Andaurex Industries Inc.
TSX VENTURE : AWX

October 12, 2006 09:00 ET

Andaurex Announces $15 Million Financing, Releases Technical Report on San Anton Gold-Silver Property

OTTAWA, ONTARIO--(CCNMatthews - Oct. 12, 2006) - NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Andaurex Industries Inc. (TSX VENTURE:AWX) is pleased to announce that a NI 43-101 Technical Report ("the Report") on the San Anton Property in the state of Guanajuato, Mexico ("the Property") has been filed on SEDAR and is available for viewing under the Andaurex profile at www.sedar.com. Pursuant to the reverse take-over transaction ("RTO") with Kings Minerals NL ("Kings") announced July 31, 2006, which is subject to shareholder and regulatory approval, Andaurex will acquire a 51% interest in the Property, which hosts the Cerro del Gallo gold-silver-copper deposit. Goldcorp Inc. owns the remaining 49% interest in the Property. Shareholders of Andaurex will be asked to approve the transaction at a special meeting to be held on November 9, 2006.

Pursuant to the Business Combination Agreement dated August 9, 2006 among Kings, certain of its subsidiaries, and Andaurex, a series of steps are contemplated for the RTO, subject to receipt of all required regulatory and shareholder approvals, that will result in the transfer of Kings' 51% ownership in San Anton de las Minas S.A. de C.V., the Mexican joint venture corporation that holds 100% of the Property, to Kings' wholly-owned Canadian subsidiary, Kings Minerals Canada Inc., and the subsequent amalgamation (the "Amalgamation") of Kings Minerals Canada Inc. with Andaurex to form an amalgamated company, to be named San Anton Resource Corporation ("San Anton").

In conjunction with the proposed business combination, Kings Canada has entered into a letter of engagement dated October 11, 2006, with Haywood Securities Inc. on behalf of a syndicate of agents ("Agents") in respect of a best efforts agency private placement financing ("Financing") of up to 18,750,000 subscription receipts ("Subscription Receipts") at a price of $C0.80 per Subscription Receipt for aggregate gross proceeds of up to $C15 million. The Financing is expected to close on or before November 6, 2006 (the "Closing Date"). Each Subscription Receipt will be exercisable to acquire, for no additional consideration, one unit ("Unit") of Kings Canada consisting of one common share and one-half of one common share purchase warrant (each whole warrant a "Warrant"). Each Warrant shall be exercisable to acquire one common share of Kings Canada at an exercise price of $C1.20 for a period of twenty-four (24) months from the Closing Date.

The net proceeds of the Financing will be held in escrow pending the satisfaction of certain escrow conditions related to the closing of the Business Combination, and upon release will be used for the exploration and development of the San Anton Project and for working capital. Upon the Amalgamation becoming effective to complete the business combination, each Subscription Receipt will be exchanged for one subscription receipt of San Anton, the subscription receipts of San Anton will immediately be automatically exercised for units of San Anton having the same terms as the Units, and the escrowed proceeds will be released to San Anton. In the event that the escrow release conditions are not satisfied within 90 days of the Closing Date, the escrowed funds together with accrued interest will be used by the Company to repurchase the Subscription Receipts for cancellation.

The Cerro del Gallo deposit hosts measured and indicated resources of 225 million tonnes grading 0.81g/t AuEq (5.9Mozs AuEq) and inferred resources of 229 million tonnes grading 0.71g/t AuEq (5.2Mozs AuEq), both based on a 0.30g/t AuEq cutoff grade. The resource estimate contained in the Report is based on a total of 24,635 metres of drilling in 110 drill holes to the cut-off date of December 16, 2005. The drill program presently underway at Cerro del Gallo is expected to add a further 30,000 metres of RC and DDH drilling to the data base incorporated in the Report.

The Report recommends a two-phase work program consisting of definition and expansion drilling and metallurgical test work at Cerro del Gallo and regional exploration of some of the more than 20 untested exploration targets on the wider Property. Drilling on Cerro del Gallo will focus on expanding existing resources, upgrading inferred resources to measured and indicated, and defining the gold rich zone on 25m by 25m centers. Exploration will focus on drilling a gold rich skarn discovered on the SE flank of Cerro del Gallo, drilling three co-incident IP/magnetic anomalies in the immediate vicinity of Cerro del Gallo, and following up high grade results from previous drilling and sampling of epithermal vein systems in the area.

Future exploration programs will focus on a number of other porphyry targets, over 10 km of epithermal vein systems and a cluster of structurally controlled vein-breccia deposits, all of which are located on the 20,100 ha Property. Many of these areas exhibit evidence of small scale local mining and have returned anomalous values in rock and soil samples.



Cerro del Gallo Mineral Resources (0.3g/t AuEq Cut-off)

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Resource Tonnes Au Ag Cu AuEq AuEq
Category Millions g/t g/t % g/t Moz
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Measured 10 0.80 16 0.09 1.28 0.41
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Indicated 215 0.33 13 0.10 0.79 5.46
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Inferred 229 0.30 11 0.10 0.71 5.22
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(0.8g/t AuEq Cut-off)

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Resource Tonnes Au Ag Cu AuEq AuEq
Category Millions g/t g/t % g/t Moz
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Measured 10 0.82 16 0.09 1.29 0.41
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Indicated 90 0.49 17 0.13 1.07 3.10
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Inferred 65 0.47 15 0.11 0.97 2.02
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The Report was prepared for Kings by Golder Associates Pty. Ltd. ("Golder") of Brisbane, Australia. The Qualified Persons as defined by NI 43-101 responsible for preparation of the Report are Mr. Ian Lipton, FAusIMM and Mr. Robert Stewart MAusIMM, both full-time employees of Golder. Mr. Lipton visited the San Anton site, and Mr. Stewart prepared the resource estimate. Mr. Lipton and Mr. Stewart are independent of Andaurex and Kings and are the Qualified Persons under NI 43-101 responsible for all technical data reported in this news release.

For their services in connection with the Financing, the Agents will receive a commission of 6.0% of the gross proceeds from the sale of such Units and be issued compensation options entitling the Agents to purchase that number of Units equal to 6.0% of the aggregate number of Subscription Receipts issued by Kings Canada with an exercise price set at the lowest price allowable by the TSXVE and the TSX, provided the exercise price is no lower than the issue price for the Subscription Receipts. Such compensation options shall have a term of twenty-four (24) months from the Closing Date, and will be exchanged for compensation options of San Anton having the same terms upon the completion of the Amalgamation.

Kings Canada is not a reporting issuer in any jurisdiction. Accordingly, the Subscription Receipts and Units issuable upon the exercise thereof will be subject to an indefinite hold period expiring four months after Kings Canada becomes a reporting issuer. Upon completion of the Amalgamation, the subscription receipts of San Anton exchanged for the Subscription Receipts under the Amalgamation and the units of San Anton issued upon the exercise of such subscription receipts will not generally be subject to any resale restrictions under applicable securities laws.

Assuming a Financing of $C15 million, and assuming the completion of the business combination, current shareholders of Andaurex will own approximately 7.0% of San Anton's outstanding shares, Kings will own approximately 74.4% of San Anton's outstanding shares, and subscribers under the Financing will own approximately 18.6% of San Anton's outstanding shares.

The securities of Kings and Andaurex, have not been and, after the closing of the proposed transaction, including the securities of San Anton, will not be registered under the United States Securities Act of 1933, as amended, or the securities laws of any state, and may not be offered or sold in the United States or to any U.S. person (as defined in Regulation S under the Securities Act of 1933) absent registration or an exemption from registration.

Investors are cautioned that, except as disclosed in the management information circular to be prepared in connection with the business combination transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Andaurex should be considered highly speculative.

WARNING: 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. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. This News Release includes certain "forward-looking statements". All statements other than statements of historical fact included in this release, including, without limitation, statements regarding potential mineralization and reserves, exploration results, and future plans and objectives of Andaurex, Kings and San Anton, are forward-looking statements that involve various 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 expectations of Andaurex are exploration risks detailed herein and from time to time in the filings made by Andaurex and San Anton with securities regulators.

Contact Information

  • Andaurex Industries Inc.
    Gregory B. Bowes, President
    613-729-9006