Eureka Announces Proposed Acquisition of Kore Mining

Eureka Resources (TSXV:EUK) (“Eureka” or the “Company”) is pleased to announce that it has signed an amalgamation agreement dated February 24, 2018 (the “Agreement”) with Kore Mining Ltd. (“Kore”), a private British Columbia corporation based in Vancouver, BC, pursuant to which Eureka has agreed to acquire all of the outstanding common shares of Kore (each, a “Kore Share”) in exchange for common shares of Eureka (each a, “Eureka Share”) by way of a three-cornered amalgamation (the “Transaction”). Kore, indirectly through its wholly-owned US subsidiaries, owns 100% interests in the Imperial and Long Valley gold development projects, located in California, USA (together, the “Projects”). The Projects comprise development stage (and historic feasibility stage) assets with over 141,225 metres of historic drilling.

Combined, most recent historical estimates of resources specify a total of 2,090,200 measured and indicated and 1,869,500 inferred gold ounces. A Qualified Person has not done sufficient work to classify the historical estimates as current resources and Kore is not treating the historical estimates as current resources. Significant data compilation, re-drilling, re-sampling and data verification will be required by a Qualified Person before the historical estimates at the Projects can be classified as current resources.

The Transaction will constitute a reverse takeover (an “RTO”) of Eureka by Kore under the policies of the TSX Venture Exchange (the “Exchange”).

Share Consolidation

As a condition to the closing of the Transaction (the “Closing”), Eureka will have completed a consolidation of the issued and outstanding Eureka Shares on the basis of one post-consolidation Eureka Share for each ten pre-consolidation Eureka Shares (the “Consolidation”).

General Terms of the Transaction

The Transaction will be effected by way of a three-cornered amalgamation, without court approval, under the Business Corporations Act (British Columbia), pursuant to which, through the amalgamation of a newly incorporated British Columbia subsidiary of Eureka and Kore, Eureka will acquire all of the issued and outstanding Kore Shares in exchange for the issuance of Eureka Shares (on a post-Consolidation basis) and Kore will become a subsidiary of Eureka.

As at the date hereof, there are 50,462,402 Eureka Shares outstanding, which will be reduced to 5,046,240 Eureka Shares on a post-Consolidation basis. Pursuant to the terms of the Agreement, Eureka has agreed to issue 3 post-Consolidation Eureka Shares in exchange for each Kore Share (the “Exchange Ratio”), resulting in the shareholders of Kore being issued a total of 56,121,606 Eureka Shares (on a post-Consolidation basis). The Exchange Ratio has been determined on the basis of there being this number of Eureka Shares outstanding at the Closing. However, prior to the Closing, Eureka intends to issue Eureka Shares in settlement of certain outstanding liabilities in accordance with the policies of the Exchange (the “Debt Settlement”). If the actual number of outstanding Eureka Shares and / or Kore Shares immediately prior to the Effective Time (including any Eureka Shares issued in connection with the Debt Settlement) is greater or less than such amount, then the Exchange Ratio shall be adjusted so as to ensure that, immediately following the Closing, the former Kore shareholders shall hold no less than 91.8% of the total number of issued and outstanding Eureka Shares (prior to giving effect to the Private Placement (as defined herein)).

The Transaction is subject to various closing conditions, including, among other things, receipt of approval of the Exchange and the conditions described below.

Following the Closing, Eureka will continue on with the business of Kore and remain a Tier 2 mining issuer, with Kore as its operating subsidiary (with Eureka, after the Closing, being referred to herein as the “Resulting Issuer”). The Resulting Issuer is anticipated to hold all existing assets of Eureka and Kore as at the Closing. It is expected that, in connection with the Closing, Eureka will change its name to “Kore Mining Ltd.”, or such other name as agreed by the parties, with a corresponding change of the trading symbol for the Eureka Shares on the Exchange.

Certain Eureka Shares to be issued to Kore shareholders in connection with the Transaction will be subject to escrow under the policies of the Exchange.

None of the securities to be issued pursuant to the Transaction have been or will be registered under the United States Securities Act of 1933, as amended, or any state securities laws, and any securities issued pursuant to the Transaction are anticipated to be issued in reliance upon available exemptions from such registration requirements. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities.

Conditions to the Transaction

The Transaction remains subject to a number of terms and conditions, including, among other things:

• Eureka and Kore obtaining all necessary consents, orders and regulatory approvals, including the conditional approval of the Exchange;
• completion of the Private Placement for minimum gross proceeds of $2,000,000 and maximum gross proceeds of $7,000,000;
• there being no material change occurring with respect to the business of Eureka or Kore;
• the satisfaction of obligations under the Agreement relating to each of the parties;
• the delivery by each of the parties of standard closing documents, including legal opinions;
• approval of the Transaction by the shareholders of Kore and Eureka, as required by applicable corporate law and the policies of the Exchange; and
• execution of support and voting agreements by all directors and officers of Kore and Eureka and any shareholders holding greater than 10% of the issued and outstanding shares of each of the parties.

Eureka intends to seek a waiver from the Exchange of any requirement for a sponsor in connection with the Transaction.

In connection with the announcement of the Transaction, trading in the Eureka Shares has been halted and is expected to remain halted until the Closing.

Proposed Officers and Directors

It is expected that, following the Closing, all of the current directors and officers of Eureka will resign and the board of directors of the Resulting Issuer (the “Board”) will consist of five directors, four of which will be nominated by Kore and one of which will be nominated by Eureka. The newly-constituted Board shall be placed before shareholders of the Resulting Issuer for election at the next occurring shareholders’ meeting.

The Resulting Issuer shall initially be managed by Adrian Rothwell, as President and Chief Executive Officer, James W. Hynes, as Chief Operating Officer, and Alan Ahlgren, as Chief Financial Officer.

The Board s expected to consist of James W. Hynes, Adrian Rothwell, Brendan Cahill and the additional nominees of each of Kore and Eureka as described above. The following are brief descriptions of the proposed directors and officers of the Resulting Issuer:

James W. Hynes

Formerly with Lafarge Canada Inc. and Reperio Resources Corp., Mr. Hynes has over 15 years of experience in the mining and metals sector, and a Bachelor of Science in Engineering (1999), specializing in geological and geotechnical engineering, from the University of New Brunswick.

Adrian Rothwell

Mr. Rothwell has over 20 years of experience in the mining and metals sector. He is currently a director of Fireweed Zinc Ltd. Previously, he served as an executive of Goldcorp Inc., and Chief Financial Officer of NuLegacy Gold Corp, Kiska Metals Corp. and MBMI Resources Inc. He is a British Columbia Chartered Professional Accountant and a member of the Chartered Accountants of Australia and New Zealand. He previously worked for 10 years at PricewaterhouseCoopers LLP. Mr. Rothwell holds a BA in Economics from Macquarie University.

Brendan Cahill

Mr. Cahill has over 15 years of experience in the mining and metals sector and in corporate finance, and is currently Chief Executive Officer of Excellon Resources Inc., and a director of Group Eleven Resources Corp. He was formerly the Vice President of Corporate Development for Pelangio Exploration Inc. and a lawyer at Davies Ward Phillips & Vineberg LLP.

W. Alan Ahlgren

Mr. Ahlgren has over 30 years of experience across various industry sectors, including mining. He is currently Chief Financial Officer of Graphite One Resources Inc., and formerly the Vice President Finance at Kinross Gold Corp. and Chief Financial Officer at AQM Copper Inc. and First Coal Corp. As a graduate of the University of Manitoba with a Bachelor of Commerce in Accounting and Finance, he is a British Columbia Chartered Professional Accountant since 1993 and a member of the Institute of Corporate Directors.

Exclusivity and Break Fees

Eureka and Kore have agreed to exclusivity terms in the Agreement. However, nothing shall prohibit either party from complying with their duties and/or fiduciary obligations under applicable law, including, without limitation, with respect to any unsolicited proposal received by either party that may be superior to the Transaction.

Eureka and Kore have each agreed to immediately notify the other party of any information it may receive concerning an actual or intended offer for any or all of its assets or any of its securities and shall allow the other party the opportunity to match any actual bona fide offer presented in writing within 3 business days of such notice. Should the other party elect not to match the actual or intended offer, and should the recipient accept the offer, the recipient of the accepted offer must pay the other party a break fee of $50,000.

Private Placement

In connection with the Transaction, it is expected that Eureka will undertake a private placement of subscription receipts for minimum gross proceeds of $2,000,000 and maximum gross proceeds of $7,000,000 (the “Private Placement”), on terms to be agreed to by the parties. At the closing of the Private Placement, the proceeds will be placed in escrow with an escrow agent and released upon satisfaction of the release condition, which is expected to occur immediately prior to the Closing.

Principal Shareholders

In connection with the Transaction, it is expected that an aggregate of 19,500,300 Eureka Shares will be issued to 1130447 B.C. Ltd. and 15,000,300 Eureka Shares will be issued to Blaxland Pacific Management Corp. (each on a post-Consolidation basis) in exchange for their Kore Shares, representing approximately 31.9% and 24.5%, respectively of the outstanding Eureka Shares following the Closing. Each of these Kore shareholders are privately incorporated British Columbia companies under the direction and control of Skye Marker and Michael D. Tomsett-Ell, respectively. The foregoing percentages have been calculated based on there being 61,167,846 Eureka Shares issued and outstanding after giving effect to the Transaction but before the issuance of any Eureka Shares in connection with the Debt Settlement and the Private Placement.

About Kore

Kore is a development stage company that offers exposure to precious metals exploration and development in North America, with a corporate strategy focused on the identification and acquisition of attractive development and advanced exploration stage projects.

Kore was incorporated under the provisions of the Business Corporations Act (British Columbia) on February 22, 2016. There are currently 17,907,202 Kore Shares issued and outstanding and there are expected to be 18,707,202 Kore Shares issued and outstanding at the Closing.

Kore owns 100% of the Projects, which are located in the State of California. Combined, most recent historical estimates of resources specify a total of 2,090,200 measured and indicated and 1,869,500 inferred gold ounces. A Qualified Person has not done sufficient work to classify the historical estimates as current resources and Kore is not treating the historical estimates as current resources. Significant data compilation, re-drilling, re-sampling and data verification may be required by a Qualified Person before the historical estimates at the Projects can be classified as current resources. Kore has no other material financial assets or liabilities.

Each of the Projects has the potential to host near-surface, open pit, heap leachable gold deposits. The Projects combine low technical risk, high advancement potential and a low initial cost.

The Imperial Project has a historical feasibility study and environmental impact study published in 1996 by Glamis Gold. A historical preliminary economic assessment was prepared in 20121, which stated a pre-tax net present value (“NPV”) of US$215 million (US$1,200/oz gold price) while projecting average production of 120,000 ounces of gold per year over a mine life of 10 years. Long Valley had a historical preliminary economic assessment performed in 2008, which projected an internal pre-tax NPV of US$102 million (US$800/oz gold price) on oxide ounces of gold only (approximately 535,400 ounces of gold).

Table 1: Combined historical2 estimates of Kore Project resources3

The historical mineral resources in this news release were estimated using the Canadian Institute of Mining, Metallurgy and Petroleum (CIM), CIM Standards on Mineral Resources and Reserves, Definitions and Guidelines prepared by the CIM Standing Committee on Reserve Definitions and adopted by CIM Council.

Imperial Mineral Historical Resource Estimation Parameters: a) Grade estimation is based on assay samples composited to 20ft intervals. Grade capping thresholds were determined following a detailed statistical analysis of the data for the entire mineralized domains varied from 0.02 to 0.2 ounces per ton (opt) gold (Au). b) Resource model grade blocks were estimated using Gemcom GEMSTM modeling software based on a traditional wireframe interpretation constructed from a sectional interpretation of drilling data. c) The database for the Imperial model consisted of 349 RC holes totalling 190,134 feet of drilling. A total of 36,361 analyses were considered for use in the resource estimate. d) The modelled gold mineralized zone was subdivided into three domains displaying different strike or dip directions with a total length of 3,200 ft, width up to 800ft and average thickness of 85ft in the East area and 1,200ft in length, 1,000ft in width and average thickness of 90ft to 120ft in the West area, dipping from 5 to 35 degrees e) A bulk density value of 0.077 ton per cubic foot was used and derived from 9 core holes consisting of 32 samples collected in a 1994 and 1995 drilling program. f) Mineral resources were reported within an optimized pit shell using a gold price of US$1,400/oz with a process recovery of 80%. g) Process costs used were US$1.50/ton and G&A was US$0.40/ton. Open pit mining costs were US$1.20/ton and sustaining capex was US$0.50/ton with open pit slopes of 45 degrees.

Long Valley Historical Mineral Resource Estimation Parameters: a) Grade estimation is based on assay samples composited to 10ft intervals. Grade capping thresholds were determined following a detailed statistical analysis of the data for the entire mineralized domains and varied from 0.029 to 0.452 ounces per ton (opt) gold (Au). Capped Au grade in the MDA model was 0.25opt. b) Resource model grade blocks were estimated using Surpac® modeling software based on a traditional wireframe interpretation constructed from a sectional interpretation of drilling data. c) The database for the Long Valley model consisted of 896 holes, including 20 core holes, totalling 268,275 feet of drilling. A total of 47,792 analyses were considered for use in the resource estimate. d) The modelled gold mineralized zone is contained within the Hilton Creek South and Southeast zones with a total length of 7,748ft and widths ranging from 500ft to 1,500ft in a generally flat lying tabular body from 50 to 200ft thickness e) A bulk density value of 0.065 ton per cubic foot was used and derived from 7 core holes consisting of 12 samples collected by Royal Gold, 10 core holes consisting of 93 samples collected by Amax and 10 samples by MDA. f) Mineral resources were reported within an optimized pit shell using a gold price of US$550/oz with a process recovery of 79% less than 150ft from surface and 39% between 150ft and 200ft. g) Process costs used were US$1.96/ton and G&A was US$0.71/ton. Open pit mining costs were US$1.20/ton with open pit slopes of 45 degrees.

PROJECT HIGHLIGHTS

A LARGE GOLD RESOURCE

• Historical estimate of 2,090,200oz M&I, 1,869,500oz Inferred with historic 2P reserves. A Qualified Person has not done sufficient work to classify the historical estimates as current resources and Kore is not treating the historical estimates as current resources.
• Last California exploration completed in 1996
• Updated in 2008 (Long Valley), 2012 (Imperial)

OVER 141,225 METRES (468,000 FEET) OF DRILLING

• Long Valley drilling has consisted of 869 holes totaling 268,275ft
• Imperial drilling has consisted of 349 RC holes and 9 core holes totalling 200,000ft

LOW COST MINING, HISTORICAL FEASIBILITY, PEA

• Low strip ratios (Long Valley 1:1, Imperial 2.68:1)
• Feasibility and draft EIS-EIR completed by Glamis (Goldcorp) in 1996 on Imperial
• California gold deposits deeply oxidized epithermal systems with broad disseminated zones
• Excellent metallurgy in oxide zones (Long Valley 79%, Imperial 83% recoveries projected)
• Low operating cost projects with weakly cemented gravel overburden at Imperial and consolidated pyroclastic and moat sediments at Long Valley

The financial statements of Kore for the fiscal year ended December 31, 2017 and the period from inception to December 31, 2016 are currently being audited. They will be included in the information circular to be prepared by Eureka in connection with the Transaction.

Technical information with respect to the Projects contained in this news release has been reviewed and approved by David S. Smith, CPG, who is Kore’s designated independent qualified person for the purposes of this news release.

About Eureka

Eureka is a mineral exploration company based in Vancouver, British Columbia.

British Columbia, Canada

Eureka’s 100% owned FG Gold property is an advanced-stage gold project located in the Cariboo Mining Division. Historical exploration has established a Measured and Indicated (376,000 ounces) gold resource at an average grade of 0.776 g/t gold, using a cut-off grade of 0.5 g/t, and an Inferred gold resource (634,900 ounces) at an average grade of 0.718 g/t gold, using a cut-off grade of 0.5 g/t. Details of the gold resource can be found in “NI 43-101 Technical Report, Frasergold Exploration Project, Cariboo Mining Division, dated July 27, 2015” available under the Company’s profile on SEDAR or on the Company’s website.

Eureka has a 100% interest in the Gold Creek property located in the Cariboo Mining Division. Gold Creek is a grassroots gold project neighbouring, and with similar geology to the Spanish Mountain deposit owned by Spanish Mountain Gold Ltd.

Yukon Territory, Canada

Eureka’s 100% owned Luxor property consists of three non-contiguous claim blocks totalling 360 mining claims. Luxor is located in the Dawson Range Gold Belt, a district of major porphyry, breccia and vein occurrences. Eureka’s 100% owned TAK property is also located in the Dawson Range Gold Belt and consists of 82 mining claims.

Neighbouring projects include Goldcorp’s Coffee project and White Gold’s White Gold project.

Nevada, USA

Eureka owns a 50% interest in the Gemini lithium brine project located approximately 40 kilometres (26 miles) south of North America’s only producing lithium mine at Silver Peak, Nevada.

With respect to Eureka technical information contained in this News Release Kristian Whitehead, P.Geo., the Company’s designated Qualified Person for this news release as it relates to Eureka’s Properties within the meaning of NI 43-101, has reviewed and approved the technical information contained in this news release.

This news release does not constitute an offer to sell or a solicitation of an offer to sell any of the Shares in the United States. The Shares 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.

Further information on Eureka can be found on the Company’s website at www.eurekaresourcesinc.com and at www.sedar.com, or by contacting Michael Sweatman, President and CEO, by email at info@eurekaresourcesinc.com or by telephone at (604) 449-2273.

1 Long Valley Project: Technical Report, February 20, 2003 by Neil Prenn, P.Eng. and Charles V Muerhoff, P. Geo. of Mine Development Associates, and Technical Report, Preliminary Assessment, January 9, 2008 by Neil Prenn, P.Eng and Thomas Dyer, P.Eng. of Mine Development Associates, Reno Nevada. Prepared for Vista Gold Corp. (“2008 PEA”).
Imperial Project: Preliminary Economic Assessment Technical Report October 26, 2012 by Gordon Doerksen, P.Eng. Lois Boxill, P.Eng. et al of SRK Consulting (Canada) Inc. Prepared for ADR Capital Corp., Vancouver, BC. (“2012 PEA”)

2 The reader is cautioned that the above referenced “Historical Resource” is considered historical in nature and as such is based on prior data and reports prepared by previous property owners. The work necessary to verify the classification of this mineral resource estimate has not been completed and the resource estimate, therefore, cannot be treated as NI 43-101 current resource verified by a Qualified Person. There can be no assurance that any of the historical resources, in whole or in part, will ever become economically viable.

3 Mineral Resources are not mineral Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the mineral Resource will be converted into mineral Reserves. The estimate of mineral resources may be materially affected by environmental, permitting, legal, title, taxation, sociopolitical, marketing, or other relevant issues.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of TSX Venture Exchange) accepts responsibility for the adequacy of accuracy of this release.

Cautionary Statement Regarding Adjacent Properties and Forward-Looking Information

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Exchange) accepts responsibility for the adequacy or accuracy of this release.

Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. 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 any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.

The Exchange has in no way passed upon the merits of the Transaction and has neither approved nor disapproved the contents of this press release.

All information contained in this news release with respect to Eureka and Kore was supplied by the parties, respectively, for inclusion herein, and Eureka and its directors and officers have relied on Kore for any information concerning such party, including information concerning the Projects.

This news release contains forward-looking statements relating to the timing and completion of the Transaction, the future operations of the Company, Kore, and the Resulting Issuer and other statements that are not historical facts. Forward-looking statements are often identified by terms such as “will”, “may”, “should”, “anticipate”, “expects” and similar expressions. All statements other than statements of historical fact, included in this release, including, without limitation, statements regarding the Transaction and the future plans and objectives of the Company, Kore, and the Resulting Issuer are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company’s, Kore’s, and the Resulting Issuer’s expectations include the failure to satisfy the conditions to completion of the Transaction set forth above and other risks detailed from time to time in the filings made by the Company, Kore, and the Resulting Issuer with securities regulations.

The reader is cautioned that assumptions used in the preparation of any forward-looking information may prove to be incorrect. Events or circumstances may cause actual results to differ materially from those predicted, as a result of numerous known and unknown risks, uncertainties, and other factors, many of which are beyond the control of the Company, Kore, and the Resulting Issuer. As a result, the Company, Kore, and the Resulting Issuer cannot guarantee that the Transaction will be completed on the terms and within the time disclosed herein or at all. The reader is cautioned not to place undue reliance on any forward-looking information. Such information, although considered reasonable by management at the time of preparation, may prove to be incorrect and actual results may differ materially from those anticipated. Forward-looking statements contained in this news release are expressly qualified by this cautionary statement. The forward-looking statements contained in this news release are made as of the date of this news release and the Company, Kore, and the Resulting Issuer will update or revise publicly any of the included forward-looking statements as expressly required by Canadian securities law.

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Source: www.newsfilecorp.com