Lion One Metals (LIO-TSXV)

The following is extracted from the January 2013-1 Issue


Lion One plans to merge with Australian-listed Avocet Resources Ltd (AYE:ASX), an exploration company based in Perth. Shareholders of Avocet will receive one share of Lion One for every 9.5 shares of Avocet. The acquisition of Avocet adds cash and several explora- tion projects, but most importantly, rounds out the managementteam,addinganexperiencedminebuilder to the Lion One team.

Avocet has A$4.3 million of cash, representing about 60% of the effective purchase price to be paid by Lion One. The company also has several exploration pro- jects in Australia and Argentina, which are prospective for gold, iron, uranium and other metals.

The Olary iron ore project in Australia is being funded by a Chinese steel company, with Avocet retaining a 25% interest, carried through a bankable feasibility study. At that time, the company can convert to a 2% royalty. The partner has carried out considerable drill- ing, but has not yet published a resource estimate. That is not surprising, as the Chinese steel company has no interest in completing an outside study, instead relying on its internal calculations.

The deposit appears to be big, it is not far from an ex- isting rail line, and the Chinese company seems intent on moving it quickly to production. In short, the roy- alty on this project could quickly become a valuable asset. They also hold a royalty on a uranium deposit that was sold in 2010. Uranium industry leader Cameco is a joint venture partner on one of the ura- nium projects.

One of the Australian projects has a historic resource of 269,000 ounces of gold in a deposit that grades 6.6 g/t. That deposit has scope to be a great deal larger. Another gold project, the Monster project in the Ashburton district of Western Australia, features a 13 kilometer mineralized trend with high grade gold and silverencounteredonsurface.

The most important aspect of the proposed merger is that Stephen Mann, the managing director of Avocet, will be joining the Lion One team with the objective of bringing the Tuvatu gold deposit in Fiji to production. Mr. Mann is a geologist with considerable experience with both major and junior companies. He was in- volved in 2 gold discoveries that were successfully ad- vanced into production. Mr. Mann is presently a direc- tor of Lion One and worked closely with the com- pany’s chairman in a previous company, which became a substantial gold producer before being taken over by a larger company.

Lion One’s Fiji gold project continues to advance to- ward production. Drilling is again underway at Tuvatu, with the objective of further expanding and upgrading the 650,000 ounce high-grade deposit.

They plan to file the environmental impact report next month, with approvals expected later this year. With underground development already in place, Tuvatu is set to move quickly into production. The combined company, with $18 million of cash and an experienced management team, is in a strong position to build that mine and then continue to build a multi-mine gold producer.