Guatemala

[Tackler]

ICN Icon to acquire Corponiquel and its Rio Negro property

2004-10-05 15:02 ET - News Release

Icon Industries Ltd. has entered into a binding letter of intent to acquire, subject to certain conditions precedent, all of the common shares of Corponiquel Sociedad Anonima, a private company incorporated in Guatemala. Corponiquel's sole asset is 100-per-cent interest in the Rio Negro mineral property located in Guatemala. To acquire the shares of Corponiquel, Icon will: i) issue six million common shares to the vendors; ii) reimburse the vendors for the out-of-pocket expenses advanced by them in connection with the property, in an amount not to exceed $100,000 (U.S.); and iii) raise at least $3-million by way of an equity financing. The property is subject to a 2-1/2-per-cent net smelter return payable to the vendors. Icon has the right to buy down the net smelter return to 1 per cent for a payment of $1.5-million (U.S.).

The escrow shares will be subject to a Tier 2 surplus escrow agreement in accordance with TSX Venture Exchange policy and will be non-voting until after they are released from escrow. Under this policy, the escrow shares will be released from escrow, subject to certain conditions being met, over a six-year period, based on the passage of time. During the first 24-month period, releases will be made at the rate of 5 per cent at the end of each six-month period. Thereafter, releases will be made at the rate of 10 per cent at the end of each six-month period.

However, under a Tier 2 escrow agreement, if the property is considered lost or abandoned, or the operations or development on the property are discontinued at any time during the escrow period, then any shares remaining in the escrow will be cancelled in accordance with TSX Venture Exchange Policy. The letter of intent provides that Icon will retain a portion of its interest in the property based on the ratio of the number of escrow shares released to the vendors, divided by six million. The remaining portion of the property will be returned to the vendors at no cost to the vendors. Corponiquel is owned by two insiders of Icon and therefore this transaction will be a related party transaction. The entering into of this letter of intent has been approved by the non-interested directors of the company, with the directors who are related parties abstaining. Among other things, completion of the proposed transaction is subject to the following:

-completion of an equity financing of at least $3-million;

-filing of a 43-101 report on the property;

-filing of a title opinion on the property;

-filing of a disclosure document;

-inclusion in the disclosure document of a valuation certificate signed by two independent directors of the company;

-approval of the transaction by a majority of the non-interested shareholders of Icon; and

-regulatory approval.

Under the terms of the letter of intent, Icon has a one-year period to complete the acquisition. If the acquisition is not completed within this one-year period: i) the rights granted to Icon pursuant to the letter of intent will lapse; ii) the vendors will retain the ownership of all of the Corponiquel common shares; and iii) Icon, the vendors and Corponiquel will not have any right to claim any compensation from each other in connection with the transaction not closing. During the effect period of the letter of intent, Icon must keep the property in good standing. Because there are a number of conditions that have to be fulfilled, the closing of this transaction cannot be assured.

The Rio Negro property is a nickel laterite project located approximately 80 kilometres north of Guatemala City, the capital of Guatemala. The property consists of one exploration licence, covering approximately 54 square kilometres. Regionally, the project lies within a mineral belt that stretches from the Dominican Republic, through Cuba and into Guatemala. This belt includes: i) the producing nickel laterite mines of Falcondo in the Dominican Republic and Moa Bay, Punta Gorda, and others in Cuba; and ii) the past-producing Exmibal mine in Guatemala.

Mineralization on the property consists of limonitic and saprolitic nickel-bearing material within the weathered profile, which ranges from 10 to 100 metres in thickness, with an average of approximately 20 to 30 metres. Nickel values within the mineralized area range from 0.5 to 3 per cent, with an average of around 1.5 per cent nickel. Exploration completed on the property principally in the 1970s consisted of approximately 235 pits, which tested the weathered material down to bedrock. Several resource calculations have been performed on the property, the most recent of which was reported by Tombstone Explorations in 1997 as ranging from 40.2 million tonnes grading 1.24 per cent Nickel, using a cut-off grade of 1 per cent nickel, to 14.8 million tonnes grading 1.62 per cent nickel, using a cut-off grade of 1.5 per cent nickel. With regard to this historical estimate: i) the company has not done the work necessary to verify the classification of the historical estimate; ii) the company is not treating these historical numbers as a resource amount defined by National Instrument 43-101, verified by a qualified person; and iii) these historical estimates should not be relied upon, since they will require verification through more detailed sampling and modern analysis. The contents of this paragraph have been reviewed by David Rhys, PGeo, a professional geoscientist and qualified person as defined by NI 43-101.