement offering (the "Offering"). The Offering shall be comprised of two components, one being a Unit Offering and the other a Flow-Through Share Offering.

The merger is further subject to the receipt of approval by the shareholders of each of Takara and St. Eugene, as well as the approval of the TSX-Venture Exchange. The parties shall use reasonable best efforts to close the transaction on or before September 15, 2009, but in any event, not later than October 30, 2009, failing which, the obligations of the parties shall terminate unless otherwise extended by mutual consent.

Upon the closing of an initial $100,000 tranche of the Unit Offering in St. Eugene, St. Eugene shall pay Takara a $25,000 deposit. In the event that the merger does not close, a break fee equal to 20% of proceeds raised in St. Eugene, in excess of $500,000, shall be payable to Takara, to a maximum of $150,000.

Terms of the Offering

The minimum $500,000 and maximum $1,000,000 Offering shall be offered in each of Takara and St. Eugene, as to $100,000 in Takara (Unit Offering only) and $900,000 in St. Eugene (comprising the Unit Offering and the Flow Through Share Offering).

The Unit Offering: The Unit Offering shall be comprised of an offering of up to 7,500,000 Units at a price of $0.04 per Unit for aggregate gross proceeds of $300,000. Each Unit shall be comprised of one common share and one full warrant. Each warrant shall entitle the holder to acquire one common share at a price of $0.06 per share during the first 12 months after issuance, and thereafter, at a price of $0.10 for the ensuing 6 month period.

2,500,000 Units ($100,000) of the Unit Offering shall be subscribed for in Takara, and 5,000,000 Units ($200,000) in St. Eugene. The proceeds shall be used to fund the proposed merger transaction and for working capital. Securities issued from Takara under the Unit Offering shall be subsequently taken up by St. Eugene at the closing of the merger, and paid for by the issuance of one common share of St. Eugene and one full warrant having like terms.

The Flow Through Share Offering: Upon closing of the Unit Offering, the parties shall use reasonable best efforts to complete the Flow Through Share Offering, an offering of up to 10,000,000 flow-through common shares of St. Eugene (only) at a price of $0.07 per share, for gross proceeds of $700,000. The proceeds of the Flow Through Share Offering shall be used to complete certain of the Phase I recommendations in the technical report of ACA Howe dated October 17, 2008 (www.sedar.com), which may include the compilation of historic digital data, the completion of a NI 43-101 compliant resource estimate, re-surveying of surface core-hole collars, and verification and updating of permitting to re-commission the mine.

The recommended Phase II program focuses the re-activation of the mine including dewatering the decline and underground workings, underground core drilling to expand the resources, and the extraction of a bulk sample to test mining and milling methods.

The Unit Offering and the Flow Through Share Offering will be offered to qualified purchasers in reliance upon exemptions from the prospectus and registration requirements of applicable jurisdictions. It is subject to certain conditions, including regulatory approval. The proceeds from the Flow Through Share Offering shall be used to incur expenditures which qualify as Canadian Exploration Expenses. Subject to approval by the TSX Venture Exchange and applicable securities legislation, a cash finders fee and or non-transferrable share purchase warrants may be paid to brokers or third parties in respect of the Offerings. Insiders may participate in these Offerings.

In event that the proposed business combination transaction among St. Eugene and Takara closes as contemplated above, and both parts of the Offering is subscribed in full, St. Eugene would have 88,372,601 common shares outstanding. Additional shares may be issuable in connection with a finders fee for the Offering, upon the exercise of convertible securities referred to above, or for such other transaction.

Combined Management Team

At the closing of the proposed merger between Takara and St. Eugene, Takara shall make application to delist from the TSX-Venture Exchange, and the board of directors of the merged entity shall be comprised of two nominees of Takara, two nominees of St. Eugene, and one jointly appointed board nominee. Takara's head office is located in Toronto and St. Eugene's in Vancouver, and it is anticipated that both offices will be maintained at closing.

Future Plans

St. Eugene anticipates an aggressive program at Tartan Lake immediately after closing the transaction. The main goal is to restore mine production quickly, focusing on reactivating mining blocks that were in production at shutdown, and on employing a more selective mining method. These mining blocks are projected to provide production for up to two years of Tartan Mine operation. The historic mineral resources will be recalculated using a more appropriate gold price and a scoping study will be initiated to further define the underground resources and determine the requirements of bringing Tartan back into production. Other surface areas will be examined and prioritized for follow up work with the goal of adding to the resources already outlined.

Roland Trenaman, P. Eng. and Pamela Strand, M.Sc., P. Geol., are "Qualified Persons" as defined in National Instrument 43-101 and have reviewed the technical information presented in this news release.

Completion of the transaction is subject to a number of conditions, including Exchange 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 Management Information Circular to be prepared in connection with the transaction, any information released or received with respect to the proposed transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Takara Resources Inc. and St. Eugene Mining Corporation Ltd. should be considered highly speculative.

All of the forward-looking information contained in this press release is qualified by this cautionary statement. There can be no assurance that the actual results or developments anticipated by Takara, as expressed or implied by the forward-looking information, will be realized or, even if substantially realized, that they will have the expected consequences to or effects on Takara or its business operations. Takara disclaims any intention or obligation to update or revise any forward-looking information as a result of new information or future events. Readers should not place undue reliance on forward-looking information.

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. Further, the TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • For Takara Resources Inc.:
    Jennifer L. Boyle, B.A., LL.B.
    Chief Executive Officer
    (647) 430-0966 (work)
    or
    Pamela Strand, P. Geol.
    Chair, Board of Directors
    (780) 435-0045 (work)
    or
    Julie Lassonde
    Director and Executive Vice President
    (647) 430-0966 (work)
    or
    For St. Eugene Mining Corporation Ltd.:
    Roland (Rolly) Trenaman, P. Eng.
    (604) 669-5775 (work)