Canaco Resources Inc. (TSX VENTURE: CAN) ("Canaco" or the
"Company") is pleased to announce its intention to spin out its 70%
interest in the Harvest copper-gold-silver VMS project (the
"Harvest Project") in Ethiopia into a wholly owned subsidiary of
Canaco, Tigray Resources Inc. ("Tigray"), through a Plan of
Arrangement (the "Arrangement"). The Arrangement is designed to
deliver greater value to shareholders by unlocking the value of the
Harvest Project, which comprises six exploration concessions
covering 277 square kilometres in the Tigray region of Ethiopia,
600 kilometres north-northwest of the capital city of Addis Ababa.
Prior to completing the acquisition of the Harvest Project,
Canaco drilled 12 holes on the Terakimiti prospect as part of a due
diligence program, 11 of which returned significant mineralized
intercepts. The highlight hole (hole 10HTD003) returned 52.1 metres
grading 4.10% copper , 1.55 grams per tonne gold and 25.97 grams
per tonne silver, starting at a depth of 45.6 metres, including
23.7 metres at 7.30% copper, 1.88 grams per tonne gold and 21.88
grams per tonne silver (refer to Canaco's press release dated
January 6, 2011).
The transaction will include the transfer of Canaco's 70%
interest in Harvest Mining PLC, which owns the Harvest Project, to
Tigray, along with 18 months' working capital and sufficient funds
to conduct the recommended first phase drill program (approximately
$4 million). Canaco intends to distribute 100% of the common shares
of Tigray it receives to Canaco shareholders on a pro rata basis
(the "Spin-Out Transaction"). It is expected Tigray will apply for
a listing on the TSX Venture Exchange on completion of the Spin-Out
Transaction, anticipated to close by the end of June 2011.
The Arrangement will be subject to TSX Venture Exchange,
regulatory and court approval, as well as shareholder approval by
not less than two-thirds of the votes cast at the special meeting
(the "Meeting") of Canaco shareholders, scheduled for June 24,
2011. Full details of the Spin-Out Transaction will be included in
the management information circular to be sent to Canaco
shareholders in connection with the Meeting.
Canaco shareholders will be entitled to receive one common share
of Tigray for every five common shares of Canaco held as of the
effective date of the Arrangement, expected to be on or about June
28, 2011. No Canaco options or warrants will entitle the holders to
receive any shares or other convertible securities of Tigray,
except to the extent such holders exercise such options or
warrants, as the case may be, to acquire common shares of Canaco
prior to the effective date of the Arrangement. There will be no
change in shareholders' holdings in Canaco as a result of the
Arrangement.
The Harvest Project is located in the southern extension of the
Arabian-Nubian Shield tectonic assemblage that stretches southward
from Eritrea. This belt of rocks hosts a number of significant VMS
mineral systems including Bisha and the deposits of the Asmara
district (including Emba Derho, Debarwa, and Adi Nefas). The
Harvest area is interpreted to lie within the prospective southern
extension of the tectonostratigraphic belt hosting the Asmara
deposits. These deposits characteristically comprise copper and
zinc-bearing sufide VMS mineralization that also contains
significant gold and silver. The gold is typically enriched in an
oxide cap (typically leached of copper and zinc). Copper, zinc and
gold are also enriched in a supergene zone underlying the oxide
horizon. The results of surficial sampling, as well as trench and
diamond drill exploration, demonstrate that the geologic features
and surficial metal enrichment at the Harvest Project exhibit
similar characteristics to those of the VMS mineral systems such as
Bisha identified in Eritrea.
Canaco President and CEO Andrew Lee Smith said: "The spin-out of
Tigray will expose existing Canaco shareholders to significant
growth as exploration advances in Ethiopia. It will also allow the
Company to continue to dedicate its resources to the exploration
and development of the Handeni Gold Project in Tanzania. Based on
the due diligence drilling completed in 2010, we are confident the
Harvest Project hosts potential for the discovery of large,
near-surface, gold-enriched polymetallic VMS deposits. We expect
Tigray will become a platform for other exploration projects in the
region and that it will provide shareholders with an attractive
investment opportunity in the emerging Ethiopian mining
sector."
On completion of the Arrangement, Tigray's initial mandate at
the Harvest Project will be to complete geological, geochemical and
geophysical profiling to establish targets for continued drill
testing. An 11,000-metre first phase diamond drill program is
planned for the Terakimti and Nesafit concessions, with an
additional 3,000 metres follow-up drilling.
The board of directors of Tigray will initially comprise all of
the directors of Canaco. The management team of Tigray will consist
of Andrew Lee Smith as President and Chief Executive Officer, Jeff
Heidema as Vice President Exploration, and Shannon Ross as Chief
Financial Officer. As Tigray advances, there will be additions to
the board and senior management team to expand Tigray's Ethiopian
presence.
The acquisition of Canaco's 70% interest in Harvest Mining PLC
remains subject to the delivery of remaining closing documents and
receipt of final acceptance from the TSX Venture Exchange.
The securities offered have not been, and will not be,
registered under the U.S. Securities Act of 1933, as amended (the
"U.S. Securities Act") or any U.S. state securities laws, and may
not be offered or sold in the United States or to, or for the
account or benefit of, United States persons absent registration or
any applicable exemption from the registration requirements of the
U.S. Securities Act and applicable U.S. state securities laws. This
press release shall not constitute an offer to sell or the
solicitation of an offer to buy securities in the United States,
nor shall there be any sale of these securities in any jurisdiction
in which such offer, solicitation or sale would be unlawful.
Quality Control
The planning, execution and monitoring of Canaco's quality
control programs at the Harvest project are under the supervision
of Jeff Heidema, P.Geo, Canaco's Vice President Exploration, and
Dr. David Groves, Canaco's Director of Project Development. Mr.
Heidema and Dr. Groves are qualified persons as defined by National
Instrument 43-101. Canaco utilizes an industry standard QA/QC
protocol with respect to sampling procedures. Blanks and certified
reference standards are inserted into the sample stream to monitor
laboratory performance, and duplicates of pulps and bulk rejects
are also used to monitor laboratory performance.
Additional information and public documents about Canaco,
including a complete list of drill hole intercepts and drill collar
maps, can be viewed at the Company's website at www.canaco.ca or at
www.sedar.com.
About Canaco
Canaco is a Vancouver-based mineral exploration company focused
on advanced exploration in Africa. Built on a foundation of
experienced management and focused on rapidly advancing exploration
projects in Tanzania and Ethiopia, Canaco believes it is well
positioned to build shareholder value through discovery and
resource development.
Canaco's shares trade on the TSX Venture Exchange under the
symbol CAN.
On behalf of the Board of Directors:
Andrew Lee Smith, P.Geo., President, CEO and Director
Cautionary Statement Regarding Forward-Looking Information
This news release contains "forward-looking information" within
the meaning of applicable Canadian securities legislation.
Generally, forward-looking information can be identified by the use
of forward-looking terminology such as "anticipate", "believe",
"plan", "expect", "intend", "estimate", "forecast", "project",
"budget", "schedule", "may", "will", "could", "might", "should" or
variations of such words or similar words or expressions.
Forward-looking information is based on reasonable assumptions that
have been made by the Company as at the date of such information
and is subject to known and unknown risks, uncertainties and other
factors that may cause the actual results, level of activity,
performance or achievements of the Company to be materially
different from those expressed or implied by such forward-looking
information, including but not limited to: risks associated with
mineral exploration and development; metal and mineral prices;
availability of capital; accuracy of the Company's projections and
estimates; interest and exchange rates; competition; stock price
fluctuations; availability of drilling equipment and access; actual
results of current exploration activities; government regulation;
political or economic developments; environmental risks; insurance
risks; capital expenditures; operating or technical difficulties in
connection with development activities; personnel relations; the
speculative nature of strategic metal exploration and development
including the risks of diminishing quantities of grades of
reserves; contests over title to properties; and changes in project
parameters as plans continue to be refined, as well as those risk
factors set out in the Company's annual information form for the
financial year ended June 30, 2010 and the Company's short form
prospectus dated March 15, 2011.
Forward-looking statements are based on assumptions management
believes to be reasonable, including but not limited to the price
of gold; the demand for gold; the ability to carry on exploration
and development activities; the timely receipt of any required
approvals; the ability to obtain qualified personnel, equipment and
services in a timely and cost-efficient manner; the ability to
operate in a safe, efficient and effective manner; and the
regulatory framework regarding environmental matters, and such
other assumptions and factors as set out herein. Although the
Company has attempted to identify important factors that could
cause actual results to differ materially from those contained in
forward-looking information, there may be other factors that cause
results not to be as anticipated, estimated or intended. There can
be no assurance that such information will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such information. Accordingly, readers should not
place undue reliance on forward-looking information. The Company
does not undertake to update any forward-looking information that
is included herein, except in accordance with applicable securities
laws.
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 news release.
Contacts: Canaco Resources Inc. Meghan Brown Director Investor
Relations 604-488-0822 or 1-866-488-0822 604-899-1240 (FAX)
investors@canaco.ca www.canaco.ca
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