September 24, 2010 / 2:47 PM / in 7 years

New Island to sell Newfoundland property

BANGALORE (Reuters) - New Island Resources agreed to sell its gold exploration property to Mountain Lake Resources Inc for C$579,000 in a cash-and-stock deal, marking its second asset sale in a month.

Mountain Lake will pay New Island C$500,000, and issue 1 million shares for the Glover Island property. It will also issue warrants worth 500,000 shares for the next two years at an exercise price of C$1.20 per share.

The diversified junior explorer will pay a net smelter returns royalty of 1 percent of commercial production, which comes down to 0.5 percent after it has paid the first C$1 million.

The Glover Island Property, located in Western Newfoundland, consists of two mineral licenses and one mining lease, covering a total of 5,100 hectares.

Last month, New Island sold its Pine Cove gold mine, also in Newfoundland, to Anaconda Mining.

In June, Mountain Lake had signed a letter of intent to buy New Island, which was terminated in early September, after New Island accepted Anaconda Mining’s offer for Pine Cove.

Mountain Lake agreed to waive payment of any break fee from New Island related to the termination of the deal and forfeit repayment of a loan to New Island of C$160,000 plus the accrued interest.

New Island shares, which have gained about 11 percent in value in the last three months, closed at 10.5 Canadian cents Wednesday on the Toronto Venture Exchange, while those of Mountain Lake were trading up 3 Canadian cents at 82 Canadian cents Friday morning.

Reporting by Arnika Thakur in Bangalore; Editing by Don Sebastian

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