Stronghold Metals Inc.
TSX VENTURE : Z

Stronghold Metals Inc.

August 04, 2011 11:33 ET

Stronghold Metals Inc. Enters Into Letter of Intent to Sell Tucuma Gold Project to Kensington Court Ventures Inc.

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 4, 2011) - Stronghold Metals Inc. ("Stronghold" or the "Company") (TSX VENTURE:Z) is pleased to announce that it has entered into a letter of intent (the "LOI") dated August 3, 2011, with Kensington Court Ventures Inc. ("Kensington"), a capital pool company listed on the TSX Venture Exchange pursuant to which Kensington has agreed to acquire (the "Acquisition") all of the issued and outstanding shares of Stronghold's Brazilian subsidiary, Mineraçäo Vale Do Sonho Ltda. ("Do Sonho").

Do Sonho currently holds a 100% interest in the Tucumã gold project (the "Tucumã Property") which consists of 6 mineral concessions covering a total of 11,456.31 hectares located in the Carajás metallogenic province in the state of Pará, Brazil.

The Acquisition, if completed, will constitute Kensington's "qualifying transaction" (the "QT") under the policies of the Exchange. The QT is not a related party transaction under the rules and policies of the Exchange and the QT does not constitute a non-arm's length QT. Approval of the shareholders of Kensington to the QT will not be required by the Exchange. Upon completion of the QT, Kensington will become a Tier 2 mining issuer on the Exchange. Kensington will apply to the Exchange for a waiver of the requirement to engage a sponsor with respect to the QT. There is no assurance that a waiver will be granted.

Under the terms of the LOI, Kensington will acquire all of the issued and outstanding shares of Do Sonho in exchange for the issuance to Stronghold of 16,300,000 common shares of Kensington. Upon completion of the Acquisition, Do Sonho will become a wholly-owned subsidiary of Kensington. Upon completion of the QT, Kensington will grant to Stronghold a 2% net smelter returns royalty (the "NSR Royalty") from the production of minerals from the Tucumã Property, subject to Kensington's right to purchase the NSR Royalty from Stronghold for $1,500,000, which right is exercisable at any time.

Since acquiring Do Sonho in 2010, Stronghold has spent $1,046,250 on exploration and development of the Tucumã Property. Do Sonho's financial results are reflected in Stronghold's consolidated audited annual financial statements and unaudited interim financial statements filed on SEDAR. Stronghold is in the process of obtaining unconsolidated financial statements for Do Sonho.

Financing

There are currently 6,858,000 common shares of Kensington issued and outstanding. In conjunction with the QT, Kensington also announces a brokered private placement to raise gross proceeds of $2,000,000 by the issuance of 8,000,000 units (the "Units") at a purchase price of $.25 per Unit. Each Unit will consist of one common share and one-half of one common share purchase warrant (each whole warrant a "Warrant"). Each Warrant will entitle the holder to acquire an additional common share of Kensington at an exercise price of $.35 per common share exercisable at any time until two years from the date of the closing of the QT. The proceeds of the private placement together with Kensington's current working capital will be used to finance an exploration program on the Tucumã Property and for general working capital purposes.

Upon completion of the QT, including completion of the private placement, Kensington will have 31,158,000 common shares issued and outstanding. Upon completion of the QT, Stronghold will hold an aggregate of 16,300,000 common shares of Kensington representing approximately 52.3% of the Company's issued and outstanding shares on a non-diluted basis.

Directors, Officers and Insiders of Kensington Following the QT

It is anticipated that upon completion of the QT, the directors, officers and insiders of Kensington will be comprised of 3 nominees from Stronghold and two existing directors. The following are brief biographies of the individuals who will be expected to be the directors and officers of Kensington on completion of the QT:

Geoff Hampson, President, Chief Executive Officer, Secretary and Director

Mr. Hampson has been involved as the founder, CEO and Chairman of the Board of many public and private companies in a wide variety of industries over the last 32 years. He has been the CEO of Corelink Data Centers LLC, a Chicago based colocation provider, Peer 1 Network Enterprises Inc. an internet infrastructure and managed services company, Live Current Media Inc., an e-commerce business and Fibrox Technologies Ltd. a manufacturer of synthetic mineral fibre. In addition, he is and has been a director and officer of a number of other reporting issuers including Cricket Capital Corp., Pacific Rodera Energy Inc., International Samuel Exploration Corp and Cymat Technologies Ltd.

Albert Wu, Chief Financial Officer

Mr. Wu is a certified Management Accountant and received his Bachelor of Commerce Degree in 1969 and his MBA in 1971, both from the Chinese University of Hong Kong. In the last twenty five years, Mr. Wu has been working with public companies in providing accounting and management services on a part-time basis. He is currently the CFO of First Bauxite Corporation, Stronghold Metals Inc., Silver Lake Resources Ltd., Urastar Energy Inc. and Pacific Imperial Mines Inc., all of which are public companies listed on the TSX Venture Exchange.

Ioannis (Yannis) Tsitos, Chairman of the Board and Director

Mr. Tsitos, MSc., is the President and Chief Executive Officer of Stronghold Metals Inc. He has over 25 years experience in the Mining Industry, having spent 19 years with BHP Billiton group. He holds a B.Sc degree in Physics from the University of Athens and a Master's degree in Applied Geophysics and Geology from the University of Birmingham, U.K. Mr. Tsitos brings to the Company a wealth of knowledge and extensive experience in the mining sector focused on exploration and development and is well-known in the Canadian and international exploration communities. He has been instrumental in the identification, negotiation and execution of more than 50 exploration agreements with juniors, majors, as well as with state exploration and mining companies. He is a member of the Association for Minerals Exploration British Columbia and Prospectors and Developers Association of Canada. He is currently also President of First Bauxite Corporation.

Larry Van Hatten, Director

From May 2005 to June 2010, Mr. Van Hatten was a partner of Ernst & Young LLP, leading its Vancouver assurance practice until announcing his retirement in June 2010. Prior to May 2005, Mr. Van Hatten was the managing partner of Ellis Foster, Chartered Accountants, a Vancouver-based firm that merged into Ernst & Young LLP in May 2005. Mr. Van Hatten is currently a director of PNG Gold Corp. From June 2002 to May 2006, Mr. Van Hatten was a director of Saxon Oil Company, an international oil and gas company engaged in the acquisition, development and production of oil and natural gas reserves. Mr. Van Hatten also served on the board of the BC Children's Hospital Foundation, which he chaired from 1996 to 1999.

Mr. Van Hatten received his Chartered Accountant designation in 1975 and his Fellow Chartered Accountant designation in 2009. In 2010, he completed the academic requirements for the Directors Education Program.

Larry Timlick, Director

Since August 2004 until 2009, Mr. Timlick had been a consultant with Triplet Management. Mr. Timlick has over 23 years of technical sales and marketing experience, of which 13 years were spent with Cisco Systems Canada as Regional Western Manager and Mr. Timlick opened offices in Vancouver, Calgary, Edmonton, Regina and Winnipeg. He has also held management positions with AT&T Canada and Telex/Tulsa Computer Products. Mr. Timlick joined Aruba Networks in August 2009 as a Territory Manager. From September 2006 to December 2008, Mr. Timlick was a director and the Corporate Secretary of Stage Capital Inc. (now known as Trueclaim Exploration Inc.), formerly a capital pool company which completed its Qualifying Transaction in December 2008. Since June 2005, Mr. Timlick has been a director of CounterPath Solutions Inc. (OTC Bulletin Board), a software developer for telecom and Internet service providers.

Luis Bizzi, Director

Dr. Bizzi is a Brazilian/Italian professional geologist and Certified Investment Analyst with over 25 years experience in minerals exploration and business development in South America. His academic credentials include a PhD from the University of Cape Town in South Africa, an MBA from Fundação Getulio Vargas in Brazil and editing of the book "Geology, Tectonics and Mineral Resources of Brazil" in 2003. He has extensive experience in minerals exploration throughout South America. He was the Exploration Manager for South America for BHP Billiton and Technical Director for South America for De Beers / Anglo American. He was also formerly the Director of Geology and Mineral Resources at CPRM - the Brazilian Geological Survey and has been a Senior Consultant at BNDES - the Brazilian Development Bank.

Tucumã Gold Project

Do Sonho, a private company incorporated under the laws of Brazil, currently holds a 100% interest in the Tucumã Property which consists of six mineral concessions covering a total of 11,456.31 hectares located in the Carajás metallogenic province in the State of Pará, Brazil.

Historically, the Tucumã Property has produced significant quantities of gold from small scale mining by artisanal miners. The Tucumã Property represents an excellent opportunity to explore for both sheer hosted economic gold vein mineralization and for gold-copper systems of the IOCG ("Iron Oxide Copper Gold") type.

The Tucumã Property is located within the Carajás metallogenic province which is part of the Amazon Craton. The province is one of the premier mining districts in Brazil. Part of the Tucumã Property has been previously explored by Highgrade Ventures, Brasilca Mining Corporation, a Teck – Inco Joint Venture and by Corporación Nacional del Cobre de Chile ("Codelco"). There is a large data base of geological, geochemical and geophysical exploration data over the region and the Tucumã Property. Only a few of the numerous identified targets have been tested by past diamond drilling programs. Stronghold filed a National Instrument 43-101 compliant report dated June 7, 2010 (the "Report") prepared by Wardrop on the Tucumã Property, which is available for viewing on SEDAR under Stronghold's profile. The Report preceded Stronghold's drill program described below.

Highlights of the 2011 drilling program conducted by Stronghold and which were announced in a March 16, 2011 press release, include 7.90m @ 3.28 g/t Au along hole T2010-3A over the Filomena target and 7.00m @ 1.32 g/t Au along hole T2010-4B over the Augusto target.

A Phase One drill program consisting of 6 diamond drill holes has now been completed to test gold targets within the Cuca concession. Five diamond holes (1,105 m of drilling) tested the Filomena target area, including the area around historic discovery hole T97-11b. Historical discovery hole T97-11b tested the Filomena gold soil geochemical anomaly, historic results are tabulated below, with the recent results.

Outcrop exposure on the Tucumã Property is less than 5%, thus historic surface soil geochemical surveys were carried out extensively to locate favourable gold targets. An area within the Cuca mineral concession, covering approximately ten square kilometres, hosts significant gold soil geochemical anomalies that remain mostly untested by drilling. The anomalies lie over a blanket of laterite and saprolite (in-situ decomposed bedrock) and are interpreted as an accumulation of gold within soil proximal to a bedrock source. Initial diamond drill testing of this extensive gold anomaly was conducted in 1997.

FILOMENA ZONE

CORE
FROM TO LENGTH
DDH (m) (m) (m) GRADE COMMENTS
SIGNIFICANT INTERSECTIONS: FILOMENA 2010-2011 PHASE ONE DRILLING
Stronghold's T2010-2B 103.10 114.00 10.90 0.39 g/t Au Filomena
including 0.95 2.48 g/t Au
Stronghold's T2010-2A 72.30 73.30 1.00 0.61 g/t Au Filomena Saprolite zone
82.30 84.20 1.90 0.49 g/t Au
Stronghold's T2010-1B 102.00 103.00 1.00 5.7 g/t Au Filomena
Stronghold's T2010-1A 169.50 171.30 1.80 0.61 g/t Au Filomena
including 0.40 2.15 g/t Au
Stronghold's T2010-3A 0.00 7.90 7.90 3.28 g/t Au Filomena Saprolite zone
including 1.00 24.75 g/t Au
47.25 49.65 2.40 1.43 g/t Au
including 0.80 4.03 g/t Au
149.85 156.70 6.85 1.19 g/t Au Filomena
including 1.00 6.7 g/t Au
166.60 167.60 1.00 5.6 g/t Au
SIGNIFICANT INTERSECTIONS: HISTORIC FILOMENA 1997 DIAMOND DRILLING
Historic T97-11B 54.32 77.69 23.37 2.53 g/t Au Filomena Saprolite Zone
including 9.12 6.30 g/t Au
120.06 134.82 14.76 3.96 g/t Au Filomena

The 2010-2011 Phase One diamond drilling taken together with the 1997 diamond drilling results are now interpreted to be part of a local trend of soil geochemical and geophysical results that trend NNE through the Diomar, Diamar North and Filomena zones for a distance of greater than 1 km of strike length. The Company is contracting a sonic drill rig to conduct a Phase Two drilling program along this trend plus other promising saprolite-hosted gold zones on the Property. Deep laterite and saprolite profiles have hampered efficient diamond drilling in these zones, and refining of drill targets will now shift to a first evaluation using a robust sonic drill core rig, which can effectively and rapidly recover intact core from weathered and residual zones up to 60 m thick.

AUGUSTO ZONE

One additional diamond drill hole (493m length) was completed during the Phase One diamond drilling program on the nearby Augusto target area.

CORE
FROM TO LENGTH
DDH (m) (m) (m) GRADE COMMENTS
Stronghold's T2010-4B 78.35 85.35 7.00 1.32 g/t Au Augusto Saprolite Zone
including 1.00 8.02 g/t Au
0.15% Cu
109.50 112.10 2.60 1.49 g/t Au Augusto
266.80 270.50 3.70 2.20 g/t Au Augusto

Stronghold Metals Inc. has not independently analyzed the core from the historical drilling; therefore the previous drill results should not be relied upon. However, Stronghold believes these historical results provide an indication of the potential that exists on the property and are thus deemed relevant to ongoing exploration. Paul McGuigan, P. Geo., a Director of Stronghold and a Qualified Person under NI 43-101, has reviewed and verified the data disclosed in this news release.

Options

Concurrent with the completion of the QT, Kensington intends to grant incentive stock options to directors and officers of the Company that will entitle the holders to purchase common shares in the capital of the Company up to a total not to exceed 10% of the Company's outstanding shares. The exercise price of the stock options will be $0.25 per common share and the options will have a term of 5 years from the completion of the QT. The grant of the stock options is subject to regulatory and Exchange acceptance.

Significant Conditions to Closing

Completion of the QT is subject to certain conditions including, without limitation, approval of the QT by the Exchange; waiver of the requirement to engage a sponsor or the engagement of a sponsor; completion by Kensington of an equity financing of $2,000,000; Kensington entering into an employment agreement with Mr. Geoff Hampson as President and Chief Executive Officer of the Company upon completion of the QT; and completion of due diligence investigations to the satisfaction of the parties. There can be no assurance that the QT will be completed as proposed or at all.

Subject to the completion of the QT, it is anticipated that an aggregate of 600,000 of the outstanding stock options of the Company will be exercised concurrent with the completion of the QT resulting in the issuance of an aggregate of 600,000 common shares (the "Option Shares") of Kensington. Subject to the completion of the QT, it is anticipated that certain directors, officers and shareholders of the Company will enter into share purchase agreements with Mr. Geoff Hampson to sell to Mr. Hampson an aggregate of 950,000 common shares of Kensington. Such shares transferred to Mr. Hampson will be held in escrow in accordance with the policies of the Exchange.

Trading Halt

In accordance with Exchange policy, the shares of Kensington will remain halted from trading on the Exchange until such time as the Exchange reinstates the shares for trading, which, depending on the policies of the Exchange, may not occur until the completion of the QT.

The technical disclosure in this release has been reviewed and verified by Paul McGuigan, a Qualified Person as defined in terms of National Instrument 43-101 – Standards of Disclosure for Mineral Projects. Mr. McGuigan is a director of Stronghold Metals Inc. and has no relationship or direct or indirect personal interest in Kensington.

Completion of the QT is subject to a number of conditions, including but not limited to, Exchange acceptance and if applicable pursuant to Exchange Requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement or other disclosure documents of Kensington to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Kensington should be considered highly speculative.

ON BEHALF OF THE BOARD

Ioannis Tsitos, President and Chief Executive Officer

The TSX Venture Exchange Inc. 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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