Lincoln Mining Corporation
TSX VENTURE : LMG

Lincoln Mining Corporation

September 05, 2012 08:00 ET

Lincoln Mining Announces Private Placement With Procon Mining for Up to $4,600,000 and Property Acquisition

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 5, 2012) - Lincoln Mining Corporation (TSX VENTURE:LMG) ("Lincoln" or the "Company") announces it has signed a subscription agreement and a non-binding memorandum of understanding with Procon Mining & Tunnelling Ltd. ("Procon") providing for private placements of securities of the Company to raise up to $4,600,000 and future cooperation to facilitate the continued development of its mineral projects in Nevada towards production. The Company has also entered into a letter agreement with Laurion Mineral Exploration Inc. ("Laurion") for the purchase and assignment of an option to earn a 100% interest in the Bell Mountain property located in Churchill County, Nevada.

Procon Transactions

Private Placements

The Company has entered into a subscription agreement (the "Subscription Agreement") with Procon which provides for a non-brokered private placement of 24,000,000 common shares of the Company at a price of $0.05 per share for total proceeds of $1,200,000 (the "Initial Placement").

No finder's fees are expected to be issued in connection with the Initial Placement. All securities issued under the Initial Placement will be subject to a four month hold period from the closing date under applicable Canadian securities laws, in addition to such other restrictions as may apply under applicable securities laws of jurisdictions outside Canada. The Initial Placement is subject to all necessary regulatory approvals including from the TSX Venture Exchange (the "TSXV").

Lincoln intends to use the proceeds raised from the Initial Placement towards the purchase price for the Bell Mountain acquisition discussed below, to advance the work programs on Lincoln's other mineral projects and for general working capital purposes.

The Subscription Agreement also provides for:

  1. a second private placement by Procon of 22,000,000 common shares of the Company at a price of $0.05 per share for total proceeds of $1,100,000 (the "Second Private Placement"); and
  2. a convertible debenture from Procon in the principal aggregate amount of $2,300,000 (the "Convertible Debenture" and together with the Second Private Placement, the "Second Financing") which (i) has a term of three years, with the principal payable on maturity; (ii) bears interest at the rate of 6% per annum; (iii) is secured by a general security agreement granted by the Company; and (iv) is convertible into common shares of the Company at a conversion price of $0.10 per share, for a total of 23,000,000 common shares if fully converted.

In addition, the Subscription Agreement provides that concurrent with the closing of the Second Financing, the Company will appoint to its board of directors four nominee directors of Procon, three of whom will replace three of the Company's existing directors, resulting in Procon's nominees representing a majority or four of the resulting seven member board of directors of the Company (collectively, the "Director Changes").

Completion of the Second Financing and the Director Changes are subject to receipt of necessary TSXV and disinterested shareholder approval for the creation of Procon as a new "Control Person" of Lincoln under TSXV policies. Lincoln plans to seek the necessary shareholder approval at its upcoming annual general meeting scheduled to be held on October 30, 2012. If the necessary approvals are obtained, pursuant to the Subscription Agreement Lincoln and Procon will complete the Second Financing and the Director Changes by November 9, 2012. Further details will be provided in the Company's information circular for its annual general meeting.

Non-Binding MOU

The Company has also signed a non-binding memorandum of understanding with Procon (the "MOU") which outlines the basis on which the Company plans to collaborate with Procon to develop the Pine Grove and Bell Mountain properties in Nevada (collectively, the "Project") through a wholly-owned subsidiary of the Company ("ProjectCo").

The non-binding MOU proposes that, among other things:

  • the Company (through ProjectCo) will acquire the Bell Mountain property in Nevada (as more thoroughly described below under "Bell Mountain Acquisition"), commission pre-feasibility studies on the Project and arrange for long term financing to bring the Project to production if warranted;
  • on completion of the Second Financing (a) Procon will assume responsibility for Lincoln's accounting, reporting, banking and other administrative functions, which will be at no charge to Lincoln until such time as Lincoln reaches commercial production at the Project; and (b) Lincoln will appoint an advisory committee consisting of Andrew Milligan, Henry Ewanchuck and Robert Elton;
  • ProjectCo will enter into an engineering, procurement construction and management contract with Procon to develop the Project on commercially reasonable and competitive terms, and upon completion of the development of the Project, ProjectCo will award a "life of mine" surface mining contract to Procon on commercially reasonably and competitive terms. Lincoln, through an operating agreement with ProjectCo, would operate the plant at the Project and would provide Procon with such managerial and technical personnel as Procon requires;
  • Procon will assist in the procurement of senior debt for ProjectCo (the "Senior Debt") from a financial institution or institutions or from Procon for 85% of the agreed upon Project development costs. The Senior Debt would be secured by a first charge on the Project. The remaining funding required for development of the Project (in excess of the Senior Debt) would be provided to ProjectCo as equity by Lincoln and Procon, pro rata to their respective interests in ProjectCo (see below) in accordance with a mutually agreed upon financing plan;
  • as consideration for assisting in arranging the Senior Debt, Procon will acquire the following interests in ProjectCo: (i) 20% on the initial advance of the Senior Debt, and (ii) an additional 15% on commencement of commercial production at the Project. The remaining shares of ProjectCo would be owned by Lincoln; and
  • ProjectCo will enter into long-term, arm's length offtake commitments with Procon on commercially reasonable terms for 35% of the gold and silver produced by the Project, with the remaining offtake being sold to third parties on arm's length terms.

All of the above-listed provisions represent non-binding statements of intention between Lincoln and Procon pursuant to the MOU, and the detailed terms of any such potential transactions would be contained in definitive binding agreements negotiated between the parties. There is no assurance that any definitive binding agreements will be entered into or that a positive pre-feasibility study will be completed in respect of the Project. In the event any of the above-listed transactions proceeds, they will be subject to receipt of all necessary TSXV and shareholder approvals and other requirements of applicable Canadian securities laws, as may be applicable, including the requirements under TSXV policies and Multilateral Instrument 61-101 regarding related party transactions.

About Procon

Procon is a full service mining contractor, headquartered in Burnaby, British Columbia. Further details may be obtained at Procon's website at www.procongroup.net or by contacting Procon at Suite 108, 4664 Lougheed Highway, Burnaby, British Columbia, Canada V5C 5T5.

After giving effect to the Initial Placement, Procon will own 24,000,000 common shares of the Company, representing 19.76% of the issued and outstanding common shares of the Company. Subject to receipt of necessary approvals, upon the completion of the Second Financing Procon will own 46,000,000 common shares of the Company and Convertible Debentures convertible into 23,000,000 common shares of the Company, which based on the current number of common shares of the Company issued and outstanding, would represent 32.06% of the Company's common shares (basic) and 41.45% of the Company's common shares on a partially diluted basis giving effect to the conversion of the Convertible Debentures and no other outstanding convertible securities of the Company.

Procon has agreed to acquire securities of the Company under the Initial Placement and the Second Financing for investment purposes and to facilitate the transactions contemplated by the MOU. Procon is relying upon the "accredited investor" exemption from the prospectus requirements of applicable securities laws in connection with the purchase of securities pursuant to the Initial Placement and the Second Financing.

Bell Mountain Acquisition

Letter Agreement with Laurion

Lincoln has signed a binding letter agreement with Laurion providing for the purchase by Lincoln (or a subsidiary) from Laurion of certain unpatented mining claims and the assignment and assumption of Laurion's option to earn a 100% interest in the Bell Mountain property located in Churchill County, Nevada. The purchase price is an aggregate of $2,350,000 cash, payable by Lincoln to Laurion as follows:

  1. $350,000 within five business days following receipt by Lincoln and Laurion of all necessary TSXV approvals to the letter agreement;
  2. $350,000 on completion of the Convertible Debenture financing with Procon, at which time Laurion and Lincoln will complete the sale and transfer of Laurion's mining claims and option on the Bell Mountain property to Lincoln (or a subsidiary of Lincoln), and Lincoln shall assume the remaining obligations of Laurion in respect of the option, which shall be completed in any event by no later than November 16, 2012;
  3. $750,000 on completion of a pre-feasibility study for the Bell Mountain property. Lincoln shall use its commercially reasonable efforts to complete the pre-feasibility study by June 30, 2013; and
  4. $900,000 on or before five months after completion of the pre-feasibility study.

The transaction under the letter agreement remains subject to various conditions, including receipt of necessary approvals from the TSXV, Lincoln's acceptance of the physical condition and status of title of the property, and receipt of all necessary third party consents. Laurion shall retain the right to reassert its interests and rights in the Bell Mountain option in order to be able to exercise the option to earn a 100% interest in the project in the case that Lincoln does not complete the remaining expenditure requirements of $1,755,000 or Lincoln defaults on any of the other obligations assumed under the option.

Pursuant to the letter agreement, the parties must use their best efforts to negotiate and execute a definitive agreement incorporating the terms of the letter agreement within 30 days.

Bell Mountain Property

The Bell Mountain property is located approximately 95 miles southeast of Reno, Nevada. It is comprised of 26 unpatented lode claims optioned by Laurion from Globex Nevada Inc. ("Globex") covering an area of approximately 217 hectares. In addition, Laurion staked 119 contiguous lode claims in 2010 totaling 995 hectares. The total Bell Mountain land package is 1,212 hectares (2,900 acres). The property is in the Fairview mining district and encompasses portions of sections 1 through 3 and 10 through 16 in Township 15 North, Range 34 East and parts of sections 35 and 36 in Township 16 North, Range 34 East, Mount Diablo Base and Meridian, Churchill County, Nevada.

Laurion has the right and option to earn a 100% interest in the property from Globex pursuant to an exploration and option agreement dated June 28, 2010 (the "Globex Agreement"). In order to complete the exercise of the option to acquire a 100% interest in the property, an additional $1,755,000 in exploration expenditures must be incurred on the property by June 28, 2015.

As disclosed in Laurion's news release dated May 4, 2011, Laurion filed a National Instrument 43-101 ("NI 43-101") technical report dated May 3, 2011 prepared by Telesto Nevada Inc. and titled "NI 43-101 Technical Report for the Bell Mountain Project, Churchill County, Nevada" (the "Technical Report"). The Technical Report, which is available under Laurion's profile on the SEDAR website (www.sedar.com), contains the following resource estimate on the Bell Mountain property as at May 3, 2011:

Table 1 - Global Bell Mountain Resource Estimate


Category

Tonnage
('000
Tonnes)
Average
Gold
Grade
(g/Tonne)

Gold
(grams)

Gold
(ozs)
Average
Silver
Grade
(g/Tonne)

Silver
(grams)

Silver
(ozs)
Total
Equivalent
Ounces Of
Gold
Measured 5,952 0.531 3,158,063 101,534 16.62 98,913,080 3,180,127 159,355
Indicated 3,810 0.518 1,974,575 63,484 19.22 73,210,796 2,353,780 106,280
Total Measured and Indicated
9,761

0.526

5,132,638

165,018

17.63

172,123,876

5,533,907

265,635
Inferred 2,046 0.449 919,108 29,550 13.26 27,135,036 872,411 45,412

Notes:

1. Rounding of tons as required by Form 43‐101F1 reporting guidelines (Item 19) results in apparent differences between tons, grade and contained ounces in the mineral resource.

2. Mineral Resources are estimated at a pit discard cutoff Grade at 0.192 g/t AuEq.

3. The assumed parameters used for establishing a cut‐off grade is identified as follows:

  • Gold Price ‐ $1,149.89/oz (US) ‐ 60% 3‐year previous average/40% 2‐year forward (Dec. 31, 2010)
  • Silver Price ‐ $20.92/oz US ‐ 60% 3‐year previous average/40% 2‐year forward (Dec. 31, 2010)
  • Recovery ‐ Gold 80%, Silver 51%
  • Total Operating Costs ‐ $11.43/ton (mining, processing and G&A)
  • Gold Equivalent Ratio ‐ 55 to 1

Mr. Jeffrey Wilson, the Company's Vice President Exploration and a "qualified person" under NI 43-101, reviewed the Technical Report on behalf of Lincoln. To the best of Lincoln's knowledge, information and belief, there is no new material scientific or technical information that would make the disclosure of the above mineral resources inaccurate or misleading. Lincoln plans to file a technical report on the Bell Mountain property within 180 days of this news release in accordance with the requirements of NI 43-101.

The Bell Mountain property is subject to two royalties which will take effect upon commencement of commercial production. The first royalty is held by N.A. Degerstrom Inc. (a previous property owner/operator) which retains a 2% net smelter return royalty which can be acquired for US$167,000. In addition, pursuant to the Globex Agreement, Globex will maintain a sliding-scale gross metal royalty ("GMR") on all mineral production (gold, silver, etc.) benchmarked upon the price of gold (1% GMR at a gold price under US$500/troy ounce, 2% GMR at a gold price between US$500 and US$1200/troy ounce and 3% GMR at a gold price over US$1200/troy ounce).

Pursuant to the Globex Agreement, upon exercise of the option and the acquisition of a 100% interest in the Bell Mountain property from Globex, Lincoln (as assignee of Laurion) would be required to pay annually a $20,000 advanced royalty payment which would be credited against the royalty payable to Globex described above.

Corporate Update

The Company also announces that Sabrina Jones has stepped down as Vice President, Corporate Affairs and Corporate Secretary but continues with the Company and Paul Saxton will temporarily fill the Corporate Secretary position.

Lincoln Mining Corp. is a Canadian precious metals exploration and development company with several projects in various stages of exploration and development which include the Pine Grove gold property in Nevada, the Oro Cruz gold property in California and the La Bufa gold-silver property in Mexico. In the United States, the Company operates under Lincoln Gold US Corp., a Nevada corporation.

Mr. Jeffrey Wilson, the Company's Vice President Exploration and a "qualified person" under NI 43-101, reviewed and approved the scientific and technical information contained in this news release.

On behalf of Lincoln Mining Corporation

Paul Saxton, President & CEO

THIS PRESS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS OR INFORMATION. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS RELEASE, INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING FUTURE PLANS AND OBJECTIVES OF LINCOLN IN RELATION TO COMPLETING PRIVATE PLACEMENT FINANCINGS AND DEVELOPING THE PINE GROVE AND BELL MOUNTAIN PROJECTS 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 COMPANY'S PLANS OR EXPECTATIONS INCLUDE THE RISK THAT ACTUAL RESULTS OF FUTURE EXPLORATION WORK, INCLUDING DRILL RESULTS AND RESULTS OF ENGINEERING AND METALLURGICAL STUDIES, WILL NOT SUPPORT THE COMPANY'S PLANS TO ADVANCE ITS NEVADA PROJECTS; THE UNCERTAINTY OF THE GEOLOGY, GRADE AND CONTINUITY OF MINERAL DEPOSITS (INCLUDING IN RESPECT OF THE BELL MOUNTAIN PROPERTY) AND THE RISK OF UNEXPECTED VARIATIONS IN MINERAL RESOURCES, GRADE AND/OR RECOVERY RATES; COST OVERRUNS AND PROJECT DELAYS; AVAILABILITY OF CAPITAL AND FINANCING IN CONNECTION WITH THE COMPANY'S PROPOSED NON-BROKERED PRIVATE PLACEMENTS OR OTHER FINANCINGS; GENERAL ECONOMIC, MARKET OR BUSINESS CONDITIONS; FLUCTUATING METAL PRICES; REGULATORY CHANGES; TIMELINES OF GOVERNMENT OR REGULATORY APPROVALS AND OTHER RISKS DETAILED HEREIN AND FROM TIME TO TIME IN THE FILINGS MADE BY THE COMPANY. THE COMPANY MAKES ALL REASONABLE EFFORTS TO UPDATE ITS CORPORATE MATERIAL, DOCUMENTATION AND FORWARD-LOOKING INFORMATION ON A TIMELY BASIS.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION 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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