Salmon River Resources Ltd.

Salmon River Resources Ltd.

November 04, 2011 09:34 ET

Salmon River Signs Memorandum of Understanding With Chinese Steel Producer Providing Financing and Off-Take Private Placement for Up to C$1.5 Million Announced

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 4, 2011) - Salmon River Resources Ltd. (TSX VENTURE:SAL) ("Salmon River" or the "Company") is pleased to announce that it has signed a non-binding Memorandum of Understanding (the "MOU") with General Steel Holdings Inc. (NYSE:GSI) ("General Steel"), a company listed on the New York Stock Exchange, for itself and on behalf of certain subsidiaries and affiliates (together, the "GS Group") regarding rights to purchase part of any future iron ore production from properties currently under option to and/or to be acquired by Salmon River (the "Off-Take") and to provide assistance to Salmon River in raising up to C$110 million in private placement financings as well as committing to fund future capital expenditures and other development costs. The MOU is intended to lay the groundwork for Salmon River to fund the exercise of its exclusive option to acquire 100% of Treppo Grande Iron Pty Ltd. ("Treppo Grande") and to fund future development costs of the Treppo Grande iron ore project (the "Treppo Grande Project"). Under the MOU terms, the GS Group has also committed to fund future capital requirements as well as provide project management and co-ordination services to the Company in return for compensation equal to up to a 51% profit interest in the Treppo Grande Project, on terms to be mutually agreed in the final definitive agreements.

Salmon River has previously reported on its exploration programme on the Treppo Grande properties, comprising 100% ownership of five tenements in the highly prospective Yilgarn Craton in South-Western Australia. For further information, readers should review Salmon River's SEDAR filings at, including the Form 43-101 Technical Report prepared by A.J. Maynard and N.R. Archer and filed on SEDAR on November 9, 2010.

To view the photo "Outcropping at Treppo Grande Mt Manning South" please click on:


In return for providing financing and management assistance outlined herein, the GS Group will be granted a right to acquire (i) up to two million tonnes per annum of Hematite ore production from the properties acquired by Salmon River under the Treppo Grande Option or other properties acquired by Salmon River in the future, at 95% of prevailing market prices once production has commenced; plus (ii) marketing rights to 40% of the Hematite ore production above two million tonnes per annum generated from such properties. It should be noted that the Treppo Grande Project is not currently in production nor has a mineral resource been estimated for the Project. There is no assurance that a commercially viable mineral resource will be found or that the Treppo Grande Project will attain commercial production.

Financing Commitment

Under the terms of the MOU, Salmon River proposes to:

  • issue, by way of private placement, a minimum of 60 million common shares at a price of C$0.50 per share, for gross proceeds of a minimum of C$30 million; and
  • issue up to C$80 million of Convertible Debentures on terms to be agreed by the parties.

Under the terms of the MOU, GS Group has agreed to:

  • purchase a minimum of 60 million common shares offered by Salmon River as part of the private placement (the "Equity Financing");
  • purchase a minimum of C$30 million of the Convertible Debentures offered by Salmon River; and
  • assist Salmon River in completing the placement of any common shares and/or Convertible Debentures not placed with the GS Group.

The GS Group has also agreed to 100% of all future capital costs for the development of the Treppo Grande Project and up to C$50 million for other strategic initiatives being explored by Salmon River. The GS Group will also provide all future project development, management and co-ordination services for the development and operation of selected mining tenements of the Treppo Grande Project and in return will receive compensation equal to up to 51% of the future profits earned from the Treppo Grande Project.

Assuming completion of these arrangements, Salmon River will have raised gross proceeds of C$110 million for exercise of the Treppo Grande Option and for working capital and funding development of the Treppo Grande Project and will have also secured funding for all of its future capital expenditure requirements in connection with the Treppo Grande Property. Upon completion of these arrangements, it is possible that General Steel or members of the GS Group could become Control Persons as that term is defined by policies of the TSX Venture Exchange and have an entitlement or interest in more than 50% of the Company's outstanding common shares, on a fully-diluted basis.

The GS Group shall be entitled to representation on the Board of Directors of Salmon River in proportion to their equity ownership level. In accordance with good governance standards, an appropriate number of independent directors shall be appointed from Salmon River's current Board.

For assistance in respect of the financings described above, independent, arms-length intermediaries may be paid finder's fees not exceeding 8% of any amounts raised, payable at their option up to half in common shares on the same terms and conditions as the Equity Financing.

The Parties propose to negotiate and complete a binding investment framework agreement (the "Investment Framework Agreement") by 30th November 2011 (or such later date as may be mutually agreed). The Investment Framework Agreement will be subject to approval of the TSX Venture Exchange and may be subject to approval by the shareholders of the Company and various governmental agencies and regulatory authorities.

In addition to the financings described above, Salmon River has agreed to undertake a non-brokered private placement to issue up to 5,000,000 common shares at $0.30 per common share. The net proceeds of the non-brokered private placement will be used primarily for legal and other expenses expected to be incurred in connection with the Investment Framework Agreement and the Treppo Grande Option. In connection with the Private Placement, Salmon River may pay cash commissions and finders' fees to certain finders in an amount equal to 8% of the proceeds from the sale of the common shares to subscribers introduced to the Company.

The common shares issued in the private placement will be subject to a four-month hold period in accordance with the policies of the TSX Venture Exchange and applicable securities legislation.

The Private Placement remains subject to the approval of the TSX Venture Exchange.

"The signing of the MOU with GS Group is a significant step in the development of Salmon River and the Treppo Grande iron ore project," commented Doug Betts, Salmon River Chair. "With these arrangements with the GS Group, Salmon River is developing significant mutual beneficial relationships with major Chinese stakeholders, which provides for the Company's current and future funding requirements and also delivers security of supply to our new Chinese partners from the highly prospective Australian Yilgarn Craton iron ore formations. We intend to move quickly to exercise the Treppo Grande Option and to develop this significant asset and its potential value with our Chinese partners."

Yu Zuo Sheng, Chairman and CEO of General Steel noted, "We are delighted to become involved with Salmon River and in its exciting Treppo Grande Project. This arrangement, we believe, has potential to generate significant benefits to our mutual public shareholders. This partnership with Salmon River is in-line with General Steel's on-going efforts to expand profit margins by securing a steady supply of raw materials at competitive price. General Steel's long-term strategy seeks to establish close relationships with overseas iron ore miners that will grant us high quality iron ore resources and place us in an advantageous position as we strive to meet the robust demand for steel production in China's western regions."

Salmon River will provide additional updates as the MOU is implemented. The full contents of the MOU remains subject to current commercial confidentiality.

About General Steel Holdings Inc. (NYSE:GSI)

General Steel Holdings Inc. (NYSE:GSI), headquartered in Beijing, China, operates a diverse portfolio of Chinese steel companies. With 7 million metric tons of crude steel production capacity, its companies serve various industries and produce a variety of steel products including rebar, high-speed wire and spiral-weld pipe. General Steel Holdings, Inc. has steel operations in Shaanxi and Guangdong provinces, Inner Mongolia Autonomous Region and Tianjin municipality. For more information, please visit To be added to General Steel's email list to receive Company news, please send your request to

About Salmon River Resources Limited (TSX VENTURE:SAL)

Salmon River Resources Limited is a mineral exploration company engaged in the exploration for and development of commercial deposits of iron ore in Western Australia. It holds an exclusive option to acquire the Mt. Manning project located in the Yilgarn region of Western Australia, approximately 210 kilometres northwest of Kalgoorlie. Salmon River believes the project has the potential to be a world-class iron ore deposit with early development potential. The shares of Salmon River are listed on the TSX Venture Exchange under the symbol "SAL". For further information see our website at

On behalf of the Board of Directors of SALMON RIVER RESOURCES LTD.

J.G. Stewart, President

Forward-Looking Statements: This press release contains forward-looking statements that are based on the beliefs of management and reflect Salmon River's current expectations. This press release relates to the execution of the GS Group MOU only, and is not intended to create legally binding relationships. The forward-looking statements in this press release also includes information relating to the intended commitments by GS Group, the Company's intention to fund certain development expense and to fund development of the Treppo Grande Project. The forward-looking statements are based on certain assumptions, which could change materially in the future, including the assumption that the non-binding MOU will lead to definitive agreements, that the transactions contemplated in the MOU will be completed, and that Salmon River will exercise its rights under the Treppo Grande Option. By their nature, forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. Such factors include the risk that the MOU may be terminated, that the transaction contemplated in the MOU may not result in a binding agreement and any agreement may have terms and conditions different from those contemplated in the MOU, that any agreement may not be completed, that GS Group may not invest, a portion of such amount, or any amount, and that the Company may not exercise its rights under the Treppo Grande Option. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on forward-looking information. Forward-looking information is provided as of the date of this press release, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required in accordance with applicable laws.

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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