Trading Symbol: FTR- TSX: V
VANCOUVER, Jan. 25 /CNW/ - Firesteel Resources Inc. (TSXV:FTR) ("Firesteel" or the "Company") is pleased to announce that it has entered into a binding letter of intent ("LOI") with Lions Gate Metals Inc. ("Lions Gate") to grant Lions Gate a four year option (the "Option") to acquire a 75% interest in the Company's 6,891 hectare ("Ha") ROK-Coyote copper-gold mineral property (the "Property"). The Property is adjacent to and immediately northwest of Imperial Metals Corporation's ("Imperial Metals") Red Chris copper-gold property which has identified mineral resources and reserves and has disclosed significant grades of copper and gold mineralization in recent drilling results. The Option has been granted in exchange for a 2% net smelter royalty and about $3.6 million in total consideration consisting of cash, Lions Gate common shares (the "Shares") and exploration work commitments to be completed over a four year period. Firesteel has the right to increase its final interest in the Property from 25% to 30% by paying $200,000 at any time after the third year of the option period but prior to the time a production decision is made on the Property.
Terms of the LOI
Under the terms of the LOI, Lions Gate will be granted an Option to acquire a seventy-five percent (75%) interest in the Property for an aggregate consideration of $3,605,000 consisting of an aggregate of 650,000 Shares (valued at $780,000 at the $1.20 closing price of the Shares on January 22, 2010), an aggregate of $496,000 in cash payments and an aggregate work commitment of $2,329,000, all over a period of four years (the "Option Period"). During the Option Period, Lions Gate will be the operator of the Property.
It is intended by the parties that the LOI will be superseded by a formal mineral lease option agreement within 45 days. Lions Gate and Firesteel will provide further updates by way of news releases when a formal agreement is signed. This LOI is entered into subject to approval of the TSX Venture Exchange ("TSX-V").
An initial cash payment of $50,000 has been paid by Lions Gate to Firesteel which shall be credited against the cash payment and work commitment obligations under the Option. Any Shares issued pursuant to the Option shall be subject to a pooling arrangement providing for the release of 25% of such shares on issuance and 25% every three months thereafter. Lions Gate shall also have a first right to repurchase or arrange for the purchase of any Shares to be issued to Firesteel. Lions Gate has agreed to pay a break fee of $10,000 to Firesteel if the LOI is terminated on or before February 12, 2010, the end of a due diligence review period.
Firesteel retains the right to acquire a five percent (5%) interest in the Property at any time following the date which is three years after the Option is approved by the TSX-V and until a production decision is made concerning the Property for total consideration of $200,000. In the event Firesteel elects to exercise this right, Firesteel's rights under the Option would be to a 30% interest in the Property. Firesteel will also be granted a 2% net smelter royalty (the "Royalty") on the Property, subject to Lions Gate's right to purchase 1/2 of such royalty (1%) for $1,000,000 at any time within 240 days of commencement of commercial production.
About the Property
The Property consists of 19 mineral claims covering an area of 6,891 Ha. It is divided into two blocks earned or under option by Firesteel from previous claim holders, each with 2% Royalty obligations; one block in an area of common interest with a 0.5% Royalty obligation; and a fourth block with no previous Royalty obligation.
This Property is situated in the Stikine Arch region of northwestern B.C. about 8 kilometers southeast of the Iskut Village and just east of Highway 37. The Property is adjacent to and immediately northwest of the Imperial Metals Red Chris copper-gold deposit (with measured and indicated resources of 446.1 million tonnes at 0.36% Cu and 0.29 g/t Au, at 0.20% Cu % Cutoff, as reported on page 52 of Imperial Metals' Annual Information Form dated March 30, 2009). In a news release dated November 9, 2009 Imperial Metals also reported the Red Chris Drill hole RC09-350 returned 152.5 meters grading 4.12% copper and 8.83 g/t gold starting at a depth of 540.0 meters.
A National Instrument 43-101 compliant report was prepared for Firesteel in 2006 entitled "Technical Report on the ROK Copper-Gold Mineral Property, Ealue Lake Area, Liard Mining Division, British Columbia, Canada". This report was prepared by independent consulting geologist Giles R. Peatfield, Ph.D., P.Eng. In this report Dr. Peatfield discussed in detail the geology of the property and its exploration history. The technical data in this release is derived from this report. The report was filed on SEDAR by the Company on January 22, 2010.
The Company had established a 2010 exploration program consisting of extending the geophysical grid to the West to cover the entire Th/K anomaly, conducting additional IP chargeability and resistivity readings over the entire grid and possibly drilling up to 1500 meters of drill holes to follow up findings from this program. However, due to continuing soft demand for equity in early stage junior minerals companies, Firesteel has been unable to raise sufficient financing for this project. Thus, the Company had decided to seek a partner to continue the pace of development. In 2009 Firesteel had entered into a letter of intent on the Property with another counterparty who could not be identified due to the terms of that agreement. That letter of intent had expired by its own terms.
With the Company's spending commitments now deferred on the Property for up to four years Firesteel intends to focus its resources on its flagship Copper Creek Property. The Company continues to seek a partner for its Poker property in B.C. and is maintaining its position for strategic reasons in its NWT and Mexican properties.
On announcing this transaction Mr. Walter Wakula, President and CEO of Firesteel, stated: "Establishing an option and joint venture arrangement on the ROK Coyote Property allows us to bring together the financial resources and technical expertise of two companies. This will help expedite the development of our Property at reduced risk and dilution and result in optimum valuation for our shareholders. Furthermore, $1.3 million in cash and Shares to be received by Firesteel represents a significant return on its investment to date in this Property."
Lions Gate is a Canadian based, junior resource company focused on the exploration, development, and acquisition of both advanced and early stage mineral projects. Lions Gate owns 100% of three substantial copper and molybdenum projects located in British Columbia. Lions Gate's flagship project is the Poplar porphyry copper - molybdenum deposit.
Firesteel is a junior minerals exploration company which explores for and develops quality precious and base metal prospects in the resource rich Stikine Arch area of British Columbia, and in the NWT and Mexico. The Company has been exploring its Copper Creek and ROK - Coyote discovery properties in northern British Columbia with strong showings of copper and gold mineralization. Firesteel maintains its interests in the oil and gas business through its 16.8 percent shareholding in Blacksteel Energy Inc. (TSXV:BEY).
Richard Young, P. Eng is a Qualified Person under National Instrument 43-101 and has reviewed and approved the technical content in this news release. He is a consulting geologist for and is independent of Firesteel.
ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRESTEEL RESOURCES INC.
President and CEO
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Advisory Regarding Forward Looking Statements
This news release contains forward-looking statements which include, but are not limited to: statements regarding the Company's plans to complete a definitive agreement with Lions Gate, receive future cash or shares from Lions Gate, complete the joint venture, realize the expected exploration work obligations committed on the Property, future drilling, expectations for exploration prospects, as well as operations plans, outlook, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact. Although Firesteel believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurance that such expectations will prove to be correct. Results of the Company may be affected by a variety of variables and risks associated with mineral exploration such as imprecision of resource and reserve estimates, environmental risks, competition, ability to access sufficient debt and equity capital from internal and external sources, ability to generate sufficient cash flow from operations to meet its current and future obligations, and risks associated with existing and potential future lawsuits and regulatory actions made against the Company; as a consequence, actual results could differ materially from those anticipated or implied in the forward-looking statements.
The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement and are made as of the date of this news release. Unless otherwise required by applicable securities laws, the Company does not intend nor does it undertake any obligation to update or review any forward-looking statements to reflect subsequent information, event, results or circumstances or otherwise.
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