Kinbauri Gold Corp.

Kinbauri Gold Corp.

May 11, 2009 11:09 ET

Kinbauri Responds to Proposed Hostile Takeover

OTTAWA, ONTARIO--(Marketwire - May 11, 2009) - Kinbauri Gold Corp. ("Kinbauri") (TSX VENTURE:KNB)(FRANKFURT:3KG.DE) has rejected a written all cash takeover proposal from Orvana Minerals Corp. ("Orvana") (TSX:ORV) dated May 6, 2009, and amended May 8th. Under the proposal, Orvana would pay $0.55 per share for all of the outstanding shares of Kinbauri The proposal is conditional on Kinbauri not consummating the previously announced deal with Glen Eagle Resources Inc. ("Glen Eagle") (TSX VENTURE:GER). (See Kinbauri press release April 17, 2009;Kinbauri Secures $32M funding for El Valle / Carles.)

The board of directors ("Board") of Kinbauri appointed an independent committee to review the proposed offer, consider other alternatives and make a recommendation to the board of directors. Based on the committee's recommendations, the Board unanimously rejected the proposed offer based on the structure provided to Kinbauri.

The announced transaction with Glen Eagle is moving towards completion, with an anticipated closing date on or about May 28, 2009. All terms have been agreed to, and signed off by both parties. The transaction is now waiting for the required approvals and transfer of funds. Kinbauri has received conditional approval from the TSX Venture Exchange.

Under terms of the agreements, Glen Eagle will invest C$32M for a 45% interest in Kinbauri's 100% owned subsidiary, Kinbauri Espana S.L., ("Espana"), which holds a 100% interest in the El Valle/Carles project for 45% of Espana. The agreement also allows Glen Eagle the right to buy a further 5% interest for an additional C$5M. This transaction implies a value for Kinbauri of $1.60 per share, without consideration of Kinbauri's other assets, far superior to the offer being made by Orvana.

The implied value is based on Glen Eagle's investment together with the Scoping Study prepared by Scott Wilson Roscoe Postle Associates (the "Scoping Study") for the El Valle/Carles project (see Kinbauri's press release, March 13th, 2009, Kinbauri Files Revised Scoping Study) and a new mine plan prepared by Kinbauri's engineers. The calculation follows from the following assumptions.

- After Tax Net Present Value (10% discount): CDN$171 million (assuming $910/ounce Au, $1.50/lb Cu, and 1 Euro = CDN$1.6)

- Current Kinbauri shares outstanding of 53.24 million

- Glen Eagle invests CDN$37 million for 50% of Espana

- Pre-production capex of CDN$57 million (per new mine plan), leaving $20 million of pre-production capex to be financed by Kinbauri and Glen Eagle through project financing; no additional equity required

- Implied price per share of Kinbauri based on after-tax NPV of CDN$171 million with Kinbauri entitled to fifty percent.

Reader's should be cautioned that Scoping Study results include some mineral resources that are not mineral reserves and that only mineral reserves are accepted as having demonstrated economic validity.

Dr. Vern Rampton, Kinbauri, President & CEO commented, "We have been in discussion with several companies with regard to the development of El Valle and Carles, with a desire to do what the board believes is best for the shareholders. To now sell our company at this price would be without recognition of its true value and without recognition of upside from development and production of the property to shareholders. This holds especially true with the recognition that El Valle should be in production in approximately one year and generating significant after-tax cash flows to Kinbauri in excess of the average annual after-tax cash flows of 18 million Canadian estimated by the Scoping Study."

With the funding supplied by Glen Eagle the company plans to proceed aggressively towards production, with a current plan that contemplates a re-start in May 2010. Requests for proposals to complete the feasibility study are being solicited and work is scheduled to begin this month. In concert, Kinbauri plans to start pre-production work based on the recently completed Scoping Study (SEDAR filed Technical Report of April 20, 2009). This work will include drilling to convert resources from inferred to measured and indicated, test mining of the high grade 107 Area ("107 Zone"), ramp and plant rehabilitation, metallurgical test-work, geotechnical and environmental studies and permitting.

The new plan, as evolved from the Scoping Study, calls for a new portal near the El Valle mill to allow early access to the top of the 107 Zone, allowing early recommencement of production. Decline development and mining will continue down and parallel to the 107 Zone, allowing mill feed to consist of higher grade material in the early stages of production. Mill feed will be supplemented with ore from the present decline and the Carles mine. It is estimated that the new plan will increase cash flow and profitability relative to the Scoping Study estimates and decrease pre-production capex significantly from the Scoping Study estimate of 89M Euros and that any future financing would be minimal , attracting project financing at favourable terms.

This press release has been prepared by Dr. Vern Rampton, P. Eng., President and Brian McEwen, P Geol, Director and Chairman of Kinbauri's Technical and Strategic Planning Committees in their capacity as qualified persons. Dr. Rampton previously recorded a "Beyond the Press Release" webcast concerning the Glen Eagle investment on April 17th and how it affects development at el Valle/Carles project on Kinbauri's Investor Relation site at

About Kinbauri:

Kinbauri is a TSXV - Tier 1 Mineral Exploration Company focused on the development of precious metal prospects in Spain, Nevada and Canada. Its immediate focus is to begin operations at its El Valle/Carles property in Asturias, northwestern Spain by 2010. It has 53,243,051 common shares issued and outstanding.

This press release contains certain forward-looking statements, which are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected. Kinbauri undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.


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