Northern Rand Resource Corp.
TSX VENTURE : NRR

February 07, 2011 12:08 ET

Northern Rand Enters Into Agreement to Acquire Orion Resources N.V.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Feb. 7, 2011) - Northern Rand Resource Corp. ("Northern Rand" or the "Company") (TSX VENTURE:NRR) is pleased to announce that it has entered into a binding arm's length letter agreement with Kapelka Exploration Inc. ("Kapelka") and Orion Resources N.V. ("Orion"), pursuant to which Northern Rand has the right to acquire up to 100% of the voting shares of Orion (the "Transaction"). Kapelka is a private company incorporated under the laws of Alberta and it owns 100% of the issued and outstanding voting shares of Orion, a company incorporated under the laws of Suriname. Orion holds a 100% interest in the Sara Creek Property located in the Brokopondo and Sipalilwini districts of east central Suriname, South America. The Sara Creek Property is comprised of two exploration concessions consisting of 56,920 hectares, located approximately 150 air kilometres south of Paramaribo, the capital city of Suriname. Paramaribo is the largest city in Suriname with a population of approximately 250,000 and is located on the banks of the Suriname River.

Sara Creek is a historic gold district with a long history of small scale mining. The Sara Creek exploration concessions are underlain by volcanic greenstone rocks in contact with a complex intrusive package of felsic units, within the highly prospective Palaeoproterozoic Guiana Shield. The Guiana Shield hosts several major gold deposits extending across northeast South America and the largest resources and reserves are in Suriname which hosts the Rosebel gold mine owned by Iamgold Gold Corp. The Sara Creek Property is contiguous on the northeast boundary with the Merian Gold Project in the Nassau region, held by Surgold, a subsidiary owned by Newmont Overseas Exploration Limited and Alcoa Worldwide Alumina, LLC.

The Rosebel mine property is located at the northern end of Lake W.J. van Blommestin, the largest lake in Suriname. The northern portion of Sara Creek Property is located 50 kilometres southeast across the lake, and flanks the southeastern shore.

Orion commenced exploration on the Sara Lake Property in 1997. Analysis of data from extensive exploration since 2006, including extensive geophysical, scouting, channel sampling and more than 7,500 auger drill holes have identified numerous areas of interest with significant gold values, including:

  • Alimonie South Target – This is the most advanced target with auger anomalies that are in situ and not transported. The target also has anomalous gold values in grab and channel samples from mining sites including the Irmao shaft. The geologic and structural setting along a major shear zone and lithologic contact between mafic igneous rocks and granite is positive for gold deposits. The target is at least 2 kilometres of strike length and up to 0.5 kilometres in width. Once the logistics are in place, this target is ready for potential resource definition by a combination of trenching and drilling.
  • Tjilipassie – The extent of workings is extensive and in spite of very poor mining and processing methods, the pits continue to be expanded and produce gold by artesian miners. Tjiliepass targets have extensive ongoing saprolite mining in at least 4 to 6 large pits in the Tjiliepass region to the north. Similar to the Gowtu Bergi occurrence at Nassau, Tjilipassie was discovered by Brazilians, and mined by locals. Drilling is proposed to test the mineralization following structural mapping to best determine the orientation of mineralization. 
  • Manguera, Paulista – These targets are associated with the diorite intrusive and have returned encouraging gold values from grab and channel sampling. Auger sampling and geologic mapping are proposed to select the best targets for drilling. A large number of recent new prospecting sites provide useful data to evaluate for the potential for a bulk mining target.
  • Gran Creek, Rossi – The Rossi pit (a former small scale placer and later hydraulic mining operation) is more than 200 meters long, 70 meters wide and up to 10 meters deep. Channel sampling is encouraging from Reis (Gran Creek) and the intrusive-related magnetic association is prospective to quickly develop gold targets for drilling. Rossi merits further systematic channel sampling in a prospective intrusive related gold target.

Subject to the approval of the TSX Venture Exchange, Northern Rand will acquire up to 100% of the voting shares of Orion as follows:

  1. In consideration for 50% of the issued and outstanding voting shares of Orion, Northern Rand will (i) issue 1,500,000 common shares of Northern Rand ("NRR Share") on the initial closing date of the Transaction; (ii) issue 1,500,000 NRR Shares on the date that is one year from the initial closing date of the Transaction; and (iii) provide Orion with $5,000,000 during the first two years from the date of signing of the definitive agreement for the Transaction to be expended on Orion's properties Assets (the "Initial Exploration Expenditures").
  2. Northern Rand shall have the right to acquire an additional number of voting shares of Orion that would result in Northern Rand owning 70% of the issued and outstanding voting shares of Orion by: (i) advancing an additional $10,000,000 to Orion at any time during the first four years from the date of signing of the definitive agreement for the Transaction to be expended on Orion's properties; and (ii) issuing an additional 4,000,000 NRR Shares.
  3. Northern Rand shall have the right to acquire an additional number of voting shares of Orion that would result in Northern Rand owning 80% of the issued and outstanding voting shares of Orion by: (i) advancing an additional $10,000,000 to Orion at any time during the first six years from the date of signing of the definitive agreement for the Transaction to be expended on Orion's properties; and (ii) issuing an additional 3,000,000 NRR Shares.
  4. If Northern Rand has earned and/or acquired 80% of the voting shares of Orion, each of Kapelka and Northern Rand shall then be responsible for funding its share of ongoing expenditures on Orion's properties. In the event that Kapelka is unable to fund its share of such expenditures, then Northern Rand shall acquire the final 20% of the issued and outstanding voting shares of Orion from Kapelka by a payment to Kapelka of the then determined fair market value of such 20% of the voting shares of Orion (valued based on a report on Orion's properties prepared at that time in accordance with National Instrument 43-101, Standards of Disclosure for Mineral Projects ("NI 43-101") by a mutually agreed to competent geologist). Northern Rand shall have the option to satisfy such payment by (i) cash; (ii) the issuance of NRR Shares at the fair market value of such NRR Shares at that time; or (iii) a combination of (i) and (ii).
  5. If Northern Rand has earned and/or acquired 80% of the voting shares of Orion, Northern Rand shall have the right, at any time, to acquire the final 20% of the issued and outstanding voting shares of Orion from Kapelka by a payment to Kapelka of the then determined fair market value of such 20% of the voting shares of Orion (valued based on a report on Orion's properties prepared at that time in accordance with NI 43-101 by a mutually agreed to competent geologist). Such payment may be satisfied by (i) cash; (ii) the issuance of NRR Shares at the fair market value of such NRR Shares at that time; or (iii) a combination of (i) and (ii), as mutually agreed to by the parties.

The letter agreement provides that each party shall have completed their due diligence of the other party to their satisfaction, acting reasonably by February 28, 2011 (or such later date as may be mutually agreeable between the parties hereto) including, without limitation, being satisfied, acting reasonably, that the other party has good and valid title to its assets and that its assets are free and clear of any and all liabilities and encumbrances. Each party has also covenanted and agreed to use commercially reasonable efforts to negotiate in good faith and enter into a definitive agreement (the "Definitive Agreement") and any other ancillary documents in respect of the Transaction on or before March 15, 2011, such Definitive Agreement and ancillary documents to be in form and substance satisfactory to the parties thereto, including representations and warranties to each party customary in transactions of this nature. The entering into of the Definitive Agreement and the completion of the Transaction will subject to a number of conditions including, without limitation, the following: (i) on or before February 8, 2011, Kapelka and Orion shall have provided to Northern Rand a technical report on Orion's properties prepared in accordance with NI 43-101 and in a form acceptable to Northern Rand and the TSX Venture Exchange (ii) all director, shareholder, securities and regulatory approvals and acceptances (as required) and all third party consents (as required) having been obtained including, without limitation, the approval of the TSX Venture Exchange; and (iii) prior to the closing date, Kapelka and Orion shall have provided to Northern Rand a title opinion on Orion's properties, in form satisfactory to Northern Rand, acting reasonably.

Northern Rand has agreed to provide Orion with an initial $300,000 in working capital, such funds to be applied against the Initial Exploration Expenditures described above. As security for the repayment of such funds, Kapelka and Orion have issued a promissory note to NRR, such promissory note bearing interest at a rate of 3% per annum and secured by a first priority security interest in and to all of the Kapelka's and Orion's present and after-acquired personal property. In the event that the parties (i) do not enter into the Definitive Agreement; or (ii) enter into the Definitive Agreement and such agreement and/or the Transaction are at any point terminated due to a material breach by Kapelka and/or Orion prior to the advance of any other funds by NRR thereunder, then the principal amount together with interest and other fees and monies which may from time to time be owing under the promissory note shall be repayable on the earlier of: (i) two years from the date of issuance of the promissory note; or (ii) the date that Kapelka and Orion complete their next equity or debt financing.

Concurrent with the Transaction described above, subject to the approval of the TSX Venture Exchange, Northern Rand proposes to undertake a non-brokered private placement of up to 25,000,000 units (each, a "Unit") at a price of $0.30 per Unit for aggregate gross proceeds of up to $7,500,000. Each Unit is proposed to consist of one common share of the Company (each, a "Common Share") and one-half of one common share purchase warrant (each, a "Warrant"). Each whole Warrant will be exerciseable to acquire a Common Share at a price of $0.50 per share for a period of 12 months from the date of issuance. The net proceeds of the private placement will be used, in part, to satisfy the cash payments related to the Transaction described above.

Subject to the approval of the TSX Venture Exchange, the parties have agreed that Alan Schwabe (or his designated nominee) shall receive a finder's fee of 10% of the NRR Shares issued under the terms of the Transaction (to a maximum of 1,000,000 NRR Shares). Such finder's fee shares shall be issued at such times as the NRR Shares are issued to Orion under the terms of the Transaction and in an amount equal to 10% of any such NRR Shares issued to Orion (to a maximum of 1,000,000 finder's fee shares).

Trading of the NRR Shares has been halted and will not resume until Northern Rand has satisfied certain TSX Venture Exchange requirements, including the requirement to provide the TSX Venture Exchange with a technical report on Orion's properties prepared in accordance with NI 43-101. Northern Rand will issue a further new release as soon as further details are available regarding the resumption of trading.

Mr. Nelson Baker, P. Eng., is the "qualified person" as defined in NI 43-101, who has reviewed and approved the technical content in this press release.

Reader Advisory

This press release should not be considered a comprehensive summary of the terms of the Transaction described above. Additional information may be required by the TSX Venture Exchange and may be disseminated at a future date following a satisfactory review by the TSX Venture Exchange.

Trading of the common shares of Northern Rand will remain halted pending receipt and review by the TSX Venture Exchange of acceptable documentation regarding Northern Rand following completion of the Transaction. The proposed Transaction has not been approved by the TSX Venture Exchange and remains subject to TSX Venture Exchange approval.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSX Venture Exchange acceptance. The Transaction cannot close until the required approvals are obtained. There can be no assurance that the Transaction will be completed as proposed or at all.

Except for statements of historical fact, this news release contains certain "forward-looking information" within the meaning of applicable securities law. Forward-looking information is frequently characterized by words such as "plan", "expect", "project", "intend", "believe", "anticipate", "estimate" and other similar words, or statements that certain events or conditions "may" or "will" occur. In particular, forward-looking information in this press release includes, but is not limited to, statements with respect to timing and completion of the Transaction, the timing and entering into of the Definitive Agreement and any ancillary documents, the completion of the conditions precedent to entering into of the Definitive Agreement and the completion of the Transaction (including receipt of TSX Venture Exchange approval) and the proposed private placement of Units. Although we believe that the expectations reflected in the forward-looking information are reasonable, there can be no assurance that such expectations will prove to be correct. We cannot guarantee future results, performance or achievements. Consequently, there is no representation that the actual results achieved will be the same, in whole or in part, as those set out in the forward-looking information.

Forward-looking information is 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 anticipated in the forward-looking information. Some of the risks and other factors could cause results to differ materially from those expressed in the forward-looking statements include, but are not limited to: general economic conditions in Canada, the United States and globally; industry conditions, including fluctuations in commodity prices; governmental regulation of the mining industry, including environmental regulation; geological, technical and drilling problems; unanticipated operating events; competition for and/or inability to retain drilling rigs and other services; the availability of capital on acceptable terms; the need to obtain required approvals from regulatory authorities; stock market volatility; volatility in market prices for commodities; liabilities inherent in mining operations; changes in tax laws and incentive programs relating to the mining industry; and the other factors described in our public filings available at www.sedar.com. Readers are cautioned that this list of risk factors should not be construed as exhaustive.

The forward-looking information contained in this news release is expressly qualified by this cautionary statement. We undertake no duty to update any of the forward-looking information to conform such information to actual results or to changes in our expectations except as otherwise required by applicable securities legislation. Readers are cautioned not to place undue reliance on forward-looking information.

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. 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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