Stronghold Gets Eagle Mountain Gold Project Without Further Cash Payments

Stronghold Metals (Z – $0.24) significantly improved its Earn-in and Joint Venture agreement with Omai Gold Mines Ltd., a subsidiary of IAMGOLD Corp, to earn a 100% interest in the Eagle Mountain gold project in Guyana.

The most eye-catching change is that Stronghold doesn’t have to make anymore cash payments to fully acquire the property. The Company immediately receives a 50% stake in the property in return for the issuance of 7.5 million shares of Stronghold to Omai Gold. Moreover, Stronghold earns the right to acquire the remaining 50% interest in Eagle Mountain on or before April 30, 2013, by paying Omai Gold $1 million in cash or shares, at Stronghold’s discretion.

The parties agreed to this amendment because Stronghold accelerated it exploration program on Eagle Mountain last year and already incurred more than twice the required expenditures under the original agreement.

The Amended Agreement

Milestone Date	Exploration Expenditures	Cash Payments to Omai	Stronghold Shares to Omai	Eagle Mountain Interest for Stronghold
Completed To Date	$3,500,000	$600,000	4,000,000	0%
By February 29, 2012			7,500,000	50%
By April 30, 2013		$1,000,000 (1)		100%
Grand TOTAL	$3,500,000	$1,600,000	11,500,000	100%
On Granting of Mining Licence		$3,500,000 (1)
Within 180 Days from Commencement of Commercial Production		$5,000,000
Overview of amended agreement between Stronghold Metals and Omai Gold Mines. (1) Stronghold has the option to issue shares to Omai Gold in lieu of this cash payment provided such share issuance does not result in Omai Gold controlling more than 19.99% of Stronghold’s issued and outstanding shares.

To date, Stronghold has paid Omai Gold $600,000, issued 4 million shares and incurred approximately $ 3.5 million in exploration expenditures on the property.

By transferring an additional 7.5 million shares to Omai Gold before February 29, 2012, Stronghold will earn a 50% interest. Under the original agreement, Stronghold was obligated to pay an additional $1.9 million ($2.5 million in total) and transfer 2 million shares by October 31, 2012 to earn the 50% interest.

Basically what happened was that Stronghold, in order to acquire a 50% stake in Eagle Mountain, gave 5.5 million shares (7.5 million minus 2 million which it had to pay anyway) instead of $1.9 million cash.

What’s very interesting is that when we divide the cash due to Omai Gold by the number of shares it offered instead, we find out at what price Stronghold’s shares were valued in the agreement. So 1.9 million divided by 5.5 million equals $0.345 per share, or 44 percent above Stronghold’s current stock price!!

As a result of this agreement, IAMGOLD, through Omai Gold, becomes the largest shareholder of Stronghold, owning 15.8 percent of issued and outstanding shares.

Furthermore, the $1 million payment due by April 30, 2013 to earn a 100% interest is equal to the original agreement, except that now Stronghold has the option to pay in shares.

On granting of the mining license, Stronghold has to pay $3.5 million, instead of $7 million as agreed upon in the original deal. Also this amount can be paid in shares at Stronghold’s discretion.

And finally, Stronghold must pay an additional $5 million in cash within 180 days after the commencement of commercial production of gold from Eagle Mountain.

Moving Towards Production

Stronghold is focused on bringing Eagle Mountain into production and plans to intensify the pace of its exploration work.

In 2012, the Company aims to publish an updated NI 43-101 resource estimate, which will most likely be in excess of 1 million ounces of gold. It will commence mineralogical and metallurgical tests, an environmental base study and it also plans to deliver a Preliminary Economic Assessment on the soft rock saprolitic ore part of the property.

Conclusion

The amendment of the agreement is a very positive step for Stronghold because:

• The Company has no short term cash payments due to Omai Gold;
• IAMGOLD didn’t have to amend the agreement, but opted to do so at a 44% premium on Stronghold’s share price. This shows the strong confidence IAMGOLD has in Stronghold;
• All of Stronghold’s assets can now go to the development of Eagle Mountain, and
• It consolidated IAMGOLD as a solid long term partner in the Eagle Mountain project.

By the way, I will soon conduct an audio interview with Mr. Yannis Tsitos, the president and CEO of Stronghold Metals, in which I’ll ask him about this amendment and his plans to move Eagle Mountain into production.

If you have a question for Mr. Tsitos, drop me a mail, and I’ll try to include it.

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