Cross Lake Minerals Ltd.: $9.75 Million Financing for QR Mine Development
VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - April 28, 2006) -
NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR RELEASE TO U.S. NEWSWIRE SERVICES
Cross Lake Minerals Ltd. (the "Company" or "Cross Lake") (TSX:CRN) is pleased to announce that in order to secure the necessary financing for both recommencing operations of the QR Mine as outlined in the QR Mine Technical Report by Wardrop Engineering Inc. (the "Wardrop Report"), and the underground development of the North Zone including diamond drilling, the Company has negotiated a private placement with Pacific International Securities Inc. ("Pacific International").
Pursuant to a letter agreement dated April 26, 2006 (the "Letter Agreement") between Cross Lake and Pacific International, the Company has engaged Pacific International to act as exclusive agent on a commercially reasonable basis with respect to a brokered private placement (the "Offering") of the Company's securities. Pursuant to the Letter Agreement, the Offering is subject to Cross Lake announcing and completing a share consolidation on the basis of five (5) old common shares being consolidated into one (1) new common share (the "Consolidation") (see further details below), and will close concurrently with the closing of the Consolidation. The disclosure provided below is given on a post-Consolidation basis.
The Letter Agreement contemplates the Offering of up to 7,500,000 units of the Company ("Units"), up to 6,500,000 flow-through units of the Company ("FT Units"), and an over-allotment option by which Pacific International may offer up to an additional 650,000 Units and up to an additional 650,000 FT Units. Each Unit will consist of one common share and one half of one transferable common share purchase warrant (each whole such purchase warrant, a "Warrant"). Each FT Unit will consist of one flow-through common share and one half of one Warrant. Each whole Warrant will be exercisable into one additional common share of the Company for a period of two years from closing of the Offering at an exercise price of $1.00 per common share, except that if over a period of 20 consecutive trading days between the date that is 4 months following the closing date of the Offering and the expiry of the Warrant, the weighted average closing price of the common shares of the Company on the Toronto Stock Exchange or such other stock exchange on which the common shares of the Company are listed exceeds $2.00, the Company may give notice in writing to the Warrant holders within 30 days of such occurrence that the Warrants will expire 30 days after such notice unless exercised prior to such date. The Units will be offered at $0.65 per Unit and the FT Units will be offered at $0.75 per FT Unit.
Under the Letter Agreement, Pacific International will be paid a cash commission of 7% of the gross proceeds of the Offering, which commission may be paid, at the election of Pacific International, in cash or in whole or in part in Units (at a deemed price of $0.65 per Unit. Pacific International will also receive compensation options equal in number to 10% of the number of Units and FT Units sold under the Offering, each of which options will entitle Pacific International to purchase, at an exercise price of $0.75, one common share of the Company for two years from the date of closing.
Furthermore, under the Letter Agreement the Company may offer up to $2,000,000 of additional Units and FT Units on a non-brokered basis (the "Non-Brokered Units") concurrently with the Offering. It is anticipated that insiders of Cross Lake may participate in the purchase of these Non-Brokered Units to the extent of not more than 5% of the aggregate of the securities offered under the brokered and non-brokered offerings.
The total gross proceeds of the Offering, not including the proceeds from the Non-Brokered Units and the over-allotment option described above, will be up to $9,750,000. Cross Lake expects to use such proceeds for the continuing development of the QR mine property with a view to following the recommendations of the Wardrop Report to advance the project toward the recommencement of production and to finance general exploration activities.
The total number of securities to be issued pursuant to the Offering will exceed 25% of the post-Consolidation issued and outstanding common shares of the Company. As a result, the rules of the Toronto Stock Exchange require that the Company obtain the approval of the shareholders to the Offering. Management of the Company will be seeking such approval at the upcoming Annual & Special General Meeting of shareholders to be held on May 19, 2006 (the "Meeting").
Completion of the brokered and non-brokered offerings is also subject to regulatory and Exchange approval.
CONSOLIDATION:
At the Meeting, shareholders will also be asked to approve the Consolidation of Cross Lake's issued and outstanding common shares on the basis of five (5) old common shares being consolidated into one (1) new common share. As at April 20, 2006, Cross Lake had 108,898,168 common shares outstanding. If approved, and on completion of the Consolidation, the Company will have approximately 21,779,634 common shares outstanding. Fractional shares will not be issued pursuant to the Consolidation, and any fractional shares created by the Consolidation will be rounded down.
Management believes that Cross Lake will be better able to respond to the demands of the capital markets once the Consolidation has been effected. Management believes that the Consolidation is necessary in order to provide the Company with a share capital structure that will better attract capital financing and enhance future growth opportunities and value creation for shareholders.
QR MINE UPDATE:
In March of 2006, Cross Lake was pleased to announce the completion of the QR Mine Technical Report by Wardrop Engineering Inc. of Vancouver (a copy of the Wardrop Report is being filed on SEDAR in conjunction with this news release at www.sedar.com). This Report was prepared in cooperation with the Company's engineers and technical staff and has recommended the recommencement of operations at the QR Mine. The capital costs of the Project were estimated at $4.5 million including $1 million in working capital. At a gold price of $550 Canadian, which was used in the Wardrop Report, it provides an extremely favorable economic analysis as a result of the development of the currently defined resource of 78,323 ounces (see news release dated March 20, 2006). The current gold price is approximately $700 Canadian, which would result in a substantially higher operating profit. Contemporaneous with the Wardrop Report, the Company has also been evaluating underground development, diamond drilling and ultimately achieving production from the North Zone of the QR Mine Property. The North Zone is the largest defined zone of gold mineralization on the Property and is located at depth below the mill and is a faulted extension of the Main Zone, which was the focus of the majority of operations by Kinross Gold Corporation from 1994 to 1998.
NORTH ZONE UPDATE:
The Company has also made the decision to proceed with underground development, diamond drilling and operations based on the North Zone of mineralization with a projected capital cost of $3.2 million for the underground development and a further $800,000 for underground diamond drilling. The proposed program will consist of a road access from the West Zone to a portal site that is economically optimum for underground development. The underground development consists collaring a portal, driving a 770 metre adit and a 300 metre crosscut with diamond drill stations every 50 metres. The crosscut will be parallel to the North Zone mineralization enabling detailed diamond drilling of a zone which could not be easily delineated from surface. The drilling program will consist of a minimum 5,000 metres.
The North Zone is located approximately 300-500 metres below the mill and is a faulted extension of the Main Zone, which was mined by open pit during previous mining operations. Company geologists and independent engineers have studied detailed technical information from this Main Zone development. This work has confirmed that the Main Zone, which has a strike length of only 300 metres and produced over 100,000 ounces of gold, is very similar in character to the North Zone. To date the North Zone, which has been defined by surface diamond drilling along a strike length in excess of 1,000 meters, and remains open, is the only zone on the QR Property that is not limited by faulting. The detailed study of the Main Zone included kriging a block model that overlaid the Main Zone open pit which showed contiguous blocks of greater than 5 g Au/t that could be mined using underground mining techniques. Therefore, if the mineralization contained within the North Zone continues to be analogous to the Main Zone, there is the potential to identify a significant additional gold resource to that now defined on the Property.
The following table summarizes the significant intersections from previous drilling of the North Zone:
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Hole # From (m) To (m) Width (m) Gold (g/t)
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55(a) 481.00 484.60 3.60 7.22
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164 297.00 315.00 18.00 2.46
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including(a) 299.00 302.00 3.00 5.32
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and 309.00 313.00 4.00 3.60
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182(a) 289.00 304.00 15.00 10.45
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269(a) 282.00 284.00 2.00 16.00
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and 415.00 418.00 5.03 3.00
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270(a) 283.00 287.00 4.00 4.58
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and(a) 288.00 290.00 2.00 13.19
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277(a) 396.00 399.00 3.00 9.65
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and 405.00 407.00 2.00 3.99
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282 259.00 261.00 2.00 3.85
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303(a) 375.00 380.00 5.00 7.53
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474(a) 246.00 262.00 16.00 7.23
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496(a) 402.95 412.95 9.19 4.91
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CL-03-2000 240.50 249.50 9.00 3.87
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and 425.00 431.00 6.00 2.97
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(a) Note: Intervals greater than 4.0g/t Au.
It is anticipated that the North Zone will be an important contributor to ongoing mining operations and gold production. The Qualified Person who reviewed the studies and manages the exploration work is the Company's Qualified Person and Vice President, Exploration Jim Miller-Tait, P.Geo. Acme Analytical Laboratories Ltd. of Vancouver, B.C. completed all assays by conventional fire assay with the exception of the two holes 474 and 496 which were assayed in the QR Mine assay lab while the mine was in production. The Company will also continue to explore to outline additional resources on the QR Property and to advance its other Projects through ongoing exploration and development.
This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address future production, reserve potential, exploration and development activities and events or developments that the Company expects, are forward-looking statements. Although management believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance, and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploration and development successes, continued availability of capital and financing, and general economic, market or business conditions. Please see our public filings at www.sedar.com for further information.
12(g) No. 82-2636 |
