Huakan International Mining Inc.
TSX VENTURE : HK

Huakan International Mining Inc.

August 08, 2012 08:30 ET

Huakan International Mining Inc. Announces an Agreement Relating to the Net Smelter Returns Royalty on the Greenwood Gold Project

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 8, 2012) - Huakan International Mining Inc. (TSX VENTURE:HK) (the "Company") has entered into an agreement (the "Agreement") with Gold Crown LLC and its wholly owned subsidiary, AMT Industries Canada Inc. (collectively, the "Purchasers"). The Purchasers acquired the Company's Greenwood Gold Project on December 2, 2011 for consideration of C$7,425,000 and a net smelter returns royalty (the "NSR Agreement"). The NSR Agreement consists of a 2% net smelter returns royalty (subject to reduction to 1% if the price of gold drops below US$1,050) on any ore milled at the Greenwood mill and guarantees payments of C$9,000,000 over a ten year period. Pursuant to the NSR Agreement, the Purchasers are required to make annual minimum net smelter royalty payments of C$500,000 and to make a lump sum payment at the end of the ten year period, if necessary, to bring the total net smelter royalty payments to C$9,000,000. The Company retains a security over certain assets of the Greenwood Gold Project until the payments under the NSR Agreement have been fulfilled.

The Purchasers have requested that the Company amend the NSR Agreement. After consideration by the Company's Board of Directors and Management, the Company believes it is in its best interests to amend the NSR Agreement as follows:

  1. Within 60 days from the date of the Agreement, the Purchasers will take steps to have the mine permits in respect of the Greenwood Gold Project, which are currently in the Company's name, assigned from the Company to the Purchasers. In connection thereto, the Purchasers will provide a safekeeping agreement and will post a replacement reclamation bond in an amount and form acceptable to the Government of British Columbia (the "Government") and the Purchasers and the Company will request that the Government release the Company's reclamation bond of C$450,000 to the Company;
  2. Within 90 days from the date of the Agreement, the Purchasers will make a cash payment of C$4,500,000 to the Company; and
  3. Upon completion of the foregoing, the Company will cancel the NSR Agreement, release the Purchasers' obligations to make any net smelter royalty payments to the Company and remove the Company's security over the assets of the Greenwood Gold Project.

Pengzhi Guo, the Chairman and Chief Executive Officer of the Company said, "We are pleased to enter into the Agreement with the Purchasers. The cash proceeds and the change in titles on the mill and mining permits allow the Company to focus its resources on its J&L precious and polymetallic metals property and potential new mineral property acquisitions."

CAUTIONARY STATEMENTS REGARDING FORWARD LOOKING INFORMATION

Certain of the statements made and information contained herein may contain forward-looking statements or forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or forward-looking information include, but are not limited to, statements concerning performance of the various terms of the Agreement by the parties thereto. Forward-looking statements or information include statements regarding the expectations and beliefs of management. Often, but not always, forward-looking statements and forward-looking information can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or the negatives thereof or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements or information include, but are not limited to, statements or information with respect to known or unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information.

Forward-looking statements or information are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements or information, including, without limitation, risks and uncertainties relating to the completion of the announced transaction with Gold Crown LLC and AMT Industries Canada Inc.; dilution; loss of its material properties; interest rates increase; global economy; limited history of production; speculative nature of exploration activities; periodic interruptions to exploration, development and mining activities; environmental hazards and liability; industrial accidents; failure of processing and mining equipment; labour disputes; supply problems; commodity price fluctuations; uncertainty of production and cost estimates; the interpretation of drill results and the estimation of mineral resources and reserves; legal and regulatory proceedings and community actions; title matters; regulatory restrictions; permitting and licensing; volatility of the market price of common shares; insurance; competition; hedging activities; currency fluctuations; and loss of key employees. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements or information. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. The Company disclaims any intent or obligation to update forward-looking statements or information except as required by law, and you are referred to the full discussion of the Company's business contained in the Company's reports filed with the securities regulatory authorities in Canada.

Neither the TSX Venture Exchange nor its Regulations 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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