SL Resources Inc.

November 11, 2010 20:31 ET

SL Resources Inc. and LLC UK Dalsvetmet Enter Into Binding Pre-Acquisition Agreement

TORONTO, ONTARIO--(Marketwire - November 11, 2010) - SL Resources Inc. ("SLR") is pleased to announce that it has entered into a binding pre-acquisition agreement (the "Pre-Acquisition Agreement") with LLC UK Dalsvetmet ("DZM"), an arm's length private Russian Federation corporation, pursuant to which SLR will acquire (the "Acquisition") four wholly-owned subsidiaries of DZM and DZM's entire 80% interest in a fifth subsidiary.

About the Acquisition

SLR will acquire Ildikangold, Dalsvetmet, LLC Koryakmining and Vostokzvetmet from DZM, being four wholly-owned subsidiaries of DZM, as well as the entire 80% interest of DZM in LLC Geozvetmet (each, an "OpCo" and collectively, the "OpCos"), in exchange for the issuance by SLR of 85,000,000 common shares (each, an "SLR Share") to DZM.

Prior to the completion of the Acquisition, SLR intends to conduct:

  1. a non-brokered offering of SLR Shares to raise aggregate gross proceeds of US$450,000 (the "SLR Share Offering"); and

  2. a non-brokered offering of subscription receipts ("Subscription Receipts") to raise aggregate gross proceeds of at least CDN$5,000,000 (the "Subscription Receipt Offering").

Pursuant to the Subscription Receipt Offering, each Subscription Receipt shall be automatically exchangeable, without any further action by the holder thereof, for one SLR Share following the satisfaction of certain release conditions relating to the completion of the Acquisition.

About DZM

The OpCos hold exploration and mining rights to five large properties in Eastern Russia (Ildikan, Uryum/Nasedkino, Zolin-Arkinsk, Pridneprov and Takhtamygda); the most developed and prospective of which are the 100% owned Ildikan and Nasedkino properties. The Pridneprov property is held by LLC Geozvetmet which is 80% owned by DZM with minority partners under a joint venture arrangement.

Ildikan

The Ildikan property contains the Savkino gold mine, a producing gold mine, located approximately 400 km due east of Chita, the administrative capital of the Zabaikalsky Kray region of the Russian Federation. The deposit is situated 15 km from the Chinese border. The distance to the nearest railway stations at Dosatui and Priargunsk is 120 km and 160 km, respectively. The property is connected to the stations via upgraded all-weather gravel roads. Access from Chita is via the Chita-Khabarovsk federal highway and then by upgraded all-weather gravel roads, a travel distance of approximately 700 km. The drive-in/drive-out camp and other infrastructure at the mine site are linked by all-weather gravel roads constructed and maintained by Ildikangold.

The licence for exploration and production of hard rock gold and subsidiary components in the Ildikan area expires on June 15, 2031 and covers 37 km2, of which the mine covers a surface area of 3.1 km2.

A National Instrument 43-101 ("NI 43-101") compliant technical report on Ildikangold's Savkino gold mine (the "Savkino Technical Report") has been prepared by Micon International Co. Limited ("Micon"), under the supervision of Stanley C. Bartlett, with contributions by Jonathan Steedman, each of whom is an independent "qualified person" under NI 43-101.

Micon created a mineral resource block model and mineral resource statement compliant with the Canadian Institute of Mining, Metallurgy, and Petroleum Resources ("CIM") Standards for Reporting Mineral Resources and Reserves. Savkino mineral resources were classified on the basis of the density of drill hole data. The Micon Savkino mineral resource estimate based on a cut-off grade of 0.5 g/t Au is summarised in Table 1.1.

Table 1.1: Savkino Mineral Resources as at 1stSeptember 2010
         
  Category Tonnage
(000's)
Grade
(Au g/t)
Gold
(kg)
Gold
(000's of oz)
 
  Measured 359 1.29 464 15
  Indicated 4,425 1.09 4,837 155
  Measured & Indicated 4,784 1.11 5,301 170
  Inferred 461 1.61 742 24

Mining the Savkino deposit commenced in 2008 as an open pit, using conventional truck and shovel methods. The pit operates year-round, with two 12 hour shifts seven days per week. Initially much of the intensely weathered rock was mined without drilling and blasting; however, the proportion of rock that requires drilling and blasting has increased now that the pit has advanced to depth.

Proved and probable mineral reserves were derived from measured and indicated mineral resources respectively that fall within the Micon final pit design. Operating factors such as dilution and ore losses were applied to the measured and indicated mineral resources within the open pit design to derive the mineral reserves. The Micon Savkino mineral reserve estimate at a cut-off grade of 0.7 g/t Au is presented in Table 1.2.

Table 1.2: Savkino Mineral Reserves as at 1st September 2010
         
  Category Tonnage
(000's)
Grade
(Au g/t)
Gold
(kg)
Gold
(000's of oz)
 
Proved 269 1.46 393 13
Probable 2,463 1.27 3,122 100
Proved + Probable 2,732 1.29 3,515 113
 
Low Grade (0.5 - 0.7 g/t Au)
Marginal 960 0.6 580 19
Waste 12,977      
Strip Ratio (t:t) 5.1      

A life of mine production schedule was prepared to achieve a production rate of 690 kg of gold per year (540 kg recovered), giving a mine life of just over 5 years. The schedule is presented in Table 1.3.

Table 1.3: Mine Production Schedule for Savkino at 1st September 2010
                   
  Year TotalTonnage(000's) Tonnage(000's) MineralGrade(Au g/t) Gold(kg) Tonnage(000's) MarginalGrade(Au g/t) Gold(kg) WasteTonnage(000's) StripRatio
2010 1,544 210 1.26 266 82 0.60 49 1,252 6.3
2011 4,457 577 1.20 690 298 0.60 178 3,582 6.7
2012 4,394 613 1.13 690 272 0.60 162 3,509 6.2
2013 3,692 561 1.23 690 178 0.62 111 2,953 5.6
2014 2,014 505 1.37 690 120 0.61 74 1,389 3.0
2015 581 266 1.84 489 10 0.64 6 305 1.2
Total 16,682 2,732 1.29 3,515 960 0.60 580 12,990 5.1

The planned production for 2010 to 2015 is summarised in Table 1.4.

Table 1.4: Planned Process Production
 
    Item 2010 2011 2012 2013 2014 2015
  Ore Stacked (kt) 481 577 602 567 506 443
  Ore Au Grade (g/t) 1.29 1.20 1.15 1.22 1.36 1.59
  Ore Contained Au (kg) 622 693 690 690 690 702
  Au Produced (kg) 496 540 540 540 540 556
  Au Recovery (%) 79.7 78.0 78.3 78.3 78.3 79.2

Nasedkino

The Nasedkino deposit is located in Eastern Siberia, 440 km northeast from the city of Chita, and 700 km by paved road to Khabarovsk, one of the biggest industrial cities in Eastern Russia. The property includes two separate licenses. The Uryum license, an exploration license covering an area of 221.35 km2 is valid until December 31, 2012 and is renewable. The Nasedkino mining license, which covers an area of 10.97 km2 is valid until December 1, 2025.

The Nasedkino deposit is readily accessible by all-weather gravel road from the town of Mogocha, which is 37 km away. Numerous gravel roads and bulldozer trails have been constructed to provide access for drilling within the licence areas. In the winter, snow trails can also be utilised, and during the spring season, when road conditions are poor, the areas can be accessed via helicopter. The town of Mogocha has a railroad station on the Trans-Siberian Railway.

A NI 43-101 compliant technical report on the Nasedkino property (the "Nasedkino Technical Report") has been prepared jointly by Micon and SRK Consulting ("SRK"), under the supervision of Stanley C. Bartlett of Micon, with contributions by Dorinda K. Blair, Eric Olin and Jeffrey Volk of SRK, each of whom is an independent "qualified person" under NI 43-101.

The Nasedkino mineral resource estimate was prepared by Mr. Jeffrey Volk of SRK and the mineral resources have been categorised following the guidelines of the Canadian Institute of Mining, Metallurgy, and Petroleum Resources ("CIM") Standards for Reporting Mineral Resources and Reserves.

Mineral resources for the Nasedkino gold project reported as contained within a potentially economically mineable open pit at a cut-off grade of 0.6272 g/t Au are presented in Table 2.1.

Table 2.1: Nasedkino Mineral Resources* as at 24th September 2010
           
    Area Mineral
Resource
Category
Tonnage
(Mt)
Grade
(g/t Au)
Contained Au
(kg)
Contained
Au
(000's of oz)
 
 
  Pridolinny Indicated 2.717 1.52 4,130 133
  Total Indicated   2.717 1.52 4,130 133
  Pridolinny Inferred 0.315 1.43 450 14
  Gora 5 Inferred 1.054 2.19 2,308 74
  Zhdanny Inferred 0.970 1.99 1,930 62
  Total Inferred   2.338 2.01 4,699 151

* Mineral resources are not mineral reserves and do not have demonstrated economic viability. All figures have been rounded to reflect the relative accuracy of the estimates. The cut-off grade is based on and assumed metal price of US$1,200/oz of gold, operating costs estimates, royalty and a metallurgical recovery of 87% for gold.

Mr. Stanley Bartlett and Mr. Jeffrey Volk have reviewed and approved the technical information in this news release. The Savkino Technical Report and the Nasedkino Technical Report will be filed under SLR's profile on SEDAR at www.sedar.com within 45 days of this press release.

About the Resulting Issuer

SLR's business will carry on the business of the OpCos upon completion of the Acquisition. In particular, the Resulting Issuer will:

  1. continue to carry on the business of the OpCos, which consists of the acquisition, exploration, development and mining of mineral properties in the Russian Federation, including the two material properties of the OpCos, Ildikan and Nasedkino; and

  2. actively seek, evaluate and acquire interests in other projects or business opportunities in the mineral exploration industry that are indicated to have substantial potential.

Upon completion of the Acquisition, the directors and officers of SLR are anticipated to be:

Maxim Finskiy – Executive Chairman and Director. Mr. Finskiy is the President of MMC Intergeo, the mining and exploration arm of the private Russian conglomerate Onexim Group, which is Russia's largest investment fund with US$25 billion in assets. From 2001 to 2008 he was Deputy General Director and Deputy Chairman of the Management Board of MMC Norilsk Nickel. Mr. Finskiy sits on the board of Polyus Gold, a Russian company which is one of the world's top gold producers.

Dr. Geoffrey Cowley – Chief Executive Officer and Director. Dr. Cowley has significant experience in a range of world class metal mining operations in Africa, Asia, Middle East, the former Soviet Union and Russia. Dr. Cowley has held senior positions with such corporations as Kinross Gold Corporation, Strikeforce Mining and Resources plc, Anglo American Corporation, De Beers, British Steel Corporation, and many others.

Robert Armao – Director. Mr. Armao serves as Chairman of the board of Armao and Company, Inc., an international communications and financial relations firm representing a broad range of clients including foreign governments, international corporations, investment funds and political organizations. Mr. Armao is a Senior Advisor to Monument Capitol Group, LLC., a Washington-based private investment and advisory firm which focuses on opportunities in the homeland security and defence sector. Mr. Armao also served as Executive Officer and Chief of Staff to the United States Secretary of Labour in 1973.

Sergey Chalykh – Director. Mr. Chalykh is the Chief Financial Officer of MMC Intergeo. Previously, he served at MMC Norilsk Nickel in a series of positions of increasing responsibility, including Deputy Director of the Investment Department from October, 2005 to February, 2007 and Director of the Investment Department from March, 2007 to October, 2008.

Francis Scola – Director. Mr. Scola is the Chief Executive Officer of Ecometals Limited, a Canadian-listed mineral exploration and development company focused on mineral resources in Latin America. Previously, he was a partner, portfolio manager and consultant for the Shipston Group, which invests in venture capital natural resource projects, private equity, currencies, futures, bonds, equities and various investment funds. Mr. Scola was also a partner and portfolio manager at Weintraub Capital Management and a partner, analyst, and portfolio manager at Touchstone Investments. Mr. Scola is a partner at LFM Partners, a partnership with extensive investments in the natural resources sector.

Edward Sugar – Director. Mr. Sugar is the founder and principal of EAS Advisors LLC, an advisory services firm. He has more than 25 years of experience in commodities and related sectors. From 1999 to 2007, Mr. Sugar worked for Jefferies & Co., an independent, full-service securities and investment banking firm. Prior to joining Jefferies and Co., Mr. Sugar was a Managing Director for Marc Rich & Co. in Melbourne, Australia from 1998 to 1999, where he focused on identifying investment and purchase candidates in the resources sector, as well as commodity trading opportunities.

Andrew Robertson – Chief Financial Officer. Mr. Robertson is a qualified Chartered Accountant in the United Kingdom with over 20 years of experience in industry. He is the Chief Financial Officer of Ecometals Limited, a Canadian-listed mineral exploration and development company focused on mineral resources in Latin America. He started his career with Laporte plc at a time when it was involved in the mining of titanium containing ores in Australia, which it processed into titanium dioxide, and also the mining of bentonite in Brazil and Spain. Mr. Robertson holds a B.Sc. degree in Business Economics from London University.

Gary Artmont – Chief Geologist. Mr. Artmont has over 34 years experience in the mining business, operating in 19 countries. In the early 1990s, Mr. Artmont was Chief Geologist for Freeport-McMoRan Copper & Gold, based in Indonesia. In the mid-2000s, as a consultant, he evaluated acquisition opportunities in Eastern Europe, West Africa, South America, Southeast Asia and Mongolia for a number of different companies, including Ivanhoe Mining, Stillwater Mining and LFM Partners. Recently, Mr. Artmont has acted as a consultant to DZM and MMC Intergeo. Mr. Artmont's work has focused on a wide range of commodities including copper, gold, uranium, iron, coal and nickel.

Immediately following completion of the Acquisition, it is anticipated that, in addition to owning the Opcos, SLR will have approximately US$450,000 in cash (excluding any proceeds raised pursuant to the Subscription Receipt Offering) and it will have liabilities of approximately CDN$27,500. It is also anticipated that, at that time, an aggregate of 89,800,000 SLR Shares will be issued and outstanding.

Upon closing of the SLR Share Offering and prior to completion of the Acquisition, it is anticipated that there will be 4,800,000 SLR Shares issued and outstanding, which will, upon closing of the Acquisition, represent approximately 5.3% of the issued and outstanding SLR Shares. It is anticipated that DZM (which is wholly owned, beneficially, by Mr. Finskiy) will own, upon closing of the Acquisition, 85,000,000 SLR Shares, representing approximately 94.7% of the issued and outstanding SLR Shares, before taking into account SLR Shares to be issued in connection with the Subscription Receipt Offering. As such, the Acquisition will result in a reverse take-over of SLR.

Conditions Precedent and Closing

The Acquisition does not require the approval of SLR's shareholders, however SLR has called a meeting of its shareholders to be held prior to the completion of the Acquisition to consider, among other things, the continuance of SLR from Ontario to the British Virgin Islands as a company under the BVI Business Companies Act, 2004, as amended (the "Continuance"), and the change of SLR's name to "White Tiger Gold Ltd." or such other name as SLR and DZM may agree (the "Name Change").

Completion of the Acquisition is subject to a number of conditions, including, but not limited to, legal and financial due diligence, the receipt of all required third party and regulatory approvals, approval of the Continuance and Name Change by the shareholders of SLR and completion of the Subscription Receipt Offering.

The Acquisition is expected to be completed on or about December 15 , 2010.

Forward-Looking Information

This news release contains or refers to forward-looking information. All statements, other than statements of historical fact, that address activities, events or developments that SLR believes, expects or anticipates will or may occur in the future are forward-looking information. Such forward-looking information includes statements contained in this news release regarding the completion of the Acquisition (including, without limitation, SLR's expectations regarding the structure of the Acquisition, the anticipated timing for the completion of the Acquisition, the structure of the SLR Share Offering and the Subscription Receipt Offering, SLR's business plans following the completion of the Acquisition, the anticipated management of SLR following the completion of the Acquisition and the anticipated post-Acquisition share capital of SLR), and statements regarding the estimation of future gold production levels, mineral resources and the future mineral resources. Forward-looking information reflects the current expectations or beliefs of SLR based on information currently available to it. Forward-looking information is subject to a number of risks and uncertainties that may cause the actual results of SLR to differ materially from those discussed in the forward-looking information, and even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on SLR. Factors that could cause actual results or events to differ materially from current expectations include, but are not limited to: delays in obtaining or failure to obtain required third-party consents and/or regulatory approval for the Acquisition, failure to meet estimated gold production levels, failure to establish estimated mineral resources, changes in gold prices, the preliminary nature of metallurgical results, the uncertainties involved in interpreting drilling results and other geological data and other factors. Any forward-looking information speaks only as of the date on which it is made and, except as may be required by applicable securities laws, SLR disclaims any intent or obligation to update forward-looking information, whether as a result of new information, future events or results or otherwise. Although the SLR believes that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and accordingly undue reliance should not be put on such statements due to the inherent uncertainty therein.

The mineral resource figures disclosed in this press release are estimates and no assurances can be given that the indicated levels of gold will be produced. Such estimates are expressions of judgment based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While SLR believes that the resource estimate included in this press release is well established, by their nature resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may ultimately prove unreliable. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that mineral resources can be upgraded to mineral reserves through continued exploration.

Due to the uncertainty that may be attached to inferred mineral resources, it cannot be assumed that all or any part of an inferred mineral resource will be upgraded to an indicated or measured mineral resource as a result of continued exploration. Confidence in the estimate is insufficient to allow meaningful application of the technical and economic parameters to enable an evaluation of economic viability worthy of public disclosure, except in certain limited circumstances set out in NI 43-101. Inferred mineral resources are excluded from estimates forming the basis of a feasibility study.

No stock exchange, securities commission or other regulatory authority has reviewed or approved the contents of this press release.

Contact Information

  • SL Resources Inc.
    Dennis H. Peterson
    Director
    416-777-6772
    dhp@petelaw.com