Dynamite Resources Ltd.
TSX VENTURE : DNR

Dynamite Resources Ltd.

October 09, 2008 09:52 ET

Dynamite Resources Acquires 40% Interest in Segala Gold Project, Mali

TORONTO, ONTARIO--(Marketwire - Oct. 9, 2008) - Dynamite Resources Ltd. (TSX VENTURE:DNR) ("Dynamite" or the "Corporation") today announced that it has entered into an agreement to purchase a 40% interest in the Segala gold project located in Mali, West Africa (the "Transaction") from Avion Resources Corp. ("Avion Resources"). Avion Resources will retain a 40% interest in the Segala Gold Project, with the remaining 20% interest held by the Government of Mali.

David Argyle, the President and CEO of Dynamite, commented, "We are very pleased to acquire a significant stake in a gold project that Avion Resources plans to put into production in the next six months. The recent turmoil in the capital markets has created a number of opportunities for well-capitalized companies to acquire interests in near-term producing projects. We have waited patiently to begin to put our available cash to work and feel that Segala represents an excellent opportunity. In addition to finalizing the resource estimate at Mike Lake, we are going to continue to work to identify additional opportunities to acquire interests in production and near-term production projects."

Segala Gold Project, Mali

Avion Resources purchased the Segala and Tabakoto gold projects from Nevsun Resources Ltd. ("Nevsun") in May 2008, for US$20 million and a 1% net smelter royalty (NSR). Nevsun had previously disclosed a mineral resource estimate at Segala.

On September 15, 2008, Avion Resources announced its plans to commence mining operations at Segala with open-pit production (at a projected low-strip ratio), followed by underground mining. Avion Resources stated that it anticipates production to begin at Segala in mid-February 2009. The mining strategy is to mine near-surface to minimize waste stripping and then proceed to underground mining.

Recent drill assays released by Avion Resources from Segala continue to return positive results. Avion Resources drilled a total of 26 holes in the Segala area this year. This work confirmed the grade and the continuity of the Segala zone, resulted in the discovery of a new zone of gold mineralization (along an area called Segala Far NW trend) that is located approximately 600 metres northwest of the Segala zone, and developed numerous additional exploration targets. See the news release issued by Avion Resources on October 6, 2008 for a description of the results from the drill program.

Terms of the Transaction

In consideration for acquiring a 40% interest in Segala, the Corporation has agreed to pay US$5 million. This amount is to be initially provided to Avion Resources as a short-term loan. The loan is to be secured against the assets of Avion Resources and the shares of its subsidiaries. Amounts outstanding under the loan shall accrue interest at a rate of 10% per year. The loan shall mature upon the occurrence of certain events but no later than June 30, 2009. Upon satisfaction of certain conditions precedent, the principal amount of the loan shall be applied as the purchase price for the Transaction. Conditions precedent to the closing of the Transaction include the receipt of all necessary third party approvals, including approval of the TSX Venture Exchange and the Government of Mali, as required.

Avion Resources shall be entitled to re-purchase from Dynamite a 20% interest in the Segala property (the "Back-in Right"), so that Dynamite would hold a 20% interest in the property, in consideration for a cash payment equal to: (i) US$10 million, and (ii) an amount equal to the revenue realized by the Corporation in respect of the sale of the first 22,000 ounces of gold produced from Segala, less any and all amounts paid by Avion Resources to Dynamite in respect of such sales, and less all direct expenditures and costs incurred in respect of the Gold produced at Segala. The Back-in Right shall be exercisable at any time during the 90-day period that commences on the production of 22,000 ounces on account of Dynamite, provided that it shall expire on March 31, 2010.

Dynamite and Avion Resources have agreed to enter into a Joint Venture in respect of the Segala project that shall commence on the exercise or expiry of the Back-in Right. Avion Resources shall have the right to drag-along Dynamite in the event of any change of control affecting the property and each party shall hold a right of first refusal in respect of any sale of an interest held by the other party in the Segala project.

The proposed transaction is not a related party transaction under applicable securities law, but it is a non-arm's length transaction under the rules of the TSX Venture Exchange because Avion Resources and Dynamite have a director and officer in common.

About Dynamite Resources

Dynamite Resources is a Canadian mineral exploration and development company with a focus on its Mike Lake Project. The Mike Lake gold-copper project is located in the prospective Tintina Gold Belt, Yukon and is situated 25 km north of the former Brewery Creek gold mine and 70 km northeast of the Klondike Goldfields.

The Company is fully financed with approximately US$15 million cash on hand.

Cautionary Notes

This press release contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes, but is not limited to, statements with respect to the future financial or operating performance of the Company, the prospective mineralization of the properties, planned exploration programs, anticipated production schedule and terms, availability and likelihood of future acquisitions, and the impact of the acquisition of the Segala projects on Dynamite. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; ability to successfully integrate the purchased properties; foreign operations risks; and other risks of the mining industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws.

THE TSX VENTURE EXCHANGE DOES NOT ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Contact Information

  • Dynamite Resources Ltd.
    David Argyle
    President and CEO
    (647) 203-8881