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Golden Dawn inks deal to acquire J&L gold project, Huakan International

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Golden Dawn inks deal to acquire J&L gold project, Huakan International

Golden Dawn Minerals Inc. said Dec. 19 that it signed an option agreement with Huakan International Mining Inc. to acquire the J&L gold project, and if completed, to acquire Huakan as well.

The J&L property comprises 20 mineral tenure claims and 10 crown-granted claims covering a total of 3,051.73 hectares in southeastern British Columbia.

Golden Dawn will issue 1 million shares to Huakan upon execution of the agreement.

To exercise the first option, Golden Dawn will pay C$8 million in cash, issue 15 million common shares, spend C$250,000 on exploration and complete studies including an updated preliminary economic assessment, due within six months from the effective date of the agreement.

To earn an initial 51% interest, the company will pay a further C$1 million in cash and issue 3 million shares within six months, spend at least C$6 million on exploration, complete a preliminary feasibility study, pay another C$2 million in cash and issue another 4 million shares by the 19th month of the deal, with another C$5 million in cash and 7 million shares due within 900 days of the deal.

Once Golden Dawn exercises the first option, Huakan will have the right to name one person to Golden Dawn's board. Upon earning the initial 51% interest, Golden Dawn will acquire a second option to increase its interest in the project to 100%.

To acquire the remaining 49% interest, Golden Dawn must pay C$30 million in cash within 43 months of the agreement and 12 months of exercising the first option, with Huakan able to request the payment be equal parts cash and shares. If the company exercises the second option, it will grant Huakan a 1.5% net smelter royalty on the project.

If Golden Dawn does not exercise the second option, its initial 51% interest will be diluted to 40% and it will no longer serve as project operator. If Golden Dawn does exercise the second option, it will be granted a third option to acquire Huakan for no additional consideration, provided it gives the company notice within 30 days of the exercise.

After Golden Dawn completes the updated PEA and permitting, it will undertake further exploration including underground drilling aiming to upgrade resources as well as metallurgical testing in preparation for the pre-feasibility study.