Vancouver, British Columbia -- April 6, 2009 -- Foundation Resources Inc. ("Foundation"), a capital pool company, is pleased to announce that it has entered into a letter agreement of an option (the "Acquisition") from Alto Ventures Ltd. ("Alto") to acquire up to a 70% interest in and to the Coldstream Property and the Burchell Lake Property located in the Burchell Lake Area, Ontario (the "Property"). If completed, the Acquisition will constitute Foundation's "Qualifying Transaction" pursuant to the policies of the TSX Venture Exchange (the "Exchange").
Information Concerning Foundation
Foundation is a company existing under the laws of British Columbia and is a reporting issuer in British Columbia, Alberta and Ontario. Foundation currently has 3,500,000 common shares ("Foundation Shares") outstanding, of which 1,500,000 shares (the "Escrow Shares") are currently held in escrow pursuant to the policies of the Exchange.
Foundation has granted stock options to acquire up to an aggregate of 350,000 Foundation Shares at a price of $0.20 per share (the "Foundation Options") to directors and officers. Other than these Foundation Shares and Foundation Options, no other securities of Foundation are outstanding. Further information concerning Foundation can be found on SEDAR at www.sedar.com.
Information Concerning the Property
Alto holds or has the right to acquire a 100% right, title and interest in and to the claims comprising the Property located in the Burchell Lake Area, Ontario, subject to certain underlying production royalties on some of the claims. The Property consists of 71 patented claims and 55 staked claims that cover 4,357 hectares.
The Property is located in the Shebandowan greenstone belt approximately 100 km west of Thunder Bay, Ontario. The Property includes the former producing North Coldstream copper-silver-gold mine and the East Coldstream gold deposit. During the past few years Alto made strategic land acquisitions through staking and purchases to cover over 10 km of a prospective mineralized structure. In 2006, a program consisting of 2,062 m of diamond drilling was completed testing the East Coldstream gold deposit. Drilling has confirmed the presence of wide zones of gold mineralization with some intersections up to 68 m in core length and grading 1.2 g/t gold. The mineralized gold system has now been traced for two km at East Coldstream and remains open along strike and to depth.
The East Coldstream gold deposit occurs at the northeast end of a linear corridor that extends westsouthwest for over 20 km and includes the North Coldstream copper-gold-silver mine (historic production of 102 million pounds of copper, 440,000 ounces of silver, and 22,000 ounces of gold from 2.7 million tons of ore), Alto's Burchell claims with multiple gold zones of up to 0.95 g/t gold over 34 m, the Moss Lake gold deposit owned by Moss Lake Mines Ltd with a NI43-101 resource estimate of 50.9 million tonnes grading 0.92 g/t gold (1.5 million contained ounces of gold) and several other significant mineral occurrences to the southwest.
Marian (Mike) Koziol, P.Eng., P.Geo., the President of Alto, is the qualified person responsible for the technical information relating to the Property set out in this news release.
The Acquisition
Foundation and Alto entered into a binding letter of intent dated April 6, 2009 (the "Letter of Intent") setting out certain terms and conditions pursuant to which the proposed Acquisition will be completed. Pursuant to the Letter of Intent, Foundation has the option to acquire up to a 70% interest in and to the Property. Pursuant to the Letter of Intent, in order to the earn a 60% interest in the Property (the "First Option"), Foundation must pay the following consideration:
Foundation may earn a further 10% interest in the Property (the "Second Option") by funding the completion of a feasibility study on the Property. Upon the exercise of the First Option, Foundation has 60 business days to provide notice to Alto that it wishes to earn the Second Option. If Foundation does not provide notice within 60 business day, or if Foundation provides notice that it will not be earning the Second Option, a joint venture will be formed between Foundation and Alto with regard to the Property providing for, among other things, the funding of all programs on the Property by Foundation and Alto funding in accordance with their respective interests.
If Foundation exercises the Second Option, Alto will have the option to enter into the joint venture with respect to the Property with Foundation holding a 70% initial interest and Alto holding a 30% initial interest. If Alto chooses not to form the joint venture, Alto's interest in the Property will be diluted to a 2.5% net smelter returns royalty, which Foundation will have the right at any time to re-purchase 40% (or 1% total) of such royalty for $1,000,000.
Alto is a company existing under the laws of British Columbia and is a reporting issuer in British Columbia and Alberta. Alto's shares are listed on the Exchange under the symbol "ATV". The principal shareholders of the outstanding common shares of Alto are Anglo Pacific Group PLC, a company formed under the laws of England and listed on the London Stock Exchange and Hidefield Gold PLC, a company formed under the laws of England and listed on AIM, who hold 9,804,000 (10.24%) and 13,313,786 (13.19%) shares of Alto, respectively. The remaining 76.57% of the common shares of Alto are held by public shareholders and directors and officers of Alto, none of whom owns more than 10% of the outstanding Alto shares. Alto and the principal shareholders of Alto are all arms length to Foundation.
Information Concerning the Proposed Qualifying Transaction
The Acquisition is subject to the parties successfully negotiating and entering into a definitive option agreement. The resulting issuer after the completion of the Acquisition will be classified as a tier 2 mining issuer. In addition to the shares issued to Alto to acquire the interest in the Property, the parties have agreed that 750,000 of the Escrow Shares will be purchased by Paul Chung and John Hiner, who will each be nominated to the board of directors of Foundation upon closing.
The completion of the Qualifying Transaction is also subject to an arm's length financing to raise sufficient funds to complete the Acquisition and satisfy the requirements of the Exchange (the "Concurrent Financing"). The final negotiated terms of the Concurrent Financing will be disclosed in a subsequent press release of Foundation and in the filing statement or management information circular, as the case may be, to be prepared by Foundation in respect of the Qualifying Transaction. The proceeds from the Concurrent Financing will be used to carry out exploration work on the Property and for general working capital.
Upon completion of the Qualifying Transaction but prior to the completion of the Concurrent Financing, Foundation (or the resulting issuer, as the case may be), Foundation will have approximately 4,000,000 common shares issued and outstanding and 350,000 stock options exercisable at $0.20 per share. The completion of the Qualifying Transaction is subject to the approval of the Exchange and all other necessary regulatory approvals. It is also subject to additional conditions precedent, including shareholder approvals of Foundation and Alto if and as required under applicable corporate or securities laws, satisfactory completion of due diligence reviews by both parties, approvals of the boards of directors of Foundation and Alto, the completion of a National Instrument 43-101 report and certain other conditions customary for transactions of this nature.
Trading in the Foundation Shares will remain halted pending the completion of the Exchange's review of the proposed Qualifying Transaction and the filing of all documents required by the Exchange. Foundation will issue a further news release at such time as the Exchange has completed its review and received the necessary documentation and trading in the Foundation Shares is to resume. There can be no assurance that trading in the Foundation Shares will resume prior to the completion of the Qualifying Transaction.
Sponsor
Foundation intends to rely on the exemption from sponsorship in Exchange Policy 2.2 section 3.4(a)(i). In the event that it is determined that a sponsor is required, a sponsor will be identified at a later date and will be announced in a subsequent press release of Foundation. An agreement to sponsor should not be construed as an assurance with respect to the merits of the transaction or the likelihood of completion of the proposed Qualifying Transaction.
Management and Board of Directors of Resulting Issuer
Upon completion of the Qualifying Transaction, it is anticipated that the board of directors and management of the resulting issuer will be restructured to consist of one of the existing directors of Foundation and the persons identified below:
Investors are cautioned that, except as disclosed in the filing statement or management information circular of Foundation to be prepared in connection with the proposed Qualifying Transaction, any information released or received with respect to the proposed Qualifying Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Foundation should be considered to be highly speculative.
For further information please contact:
Douglas Johnson, President and Chief Executive Officer of Foundation
Telephone: (604) 682-7335.
Completion of the Qualifying Transaction 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 Qualifying Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Qualifying Transaction will be completed as proposed or at all.
This press release contains projections and forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of Foundation. These risks and uncertainties could cause actual results and Foundation's plans and objectives to differ materially from those expressed in the forward-looking information. Actual results and future events could differ materially from those anticipated in such information. These and all subsequent written and oral forward-looking information are based on estimates and opinions of management on the dates they are made and expressly qualified in their entirety by this notice. Foundation assumes no obligation to update forward-looking information should circumstances or management's estimates or opinions change.
The TSX Venture Exchange has in no way passed upon the merits of the proposed Qualifying Transaction and has neither approved nor disapproved the contents of this release. Neither the TSX Venture Exchange nor its Regulation Services Provide (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
(NOT FOR DISSEMINATION IN THE UNITED STATES OF AMERICA)
