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Stans Energy Corp (2)
Symbol HRE
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Close 2016-08-25 C$ 0.03
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Stans Energy signs MOU to acquire Li stockpile, mill

2016-08-25 13:16 ET - News Release

Mr. Rodney Irwin reports

STANS ANNOUNCES MOU FOR LITHIUM STOCKPILE AND MILL

Stans Energy Corp. has entered into a memorandum of understanding for an option to acquire 100 per cent of Pervomayskiy GOK LLC (PGOK), a Russian limited liability corporation, the owner of a lithium mineralization stockpile, the Zabaikalsky mill and supporting infrastructure.

Under the terms of the memorandum of understanding, Stans and PGOK have agreed on consideration for the possible development of the stockpile, recommissioning of the mill and the addition of a lithium carbonate production facility. After preliminary evaluation of the in-house technical economic assessment prepared by PGOK according to Russian standards in 2015, Stans confirms its intention of conducting due diligence on the stockpile of lithium-bearing mineralization, the renovation of the mill and the development of a process circuit for producing lithium carbonate, all according to National Instrument 43-101 standards.

Stockpile and mill

The stockpile and mill are associated with the historic mining operations from the Zavitinsky lithium and beryllium mine, which is about 250 kilometres from Chita City, located in the Trans-Baikal region of Russia. A full array of infrastructure is available near the stockpile and mill, including: an electricity-generating power station and substation, heat and water supply, tailings storage and railway terminals. The mill is directly connected with the Trans-Siberian Railway.

The mine was in production from 1942 through the mid-1990s and was the Soviet Union's only active lithium mine. The mine and mill produced over 100,000 tonnes of lithium in concentrate form over its lifespan. A cut-off grade of 0.3 per cent lithium oxide was set by the state for mining operations as the primary use of lithium at that time in the Soviet Union was for military purposes and market economics were not a consideration. The mill produced concentrates of both beryllium and lithium while the mine was in production, and, after the mine was closed, the mill continued to process fluorite, gold and antimony ore through to 2010, when it was put under care and maintenance due to a lack of feed material. The stockpile contains approximately 19 million tonnes of mineralized material grading at or below 0.3 per cent lithium oxide, which Stans will be confirming both the volume and grade as part of its due diligence process. Upon completion of legal and technical due diligence, Stans will carry out a definitive feasibility study to evaluate the new lithium carbonate production technology developed by VNIIHT (the Russian leading institute of chemical technology), as well as to determine the recommissioning and upgrading costs and timelines of the mill.

Memorandum of understanding

The memorandum of understanding establishes the parties' decision on phased implementation of this project under the following conditions.

Phase 1 -- resource estimation and technical economic assessment confirmation

  1. PGOK shall provide Stans with all legal and technical documentation on the stockpile, the mill and the overall project, including new lithium carbonate production technology and PGOK corporate structure, on a timely basis.
  2. Stans shall then conduct a full geological audit of the stockpile to estimate the lithium mineral resources by the Canadian standards specified in NI 43-101, Standards of Disclosure for Mineral Projects.
  3. Stans will earn the right to acquire a 5-per-cent participatory interest of PGOK in exchange for the satisfactory completion of due diligence at Stans's expense (up to $1-million (U.S.)).

Phase 2 -- definitive feasibility study design

  • Provided that the legal and geological due diligence is acceptable to Stans, Stans shall then be responsible to produce a definitive feasibility study of the overall project and shall have an option to acquire an additional 25 per cent of participatory interest in PGOK based on Stans completing the definitive feasibility study at its expense (budget to be determined).

Phase 3 -- construction and the start-up of the mine

  • Stans shall arrange for financing and construction of the stockpile processing operations and shall have an option to acquire up to 100 per cent of PGOK ownership. The final decision of the structure of the participants' interests in PGOK and the number of Stans shares to be owned by PGOK shall be determined in good faith by the parties.

"This memorandum of understanding represents an exciting new opportunity for Stans and our stakeholders as we embark down a path of due diligence for the potential of developing a near-term production lithium prospect. The intensive use of lithium and its downstream products represent a fundamental pivot in global energy consumption and storage. We are proud to be part of this change and look forward to the challenges ahead. Stans's experience in the redevelopment of the Kutessay-II mine and Kashka rare earth processing plant will be utilized in this challenging project, and we are confident that our technical team and Stans's management are up to the task," stated Rodney Irwin, interim president and chief executive officer of Stans.

Notes

With regard to reported mineral resources in the stockpile, this press release contains historical information only. No NI 43-101-compliant reports on this property or stockpile have been prepared or are available. The property description is translated from Russian and taken from historical information.

The estimates disclosed are conceptual in nature, and there has been insufficient sampling conducted to NI 43-101 standards to define a mineral resource that may be categorized as an indicated, measured or inferred resource.

The source and data of these historical estimates are from a technical economic assessment of the stockpile and mill completed by PGOK in 2015.

A qualified person has not done sufficient work to classify the historical estimate as current mineral resources; Stans is not treating the historical estimate as current mineral resources; and the historical estimate should not be relied upon.

We seek Safe Harbor.

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