NEWS RELEASE
GOWEST GOLD
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TORONTO – Gowest Gold Ltd. (“Gowest” or the “Company”) (TSX-VENTURE: GWA) is pleased to announce that it has entered into a non-binding letter of intent with Northern Sun Mining Corp. (“Northern Sun”), a corporation existing under the laws of the Province of Ontario, with respect to the creation of a joint-venture corporation (“JVco”) that will own and operate the Redstone Mill (the “Transaction”).
Upon completion of the proposed Transaction, each of the parties will hold a 50 per cent interest in JVco.
The Redstone Mill, located near Timmins, Ontario, is currently 100 per cent owned by Northern Sun and has the capacity to process approximately 1,500 tonnes of ore-per-day.
Located just south of Gowest’s Bradshaw Gold Deposit, which forms part of its North Timmins Gold Project, the Redstone Mill is well-situated to satisfy Gowest’s anticipated future ore processing requirements.
In order to effect the proposed Transaction, Northern Sun will initially transfer to JVco all of the assets comprising the Redstone Mill, and JVco will assume all of the obligations and liabilities relating to the Redstone Mill, in exchange for shares of JVco having an aggregate deemed value of $23 million.
The assets will be transferred to JVco free and clear of all liens or encumbrances (other than any permitted encumbrances.)
Following the organization of JVco by Northern Sun, Gowest will purchase a 50 per cent interest in JVco for consideration equal to $11.5 million (the “Purchase Price”). The Purchase Price is proposed to be paid by Gowest in two (2) installments as follows:
(i) the first installment of the purchase price shall be due and payable on the closing of the Transaction (the “Closing”) and shall be satisfied by the issuance to Northern Sun of units of Gowest (each a “Unit” and, collectively, “Units”) having an aggregate value equal to $5.75 million. For the purposes of the Transaction, the proposed deemed value per Unit will be $0.15. Each Unit will be comprised of one common share of Gowest and one-half of one common share purchase warrant, with each whole common share purchase warrant entitling Northern Sun to acquire one additional common share of Gowest at a proposed exercise price of $0.165 for a period of 18 months following the Closing; and,
(ii) the second installment of the Purchase Price shall be due and payable on or before the date that is 12 months following the Closing, and satisfied, at the option of Northern Sun, either in cash or by the issuance to Northern Sun of that number of common shares of Gowest having an aggregate value equal to $5.75 million. If Northern Sun elects to take shares, the value per common share of Gowest will be equal to the volume weighted average closing price for the common shares of Gowest on the TSX Venture Exchange during the 30 trading days preceding the date on which the election to take common shares is made by Northern Sun, less a 25 per cent discount, provided that the value per common share shall not be less than the deemed value per Unit at Closing.
In connection with the Transaction, it is proposed that JVco and Gowest will enter into agreements, on market terms, pursuant to which JVco will (among other things) agree to process ore produced by Gowest from its proposed 30,000 tonne bulk sample and JVco will reserve an average of 500 tonnes-per-day of capacity in order to satisfy Gowest’s anticipated future ore processing requirements.
Greg Romain, President and CEO commented, “We look forward to becoming equal partners with Northern Sun in the Redstone Mill, where we can process the material we extract from Bradshaw, and, with our partner, we can benefit financially by helping to secure additional feed for the remaining mill capacity from other regionally located mining companies.”
It is currently anticipated that definitive documentation in respect of the Transaction will be completed on or prior to February 28, 2017, and Closing will occur as soon as practicable thereafter. The proposed Transaction is an arm’s length transaction.
Completion of the proposed Transaction remains subject to the negotiation of definitive documentation setting forth the detailed terms and conditions of the Transaction, including, without limitation, an asset purchase agreement in respect of the transfer of the assets and liabilities comprising the Redstone Mill to JVco, a share purchase agreement in respect of the purchase by Gowest of a 50 per cent interest in JVco from Northern Sun, a shareholders’ agreement among Gowest, Northern Sun and JVco governing (among other things) the business and affairs of JVco, and agreement(s) relating to the processing of Gowest ore by JVco.
Such agreements shall be in form and content satisfactory to each of Gowest and Northern Sun and the completion of the Transaction shall be subject to (among other things) the satisfaction or waiver of all conditions precedent to Closing to be set out therein. In addition, the Transaction is subject to the approval of the TSX Venture Exchange.
Additional details concerning the proposed Transaction will be provided in connection with the negotiation and execution of definitive documentation between the parties.
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