Northern Rand Resource Corp.
TSX VENTURE : NRR

May 12, 2011 08:00 ET

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

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2011) - Northern Rand Resource Corp. ("Northern Rand" or the "Company") (TSX VENTURE:NRR) is pleased to announce that, further to its press release dated February 7, 2011 announcing that it had entered into a binding arm's length letter agreement (the "LOI") with Kapelka Exploration Inc. ("Kapelka") and Orion Resources N.V. ("Orion"), the Company has entered into a definitive share acquisition agreement (the "Share Acquisition Agreement") with Kapelka and Orion pursuant to which Northern Rand has the right to acquire up to 100% of the voting shares of Orion (the "Transaction"). In the process of finalizing the terms of the Share Acquisition Agreement, the parties renegotiated certain specific terms of the Transaction from those set forth in the LOI, the particulars of which are disclosed in this press release. 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 some of the largest resources and reserves are in Suriname which hosts the Rosebel gold mine owned by Iamgold Gold Corp. The Sara Creek Property is 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 ("Orion Shares") as follows:

  1. On the closing date of the Transaction, Northern Rand shall (i) issue 10,000,000 common shares of Northern Rand ("NRR Shares") to Orion; and (ii) pay cash to Orion in the amount of $500,000. In turn, Orion shall issue 800 Orion Shares to Northern Rand, resulting in Northern Rand owning 80% of the issued and outstanding Orion Shares.

  2. If Northern Rand has acquired 80% of the issued and outstanding Orion Shares and provided a minimum of $25 million has been spent on audited exploration expenditures on the mineral assets (the "Mineral Assets") held by Orion, each of Kapelka and Northern Rand shall then be responsible for funding its share of ongoing expenditures in accordance with the budget determined by the board of directors of Orion.

  3. If Northern Rand has acquired 80% of the issued and outstanding Orion Shares, and provided a minimum of $25 million has been spent on audited exploration expenditures on the Mineral Assets, Northern Rand shall have the right to acquire the final 20% of the issued and outstanding Orion Shares from Kapelka. The consideration for such Orion Shares shall be satisfied by a cash payment to Kapelka of the then determined fair market value of such 20% of the issued and outstanding Orion Shares (valued based on a report on the Mineral Assets 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).

  4. In the event that Northern Rand does not exercise its rights to acquire the last 20% of the issued and outstanding Orion Shares from Kapelka, then Kapelka shall be permitted to sell its Orion Shares to a third party by following the right of first refusal procedures set forth in the Share Acquisition Agreement.

  5. In the event that Northern Rand does not exercise its rights to acquire the last 20% of the issued and outstanding Orion Shares from Kapelka and Kapelka is subsequently unable to sell its Orion Shares in accordance with the terms of the Share Acquisition Agreement, then Kapelka shall have the right to require Northern Rand to acquire the Orion Shares held by Kapelka by a payment to Kapelka of the then determined fair market value of such 20% of the issued and outstanding Orion Shares (valued based on a report on the mineral assets 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 fully paid and non-assessable NRR Shares at the fair market value of such NRR Shares at that time; or (iii) a combination of (i) and (ii), as determined by Northern Rand, in its discretion.

  6. In the event that the last 20% of the issued and outstanding Orion Shares held by Kapelka are not ultimately sold in accordance with the terms of the Share Acquisition Agreement, then each of Kapelka and Northern Rand shall continue to be responsible for funding its share of ongoing expenditures in accordance with the budget determined by the board of directors of Orion.

The closing of the Transaction shall take place no later than May 31, 2011, unless otherwise agreed upon by the parties. The completion of the Transaction is subject to a number of conditions including, without limitation, the following: (i) the TSX Venture Exchange shall have accepted the technical report on Orion's properties prepared in accordance with NI 43-101; (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/or Orion shall have provided a title opinion on the Mineral Assets, in form satisfactory to the TSX Venture Exchange and Northern Rand, acting reasonably. The technical report and the title opinion have been provided to Northern Rand and have been submitted to the TSX Venture Exchange for its review.

Concurrently with the execution of the Share Acquisition Agreement, Northern Rand entered into an agreement ("NSR/NPI Cancellation Agreement") with Sumar Management Consultants Ltd., 1379197 Alberta Ltd. and Mr. Luc De Rooy (the "NSR Holders") providing for the cancellation of certain rights related to a 3% net smelter return ("NSR") and a net profits interest of 12% ("NPI") held by the NSR Holders in relation to the Mineral Assets. Pursuant to the terms of the NSR/NPI Cancellation Agreement, the NSR Holders have agreed to the cancellation of 1% of the current NSR (for clarity, reducing the NSR to 2%) and the immediate and complete cancellation of the NPI upon the payment by Northern Rand to the NSR Holders of an aggregate amount of $250,000. At any time from the closing date until the fifth anniversary date of the closing date, Northern Rand shall have the right to elect in writing to pay the NSR Holders an aggregate amount of $1,500,000 in consideration for the cancellation of an additional 1% of the NSR (for clarity, reducing the NSR to 1%).

On or before the closing date, Orion has agreed to open a bank account in Canada and, on the closing date, Northern Rand has agreed to deliver the sum of $5,000,000 to be deposited in such bank account. The funds shall be used to further Orion's existing exploration program. The parties have agreed that $300,000 of the $5,000,000 required to be deposited is deemed to have already been delivered by Northern Rand as evidenced by the promissory note (the "Promissory Note") described in Northern Rand's February 7, 2011 press release. The Promissory Note shall be applied against the $5,000,000 at closing and, at that time, the Promissory Note shall be cancelled and considered paid in full at closing.

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 units (each, a "Unit") at a price of $0.30 per Unit for aggregate gross proceeds of up to $10,000,000. 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 Elizabeth Schwabe (or her designated nominee) shall receive a finder's fee in the maximum amount permitted by the TSX Venture Exchange, with Northern Rand being solely responsible for satisfaction of such fee.

Trading of the NRR Shares has been halted and will not resume until Northern Rand has satisfied certain TSX Venture Exchange requirements. As referenced above, the technical report and the title opinion, among other documents, are in the process of being reviewed by the TSX Venture Exchange. 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 completion of the conditions precedent to the completion of the Transaction (including receipt of TSX Venture Exchange approval). 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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