Sabina Silver Corporation
TSX VENTURE : SBB

Sabina Silver Corporation

March 30, 2009 07:01 ET

Sabina Silver Enters Into Agreement to Purchase Back River Assets From Dundee Precious Metals to Create Premier Northern Canada Advanced Exploration Company

Claims cover over 3,000 sq km on a Greenstone Belt that hosts Hackett River Project in Nunavut M & I Resource of 3.4 million tonnes at 10.9 g/t for 1.19 million ounces gold Inferred Resource of 3.6 million tonnes at 10.2 g/t for 1.16 million ounces gold

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 30, 2009) - Sabina Silver Corporation (TSX VENTURE:SBB) announced today that it has entered into a Definitive Asset Purchase Agreement (the "Agreement") to purchase the Back River and Wishbone properties in Nunavut, Canada (collectively known as the Back River Assets) from Dundee Precious Metals Inc. ("DPM").

As previously disclosed Sabina's strategy is to seek accretive acquisitions within established criteria while continuing to advance its Hackett River Project. The Company has been actively assessing large or district scale Canadian precious metals targets which have substantial already defined 43-101 mineral resource.

The Back River Assets consist of two main components, the original Back River property hosting the George and Goose Lake iron formation hosted gold deposits and a recent new project area, the Wishbone Project. This property covers a large portion of the Hackett River Greenstone Belt ("HRGB") and hosts Sabina's Hackett River Project as well as other smaller base and precious metal deposits. The combined properties total approximately 3,000 square km and cover a largely unexplored highly prospective greenstone belt.

"We are very excited about this transaction," said Tony Walsh, President & CEO. "All of the projects are in the same area and share logistical opportunities and potential development synergies. For example, the George Lake deposit is approximately 40 km from Hackett River. The Sabina management team has proven experience in successfully managing and permitting large arctic projects, including the development of Miramar Mining's Hope Bay Greenstone Belt. We have previously operated the George and Goose Lake projects and believe they have excellent potential to add to their resources. Also, Nunavut is a pro-mining jurisdiction, supportive of exploration and mining development. These Canadian properties will also provide the option for the Company to access, if required, funding through the sale of flow through qualified shares. We believe that this transaction adds immediate value to the Company and will continue to do so for years to come."

"We have always recognized the value of the Back River assets however, with our focus clearly on advancing our Bulgarian assets, this transaction provides us with an opportunity to continue to participate in Back River's growth and development without diverting resources from our core business," said Jonathan Goodman, President & CEO. "Back River is an excellent exploration property that will complement the adjacent Sabina properties allowing DPM to become a significant shareholder in a much larger exploration venture run by one of the best exploration groups in Canada."

More Precious Metals

The assets that add immediate tangible value in this transaction are the George and Goose Lake banded iron formation gold deposits. This year's exploration program at Hackett River will target higher value mineralization (copper, silver, gold). An increase in resources containing these metals would enhance the economics of the significant base metals component at Hackett River. On closing of this transaction, Sabina will significantly increase its precious metals portion of the resource base. The Company would control 205 million indicated ounces of silver and an additional 64 million inferred ounces of silver along with 1.2 million indicated ounces of gold and an additional 1.1 million inferred ounces of gold. These gold ounces are located in close proximity to the contemplated Hackett River infrastructure and both projects would benefit from logistical, exploration and management synergies.

Control of a New Canadian Greenstone Belt

The Wishbone Project is a large early stage exploration play. It consists of staked claims and prospecting permits covering the known extents of the HRGB. The claims and permits extend for nearly 150 kilometres north to south and up to 50 kilometres east to west. The belt contains Sabina's Hackett River Project as well as Savant Explorations' Yava and Xstrata's Musk deposits among others. The area has seen sporadic exploration starting in the early 1970's by large base metal companies including Noranda and Cominco, but has very limited drill testing. DPM recently conducted, over the core portion of the highly prospective HRGB, a high quality 12,350 line kilometre airborne VTEM (time-domain electromagnetic and magnetic) survey which has outlined 200 EM anomalies for prioritization and follow-up. The Wishbone Project gives Sabina years of prospective exploration targets providing opportunities to create leverage and value while more advanced projects are pushed towards fruition. The Wishbone targets also create opportunities for the development of satellite mill feed for the anticipated Hackett River mill.

To view the Claim Group Location Map, please click on the following link: http://media3.marketwire.com/docs/sbb1.pdf

Regional Influence

Of intrinsic value are the opportunities that exist for Sabina on a regional basis. Hackett River has amassed the size to exist as a stand-alone project, including supporting the cost of a dedicated road and deep water port if required. However, the acquisition of the Back River Assets could enable these large fixed costs to be spread over a larger and higher value resource base. Further, the established infrastructure at Hackett River could become an economic driver for the region and the territory. Projects in the area that may be uneconomic on their own could become viable by utilizing facilities established at Hackett River for service fees and/or tolls. This not only gives Sabina the opportunity to positively impact the economics of our own projects but also potentially have a strong influence on mining in the region.

To view the Project Location Map - Nunavut, please click on the following link: http://media3.marketwire.com/docs/sbb2.pdf

Sabina remains committed to a strong balance sheet. After expenditures incurred on this transaction and over the next 12 months on the projects, it is anticipated the Company will end 2009 with $20 million in cash.

Purchase Price

Sabina would acquire the Back River Assets by issuing to DPM in three tranches:

1) At closing:

$7 million cash

17 million Common Shares (approximately 18.8% of the number of currently outstanding)

2) A Series A Special Warrant(i)

3) A Series B Special Warrant(i)

(i)Special Warrants are comprised of one common share and one-half of one common share purchase warrant. The Series A Special Warrants to be triggered upon a Board decision to proceed to feasibility study or proceed to production on the Back River Assets. The Series B Special Warrants to be triggered upon a positive production decision on the Back River Assets.

Full details on the Warrants and their future triggering events are described below under "Terms".

The Board of Sabina appointed a Special Committee to consider the terms of the proposed transaction. Paradigm Capital Inc. was retained as advisor to the Special Committee of Sabina and has provided to such Special Committee of Sabina, their written and verbal advice, that the consideration offered pursuant to the transaction is fair, from a financial point of view, to the shareholders of Sabina. Dundee Securities was retained as a financial advisor to the Company.

Based on the report of the Special Committee and the Dundee Securities Inc. and Paradigm Capital Inc. fairness opinions, the Board unanimously recommended proceeding with the Agreement.

Directors and officers of Sabina hold 2.5% of the outstanding shares of the Company.

Board Nominees

Pursuant to the Nomination Rights Agreement referred to below as one of the ancillary agreements, upon closing of the transaction, DPM intends to nominate as its nominee members to the Board of Sabina Silver, Mr. Jonathan Goodman and Mr. David Fennell.

Jonathan Goodman is the President & CEO of DPM. Mr. Goodman has over 20 years experience in the resource and investment industry, working as a geologist, senior analyst, portfolio manager and senior executive. Mr. Goodman joined Goodman & Company, Investment Counsel Ltd. in 1990, where he was responsible for the selection of Canadian equities and played a major role in developing asset allocation strategies, before becoming the company's President. He is also a founder of Goepel Shields and Partners, an investment firm. Mr. Goodman graduated from the Colorado School of Mines as a Professional Engineer and holds a Master of Business Administration from the University of Toronto. He is also a Chartered Financial Analyst, and is a director of several publicly-traded resource companies.

Mr. Fennell received his law degree in 1979 from the University of Alberta and practiced in the areas of corporate and resource law, until 1983 when he founded Golden Star Resources. During his term as President & CEO, Golden Star became a TSE 300 company and one of the largest and most successful exploration companies. In 1998, Mr. Fennell left Golden Star to become Chairman and CEO of Cambiex Explorations Ltd., which became Hope Bay Gold Corporation. He held this position until the merger of Hope Bay and Miramar Mining Corporation where he continued as Executive Vice-Chairman and director for the combined entity until its takeover, in January 2008, by Newmont Mining Corporation. He was Chairman of Ariane Gold Corp. from August 2002 until its acquisition by Cambior Inc. in November 2003, and was a director of Palmarejo Silver and Gold Corporation until the merger with Coeur d'Alene Mines Corporation, one of the world's leading silver companies, in December 2007. He was also Chairman of Maximus Ventures Ltd. until the business combination with NX Gold Ltd. and the name change to Bear Lake Gold Ltd. He is currently Chairman of Bear Lake Gold Ltd., Reunion Gold Corporation and Queensland Minerals Ltd., as well as Executive Chairman of Odyssey Resources Ltd. and a director of Major Drilling Group International Inc.

Shareholder Rights Plan Adopted

Sabina announces the establishment of a shareholder rights plan agreement (the "Plan") effective Friday March 27, 2009 subject to TSXV acceptance. Although the plan is effective upon its adoption, in accordance with the TSXV requirements, it will be submitted to Sabina shareholders for approval at the Company's Annual General Meeting which is expected to be in May, 2009.

If the plan is approved at the meeting it will continue in effect until the earlier of the termination time as defined in the Plan or the date of the annual meeting of shareholders in 2012. If the plan is not approved, it will terminate at the end of this year's meeting. Provisions have been included in the Plan to exempt acquisitions of shares by DPM upon the exercise of its rights pursuant to the Agreement and ancillary agreements as described under the "Terms". The Plan is not designed to deter take-over proposals, but rather to provide proper opportunity for shareholders and management to consider the merits of any such proposals.

The Company believes the Plan is similar to those adopted by other Canadian companies, is consistent with Canadian corporate practice and addresses guidelines for such plans as set out by institutional investor advocates.

Sabina is not currently aware of any pending or threatened takeover initiatives directed at the Company. A copy of the Plan can be obtained by contacting info@sabinasilver.com.

Terms

Special Warrants

The Series A Special Warrants will be exercisable if any of the following events occurs:

(i) a positive decision is made by the board of directors of Sabina (or, if at the relevant time Sabina is not the operator or majority owner of the properties, a positive decision of the operator or the majority owner of the properties is made) to proceed with the preparation of a feasibility study (as defined in NI 43-101) on all or any part of the properties;

(ii) a positive decision is made by the board of directors of Sabina (or, if at the relevant time is not the operator or majority owner of the properties, a positive decision of the operator or the majority owner of the properties is made) to bring all or any part of the properties into production;

(iii) a consolidation, amalgamation, merger or take-over of Sabina that results in the acquisition of at least 66 2/3 of the outstanding Sabina Shares for cash consideration or, if for non-cash consideration, as long as the acquisition price is at least a 25% premium to the volume weighted average trading price (the "VWAP") of Sabina Shares for the five consecutive trading days ending on the trading day prior to the first public announcement of such consolidation, amalgamation merger or take-over; or

(iv) the transfer of the undertaking or assets of Sabina as an entirety or substantially as an entirety in a transaction that is subject to shareholder approval of Sabina.

Upon the occurrence of any of the events described above, the Series A Special Warrants will be automatically exercised and DPM will receive, without payment of additional consideration, 5,000,000 Class A Units, each comprising one Sabina Share and, if applicable, one-half of one Class A Unit Warrant. Each whole Class A Unit Warrant will be exercisable for five years from the closing date of the Agreement to purchase one Sabina Share at a price equal to the VWAP of the Sabina Shares on the TSXV the five consecutive trading days ending on the trading day prior to the closing ("Exercise Price"). The Series A Special Warrants and the Class A Unit Warrants will contain customary anti-dilution provisions in favour of DPM.

Upon the occurrence of any of the events described in (ii), (iii) or (iv) above, the Series B Special Warrants will be automatically exercised and DPM will receive, without payment of additional consideration, 5,000,000 Class B Units, each comprising one Sabina Share and, if applicable, one-half of one Class B Unit Warrant. Each whole Class B Unit Warrant will be exercisable for five years from the closing date of the Agreement, to purchase one Sabina Share at the Exercise Price. The Series B Special Warrants and the Class B Unit Warrants will contain customary anti-dilution provisions in favour of DPM.

Ancillary Agreements

DPM and Sabina will negotiate in good faith and enter into the following ancillary agreements at closing:

A. Equity Participation Agreement

The Equity Participation Agreement will grant to DPM the right to participate, up to 19.9% (the "Participation Right"), in any equity securities issued pursuant to a financing of Sabina (an "Equity Financing"), or equity securities issued by Sabina in connection with the acquisition of any shares or assets or a third party, if any (an "Acquisition Transaction"), provided that:

(a) the Participation Right will not apply to Sabina Shares issuable upon the exercise of stock options granted or to be granted under its stock option plan or to other outstanding rights to purchase Sabina Shares;

(b) in the event that the Series A Special Warrants or Series B Special Warrants or the Class A Unit Warrants or Class B Unit Warrants are exercised, the Participation Right will be increased to the percentage of the outstanding Sabina Shares owned by DPM after giving effect to such exercise;

(c) in the event of any Equity Financing or Acquisition Transaction, Silver Wheaton Corp. will have the first right to exercise its participation rights under the Silver Wheaton participation agreement, following which DPM will have the right, on a one-time basis in respect of that Equity Financing or Acquisition Transaction, to exercise the Participation Right after giving effect to any exercise by Silver Wheaton Corp. of its participation right;

(d) DPM will have the right to maintain its pro rata interest (calculated on an undiluted basis) in the event Sabina issues or proposes to issue equity securities pursuant to an Equity Financing or an Acquisition Transaction; and

(e) the Participation Right will terminate in the event that DPM ceases to beneficially own at least 10% of the number of Sabina Shares issued and outstanding at any time (calculated on an undiluted basis).

B. Nomination Rights Agreement

The Nomination Rights Agreement will grant to DPM the right, as long as DPM holds at least 15% of the outstanding Sabina Shares, to have two nominee-members on the board of Sabina and, as long as DPM holds at least 10% of the outstanding Sabina Shares, to have one nominee-member on the board of Sabina.

C. Qualification Rights Agreement

The Qualification Rights Agreement will grant to DPM the right to request the qualification for distribution by prospectus, at DPM's expense (unless such qualification for distribution is part of a public distribution being made by Sabina) as long as DPM holds more than 20% of the outstanding Sabina Shares or is otherwise considered a control person as such term is defined under the Securities Act (Ontario).

D. Standstill Agreement

Pursuant to the Standstill Agreement, DPM will agree that, for a period of at least four years DPM will not, either directly, through a subsidiary (as defined in the Securities Act (Ontario)) or with any third party acting jointly or in concert with DPM, without the prior written consent of Sabina (which consent may be given or withheld by Sabina in its sole discretion), acquire any Sabina Shares (other than pursuant to the Agreement and the ancillary agreements) if, after giving effect thereto, its direct or indirect beneficial ownership (as defined in section 90(1) of the Securities Act (Ontario)) of Sabina Shares would exceed its percentage ownership of the outstanding Sabina Shares immediately following closing (being 18.8%) (calculated on an undiluted basis), provided that the foregoing will not apply:

(a) from the time of the announcement, and for the duration, of a take-over bid made by an offeror, other than DPM, to all or substantially all of the shareholders of Sabina to purchase at least 50% of the number of Sabina Shares then outstanding; or

(b) if DPM makes a take-over bid to all or substantially all of the shareholders of Sabina to purchase all Sabina Shares then issued and outstanding, which take-over bid is open for acceptance for a period of at least the minimum period required by Canadian securities laws.

The Transaction is subject to regulatory approvals among others and may require shareholder approval.

Quality Assurance

The Hackett River mineral resource estimate was prepared by Mr. Albert Chong, P.Geo., Senior Geologist of AMEC Americas Limited. Mr. Chong is a qualified person as defined by National Instrument 43-101. CIM Definition Standards (2005) have been used in defining the mineral resource categories. The Hackett River resource estimate was announced on March 11, 2009. Mineral resources for Goose Lake and George Lake were generated by RSG Global Consulting Pty Ltd (Coffey Mining) in September 2007, and are posted on www.sedar.com. Mr. John Wakeford, P.Geo. and a Qualified Person in accordance with NI 43-101 has reviewed the resources referred to above and attached and has approved their dissemination.

SABINA SILVER CORPORATION is a Canadian public mineral exploration and development company with assets at the Hackett River silver-zinc project in Nunavut and several projects in the Red Lake gold camp. The Company is well capitalized with approximately $40 million in cash and marketable securities at December 31, 2008. The strategy to grow the company focuses on two mandates: 1) to continue to focus on enormous exploration and development potential of Hackett River Silver-Zinc project; and 2) Maintain strong balance sheet to acquire accretive precious metals assets.

Forward Looking Statements

Statements relating to exploration, pre-feasibility, development and production at Hackett River, Back River and the Wishbone Properties and the expected results of this work are forward-looking statements within the meaning of securities legislation of certain Provinces in Canada. Forward looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Information inferred from the interpretation of drilling results may also be deemed to be forward looking statements, as it constitutes a prediction of what might be found to be present when and if a project is actually developed. These forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from those reflected in the forward-looking statements, including, without limitation: risks related to fluctuations in metal prices; uncertainties related to raising sufficient financing to fund the planned work in a timely manner and on acceptable terms; changes in planned work resulting from weather, logistical, technical or other factors; the possibility that results of work will not fulfill expectations and realize the perceived potential of the Company's properties; risk of accidents, equipment breakdowns and labour disputes or other unanticipated difficulties or interruptions; the possibility of cost overruns or unanticipated expenses in the work program; the risk of environmental contamination or damage resulting from Sabina's operations and other risks and uncertainties, including those described in Sabina's Annual Report for the year ended December 31, 2007.

Forward-looking statements are based on the beliefs, estimates and opinions of Sabina's management on the date the statements are made. Sabina undertakes no obligation to update these forward-looking statements should management's beliefs, estimates or opinions, or other factors, should change.

This news release has been authorized by the undersigned on behalf of Sabina Silver Corporation.

Tony Walsh, President & CEO

Neither 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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