Here's the news:
Golden Hemlock Explorations -
San Jose de Gracia exploration agreement; private placement; director
resigns
Golden Hemlock Explorations
GHE
Shares issued 18,588,656
1998-07-23 close $0.07
Friday Aug 21 1998
Mr. Robin Forshaw reports
The company has made an agreement in principle to the terms and provisions of a
mine operating agreement with West Coast Mines, Inc. of Dallas, Texas for the
further exploration and development of the San Jose de Gracia project, Sinaloa
State, Mexico (the SJG Properties). Excepting unforeseen contingencies, the
company expects to complete documentation for the closing of this mine operating
agreement within the next three weeks.
The major provisions of the mine operating agreement are written as follows:
1. West Coast retains a 24.9 per cent net profits interest, which interest is defined
as a pre-tax interest, net of operating costs, on all revenue generated from the SJG
Properties, including any sales or transfer of property interests. In exchange for
West Coast retaining the 24.9 per cent NPI, West Coast will cancel a promissory
note from Minera Finisterre S.A. de C.V., the company's Mexican subsidiary, in
the amount of $500,000 (U.S.). This 24.9 per cent NPI predates the company's
involvement in the SJG Properties. Golden Hemlock retains a right of first refusal
on the 24.9 per cent NPI.
2. West Coast will acquire 25 per cent of the outstanding shares of Finisterre. In
that Finisterre holds 100 per cent ownership of the SJG Properties, subject to the
24.9 per cent NPI, this 25 per cent equity in the shares of Finisterre effectively
represents a 25 per cent equity interest in the SJG Properties. In exchange for this
25 per cent interest in Finisterre, West Coast will waive the repayment of certain
funds advanced previously by West Coast for property payments and report
preparation costs and waive certain accelerated payback provisions relative to the
24.9 per cent NPI. West Coast will also waive a contractual obligation of Golden
Hemlock to contribute $250,000 (U.S.) to an operating account for the SJG
Properties.
3. The company and West Coast confirm that their respective actual or deemed
capital contributions to the SJG Properties, exclusive of the 24.9 per cent NPI,
currently are (a) Golden Hemlock, $4.5-million (Canadian) (75 per cent) and (b)
West Coast, $1.5-million (Canadian) (25 per cent).
4. A San Jose operating committee, under the co-direction of the company and
West Coast, will control and direct all activities at the SJG Properties. Koy
(K.D.) Diepholz, the chairman and CEO of West Coast, is appointed secretary
manager of the SJOPCO.
5. West Coast will contribute $350,000 (Canadian) for the first phase of an
agreed three phase exploration program to be conducted by reputable
professional engineering firms as agreed by the SJOPCO. Upon completion of this
phase, West Coast's equity interest in Finisterre, subject to the 24.9 per cent NPI,
would increase to 29.13 per cent, representing West Coast's contribution of
1.85-million (Canadian) against total contributions of $6.35-million (Canadian).
6. West Coast acquires the option to contribute up to $650,000 (Canadian) for a
second phase of development at the SJG Properties, as such development is
approved by the SJOPCO. At the completion of this second phase of activity,
West Coast's equity interest in Finisterre, subject to the 24.9 per cent NPI, would
increase to 35.7 per cent, representing West Coast's contribution of $2.5-million
(Canadian) against total contributions of $7.0-million (Canadian).
7. West Coast acquires the option to contribute up to $1,000,000 (Canadian) for
a third phase of development at the SJG Properties, as such development is
approved by the SJOPCO. At the completion of this third phase of activity, West
Coast's equity interest in Finisterre, subject to the 24.9 per cent NPI, would
increase to 43.75 per cent, representing West Coast's contribution of $3.5-million
(Canadian) against total contributions of $8.0-million (Canadian).
Private Placement
8. West Coast will subscribe for 333,333 units in the company's common stock at
15 cents per unit by way of a private placement, generating total proceeds of
$50,000 (Canadian). Each unit of this placement will consist of one share and one
warrant exercisable at 15 cents in the first year and 17.25 cents in the second
year. The company will use the proceeds to comply with certain regulations, and
for general working capital. No finder's fee is applicable.
The company's board of directors has approved the terms of the mine operating
agreement. Approval by West Coast and availability of closing documentation is
expected. Upon the closing of the mine operating agreement, West Coast will
waive certain claims against Golden Hemlock, Finisterre and related parties.
Other Matters
The company's annual financial statements for the year ended Feb. 28, 1998 were
due for filing and for distribution to the shareholders July 20, 1998. The
company's financial statements for the quarter ended May 31, 1998 were due for
filing and for distribution to entitled recipients July 30, 1998. Because of the
material effect on the company's financial statements of the agreement in principle
announced Aug. 20, 1998, the audit of the company's Feb. 28 and May 31, 1998
consolidated financial statements has been delayed. The company expects the
completion of these audits and the issue of the financial statements by Oct. 15,
1998, and the holding of the company's 1998 annual meeting by Nov. 30, 1998.
Koy Diepholz of Dallas, Texas has resigned as a director. Mr. Diepholz was
elected a director at the annual meeting in November 1997.
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