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FIRESTEEL CLOSES FORMAL OPTION AGREEMENT ON ROK COYOTE PROPERTY

^{Published on 2011-01-12 06:36:30 - Market Wire}
 

Trading Symbol: FTR- TSX: V

VANCOUVER, Jan. 12 /CNW/ - Firesteel Resources Inc. (TSXV:FTR) ("Firesteel" or the "Company") is pleased to announce that it has concluded a formal option agreement ("Agreement") with Lions Gate Metals Inc. ("Lions Gate") with respect to Firesteel's 6,891 hectare ROK-Coyote copper-gold mineral property (the "Property") following up on a letter of intent announced by the Company in its news release dated November 2, 2010. Under this Agreement Firesteel has granted Lions Gate a four year option (the "Option") to acquire a seventy-five percent (75%) interest in the Property in exchange for aggregate consideration and exploration work commitments of $3,358,000 subject to Firesteel's right to back in for a five percent (5%) interest after three years for $200,000. The Agreement has an effective date of January 5, 2011. The Property is adjacent to and immediately northwest of Imperial Metals Corporation's ("Imperial Metals") Red Chris copper-gold property which has identified mineral resources and reserves and has disclosed significant grades of copper and gold mineralization in recent drilling results.

Terms of the Option Agreement

Under the terms of the Agreement, Lions Gate has been granted a four year Option to acquire a seventy-five percent (75%) interest in the Property for an aggregate consideration of $3,358,000 consisting of an aggregate of 650,000 Shares (valued at $533,000 at the $0.82 closing price of the Shares on January 7, 2011), an aggregate of $496,000 in cash payments and an aggregate exploration work commitment of $2,329,000, all over a period of four years (the "Option Period"). During the Option Period, Lions Gate will be the operator of the Property.

The sum of $50,000 was paid in cash by Lions Gate in January 2010 and a further $121,000 was paid in cash on closing of the transaction. The required TSX Venture Exchange ("TSX-V") approval has been obtained by Lions Gate. Any Shares issued by Lions Gate pursuant to the Agreement are subject to a pooling arrangement under escrow provisions providing for the release of twenty-five percent (25%) of such Shares on issuance and twenty-five percent (25%) every three months thereafter. Lions Gate has a first right to repurchase or arrange for the purchase of any Shares to be issued to Firesteel based on average market trading prices at the time of disposal of the Shares. Lions Gate has issued 50,000 Shares at Closing, released 12,500 of these Shares to Firesteel and 37,500 Shares have placed in escrow.

The details of payments to Firesteel and work commitments on the Property are shown in the following table for the four year term of the Option:

(1)     This is reduced by the initial $171,000 in cash payments to Firesteel such that the required expenditures to be completed by the First Anniversary Date are $179,000.

Firesteel retains the right to back in to a five percent (5%) interest in the Property by paying $200,000 at any time following the date which is three years after the effective date of the Agreement and until a production decision is made. If Firesteel exercises this right, the resulting interests in the Property would be seventy percent (70%) Lions Gate and thirty percent (30%) Firesteel. 

The Property consists of 19 contiguous mineral claims aggregating 6891 hectares in total area. Firesteel acquired its interest in the Property either directly or by exercising its options under two agreements with four individuals who are underlying royalty holders on a portion of the Property (the "Underlying Royalty Holders"). Pursuant to these agreements the Underlying Royalty Holders are entitled to either a 2% net smelter returns ("NSR") royalty or a 0.5% NSR royalty from sales of production on their portion of three blocks of mineral claims on the Property. Firesteel has the right to purchase the 2% royalty entitlements on two of these blocks for $2,000,000. There is a further block of mineral claims which Firesteel had staked and for which there is no royalty obligation to third parties.

Formation of Joint Venture

If Lions Gate makes the cash payments, issues the Shares and incurs all of the work commitment expenditures (or pays cash in lieu thereof), Lions Gate will, upon exercise of the Option, have earned an undivided 75% interest in the Property, subject to Firesteel's 5% back in right. Upon the exercise of the Option, Firesteel and Lions Gate shall form a joint venture on the Property ("Joint Venture"). Lions Gate will be the initial operator of the Joint Venture. At that time Firesteel and Lions Gate will enter into a Joint Venture Agreement for the further joint exploration and development of the Property. The Joint Venture Agreement shall include the material joint venture terms which form part of the Agreement. The Joint Venture shall pay royalties to the Underlying Royalty Holders.

Failure of either party to meet their share of Property expenditures following formation of the Joint Venture will result in dilution of that party's interest in the Property. Should Firesteel's interest be reduced to less than 10%, its interest in the Property shall be forfeited to Lions Gate and such interest will be converted to a 2% NSR royalty. Lions Gate shall have the right to purchase ½ (1%) of this Firesteel royalty for $1,000,000.

About Lions Gate

Lions Gate is a Canadian based, junior resource company focused on the exploration, development, and acquisition of both advanced and early stage mineral projects.  Lions Gate owns 100% of four substantial copper and molybdenum projects located in British Columbia.  Lions Gate's flagship project is the Poplar porphyry copper molybdenum deposit near Houston, BC. The Huckleberry Mine, located approximately 35 kilometres southwest of the Poplar Deposit, produces copper and molybdenum from a deposit of similar age and setting. 

About Firesteel

Firesteel is a junior minerals exploration company which explores for and develops quality precious and base metal prospects in the resource rich Stikine Arch area of British Columbia, and in the NWT and Mexico.  The Company has been exploring its Copper Creek and ROK - Coyote discovery properties in northern British Columbia with strong showings of copper and gold mineralization. Firesteel maintains its interests in the oil and gas business through its 15 percent shareholding in Blacksteel Energy Inc. (TSXV:BEY).

ON BEHALF OF THE BOARD OF DIRECTORS OF
FIRESTEEL RESOURCES INC.

"Walter Wakula"

_________________________
Walter Wakula,
Chairman of the Board

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.

Advisory Regarding Forward Looking Statements

This news release contains forward-looking statements which include, but are not limited to: statements regarding the Company's expectation that Lions Gate will complete the terms of and exercise the Option, form a joint venture and maintain the Company's interest in the Property, receive future cash and Shares from Lions Gate, realize the expected exploration work obligations committed on the Property including future drilling, expectations for exploration prospects, as well as operations plans, outlook, expectations, opinions, forecasts, projections, guidance or other statements that are not statements of fact.  Although Firesteel believes that the expectations reflected in such forward-looking statements are reasonable, it cannot give any assurance that such expectations will prove to be correct.  Results of the Company may be affected by a variety of variables which could differ materially from those anticipated or implied in the forward-looking statements.

The Company's forward-looking statements are expressly qualified in their entirety by this cautionary statement and are made as of the date of this news release.  Unless otherwise required by applicable securities laws, the Company does not intend nor does it undertake any obligation to update or review any forward-looking statements to reflect subsequent information, event, results or circumstances or otherwise.