Damara Options Kinaskan-Castle Cu-Au Project in the Golden Triangle

WEST KELOWNA, British Columbia, Nov.20, 2017(GLOBE NEWSWIRE) -- DAMARA GOLD CORP. (TSX-V:DMR) (“Damara” or the “Company”) and Colorado Resources Ltd (“Colorado”) (TSX-V:CXO) are pleased to announce that they have entered into a letter agreement (the “Agreement”) whereby Damara can acquire a 100% interest (subject to its Back-in Right (as defined below)) (the “Transaction”) in Colorado’s Kinaskan-Castle project (the “K-C Property”) located in the Liard Mining Division within the “Golden Triangle Area” of northwestern British Columbia. Completion of the Transaction is subject to the receipt of all required approvals, including the approval of Damara’s shareholders and the approval of the Exchange (as defined below).

The Property
The K-C Property is comprised of 49 mineral claims (17,839ha) and is located approximately 195 km north of the town of Stewart and 75 km south of Dease Lake. The Golden Triangle area is a district which hosts several significant gold-copper mines¹ including Imperial Metals Red Chris¹ and mine development and mineral occurrences including GJ¹, Quash¹, Hank¹, GT Gold¹ and Spectrum¹.

Historical² Exploration
Previous work at the K-C Property focused on the western side of the property and included the completion of 21 diamond drillholes (4,805m) between 1988 and 2013. The mineralization at the K-C Property is associated with an east-west striking structural and intrusive corridor that is spatially related to a 150m x 1500m long copper and gold soil anomaly, a coincident magnetic anomaly and IP chargeability high. 

Gold – copper mineralization noted to date includes both broad porphyry style and higher grade vein styles as illustrated by two intercepts in historic² holes:

• DDH CA 13-01 with 274 m of 0.102% Cu and 0.283 g/t Au
• DDH CA 13-03 with 4 m of 2.14% Cu, 4.88 g/t Au, and 73.2 g/t Ag contained within a 174 m interval of 0.106% Cu and 0.466 g/t Au³

The historic data² suggest that the gold-copper mineralization on the K-C Property is open to the east and it occurs in an alteration zone that has been traced over a distance of 4.4 km to the eastern property boundary. This area has seen the lowest density of historical drill testing.

Recent Exploration
Colorado recently initiated a preliminary exploration program which included the collection of 859 soil and 201 rock samples, 10 km² of geological mapping, an 11-line km I.P. survey and a 150-line km airborne magnetic survey. Damara, as part of the consideration, will bear the cost of this initial program.

Transaction and Concurrent Financing Rationale

• The Transaction and will provide Damara the opportunity to become an active explorer in the Golden Triangle;
   
• The Concurrent Financing will broaden Damara’s shareholder investor base and fund the exploration programs and provide working capital for the next 12 months;
   
• The Transaction will allow for the combined exploration expertise of Colorado’s and Damara’s board and management to advance the K-C Property;
   
• Increased market capitalization along with the improved capital markets are expected to boost Damara’s trading activity and liquidity.

William Yeomans, Director of Damara, stated: “The collaboration of Damara and Colorado is a unique opportunity for Damara shareholders as it positions the Company favorably to advance the K-C Property and become an explorer in the prolific Golden Triangle Area.”

Lawrence Nagy, Chairman of Colorado, stated: “The Transaction will give Colorado, which currently holds a 15.7% interest in Damara, the opportunity to focus its attention on its core assets - KSP and North ROK - while providing an opportunity to share in any future success at the K-C Property.”

Transaction Overview
Consideration for the Transaction includes an aggregate $250,000 in cash payments and the issuance of 10,250,000 common shares in the capital of Damara (the “Consideration Shares”) to Colorado, and $8,000,000 in exploration expenditures (which includes $300,000 reimbursement of the initial program within 5 business days of receipt of the approval of the TSX Venture Exchange (the “Exchange”) for the Transaction) over a three year period. Colorado will have the exclusive right, within 45 days from the option exercise date, to elect to exercise its back-in right (the “Back-in Right”) wherein Colorado can acquire a 51% interest upon incurring $8,000,000 in exploration expenditures over a two year period with a minimum $2,000,000 in year one. In the event the Back-in Right is exercised and the terms thereof fulfilled, the parties have agreed to form a joint venture in which Damara will hold a 49% interest and Colorado will hold a 51% interest. In the event the Back-in Right is not exercised Colorado will be granted a 1% net smelter return royalty.

The Transaction is a non-arm’s length transaction pursuant to Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”).

In accordance with Exchange policies, the Company will seek minority shareholder approval of the Transaction, including the issuance of the Consideration Shares. Further information regarding the Transaction will be contained in a management information circular that Damara will prepare and file in due course in connection with an annual general and special meeting of Damara shareholders, which is expected to be held on December 29, 2017. Closing of the Transaction is expected to occur shortly thereafter.

Damara’s independent directors have determined that the proposed Transaction is fair and in the best interests of the Company and will recommend that disinterested shareholders vote in favour of resolutions supporting the Transaction. The Board will seek to engage a financial adviser to provide the required valuation of MI 61-101, subject to limitations and assumptions contained therein, and confirm that the aggregate consideration as described in the Agreement to be paid by Damara in connection with the Transaction is fair, from a financial point of view, to Damara’s shareholders. 

For Colorado, the Transaction would qualify as an Exempt Transaction pursuant to the policies of the Exchange except for the fact that the Transaction involves Non-Arm’s Length Parties and therefor is subject to Exchange approval. Colorado is exempt from the valuation and minority shareholder approval requirements of MI 61-101 as the Transaction.

Concurrent Financing
The Company also announces it is arranging a concurrent financing (the “Concurrent Financing”) wherein it intends to issue units (each a “Unit”) at a price of $0.15 per Unit and flow-through common shares (“FTS”) at a price of $0.20 per FTS. Each Unit will consist of one common share (issued on a non-flow-though basis) and one-half of one share purchase warrant (each whole warrant a “Warrant”). Each Warrant will entitle the holder to purchase an additional common share at $0.30 per share for a period of 24 months. Completion of the minimum Concurrent Financing is a condition of the Transaction.

Qualified Person
William Yeomans, P. Geo., a director of the Company is the Qualified Person as defined by National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”) who reviewed the preparation of the technical data in this news release for each of Damara and Colorado. 

About Damara
Damara Gold Corp. is a TSX Venture listed Canadian public company with a Board of Directors seasoned in the mineral exploration industry and with a record of mineral deposit discovery worldwide.

NR: 17-07

Cautionary Notes
¹ This news release contains information about adjacent properties on which neither Damara nor Colorado has a right to explore or mine. Readers are cautioned that mineral deposits on adjacent properties are not indicative of mineral deposits on the Company’s or Colorado’s properties.
² Historical information contained in this news release, maps or figures regarding the Company’s or Colorado’s projects or adjacent properties are reported for historical reference only and cannot be relied upon as neither the Company’s QP or Colorado’s QP, as defined under NI-43-101 has not prepared nor verified the historical information.
³ All drill intercepts are drill indicated lengths. Insufficient technical information exists to demonstrate the true widths of these intersections.

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

Statements Regarding Forward-Looking Information
Certain statements contained in this news release may contain forward-looking information within the meaning of Canadian securities laws. Such forward-looking information is identified by words such as “estimates”, “intends”, “expects”, “believes”, “may”, “will” and include, without limitation, statements regarding the Colorado’s or the Company’s plans or business operations (including plans for completing the Transaction and the Concurrent Financing, as applicable and otherwise for progressing assets), estimates regarding mineral resources, projections regarding mineralization and projected expenditures. There can be no assurance that such statements will prove to be accurate; actual results and future events could differ materially from such statements. Factors that could cause actual results to differ materially include, among others, metal prices, risks inherent in the mining industry, financing risks, labour risks, uncertainty of mineral resource estimates, equipment and supply risks, title disputes, regulatory risks and environmental concerns. In addition, the completion of the Transaction and the Concurrent Financing is subject to the receipt of all required approvals, including the approval of the Company’s shareholders and the Exchange. Most of these factors are outside the control of Colorado and the Company. Investors are cautioned not to put undue reliance on forward-looking information. Except as otherwise required by applicable securities statutes or regulation, the Company and Colorado expressly disclaim any intent or obligation to update publicly forward-looking information, whether as a result of new information, future events or otherwise.