TheNewswire - NOVEMBER8, 2021 - Nippon Dragon (TSXV:NIP) is pleased to announce,following overwhelming support from the Company’s disinterested shareholders at its annual and special meeting of the shareholders held on October 28, 2021, that it  has closed its transaction with Labyrinth Resources Limited (“Labyrinth”)(ASX: LRL, formerly Orminex Limited) pursuant to a project acquisition agreement (the “Agreement”) dated August 30, 2021 (the “Transaction”) for the sale of Nippon Dragon’s interest in the Rocmec 1 and Denain projects (the “Projects”).

Sale to Labyrinth

As is further disclosed in the Company’s news release of September 1, the following summarizes the material terms of the Agreement and the Transaction:

• - In consideration for the sale of the Projects, the Company shall receive total cash consideration of CAD$5,000,000 (the Purchase Price”), of which if it received the first instalment payment in an amount of CAD$2,000,0000 from Labyrinth on November 8, 2021, with the balance of the Purchase Price being payable in two equalinstallments over the course of one year. The first instalment is due on May 8, 2022, and then second and final instalment is due on November 7, 2022.

  - Nippon Dragon will retain title to the Projects until Labyrinth has completed payment of the Purchase Price in full, with transfer forms being executed and held with a third-party escrow agent until such time. In addition to the Purchase Price, Labyrinth has agreed to pay to Nippon Dragon an additional CAD$1,085,000 to fund Nippon’s ongoing exploration program on the Denain exploration project, which is scheduled to be fully completed before payment of the Purchase Price, with such funds to deployed based on the discretion of Labyrinth. A portion of the funds has already been expended, the required permits and drill campaign plans for an estimated 4000m drilling programme on the North and South veins have been obtained. The drill rig should be mobilized on the Denain site on November 10th.

  - Furthermore, Labyrinth will deliver to Nippon Dragon 4,500 ounces of physical gold within an to be delivered on an agreed upon schedule based on the production activities of Labyrinth, and in all cases no later than 48 months of the Commencement Date. This important component of the Transaction will be used by Nippon Dragon to deliver gold to its Forward Gold Purchase Agreement (FGPA) participants. Moreover, Nippon Dragon will be entitled to a 1% net smelter royalty on revenue received from certain individual veins present on the Projects, including the Boucher vein. Labyrinth shall have the ability to purchase one-half of this royalty for CAD$1,000,000.

Labyrinth is an Australian Stock Exchange listed mining and exploration company with multiple high grade gold projects in Western Australia and a team with a proven record of operating safe, high performing underground mines that deliver consistent shareholder value. Labyrinth has a strategy of acquiring and operating quality assets in Tier-1 jurisdictions with a view to unlock significant value from high-grade gold projects through demonstrated geological and mining expertise.

“Today's announcement fits into the major and necessary transformation of the company which began with my appointment as Interim President last November. This agreement with Labyrinth could not have been concluded without the cooperation of our creditors RM2C as well as Material Japan and we thank them for their support. I must also point out that this was the result of the work of Nippon’s entire team. I am also very proud of what we have accomplished together. The future of Nippon Dragon Resources has never been brighter and I look forward to very long and successful relationship with Labyrinth” stated Jean-Yves Thérien, Nippon’s Interim President and CEO.

Resumption of Trading

As the Transaction constitutes a “Reviewable Transaction” in accordance with TSX Venture Exchange (the “TSXV”) Policy 5.3 – Acquisitions and Dispositions of Non-Cash Assets, the Transaction remains subject to the receipt of final approval of the TSXV. Moreover, as the sale of the Projects constitutes a sale of substantially all of the assets of Nippon Dragon, the Company sought and obtained the approval of 66 2/3% of Nippon Dragon’s shareholders at its annual and special meeting held on October 28, 2021 (the “Meeting”), where the disinterested shareholders voted to approve of the Transaction and matters ancillary thereto. It should be noted that no finders fee was paid in connection with the Transaction.

The Company expects to receive final approval of the Transaction from the TSXV on or around November 11, 2021, following which its common shares will resume trading on the facilities of the TSXV. An updating news release to that effect will be disseminated by the Company in due course.

RM2C Transaction

On the date hereof, the Company paid to Groupe RM2C (“RM2C”) an amount of CAD$580,541.00 from the proceeds of the Transaction to repay the outstanding amount of its secured loan, and an amount of $100,000 of outstanding accrued interest into units of Nippon Dragon (the “Units”) at a price of $0.05 per Unit, with each Unit being comprised of one common share and one common share purchase warrant (each a “Warrant”) of Nippon Dragon. Each Warrant shall entitle its holder to acquire one common share of Nippon Dragon for the price of $0.075 per common share. The securities issued to RM2C are subject to a four-month hold period expiring on March 9, 2022.

In consideration for the above, RM2C has discharged its security registered against title to the Rocmec project (the “RM2C Transaction”) and has released the Company from its obligations toward RM2C.

The RM2C Transaction remains subject to the approval of the TSXV.

Material Japan Transactions

As disclosed in the Company’s news releases dated September 1, 2021, disinterested shareholders of Nippon voted at the Meeting to (i) ratify, approve and confirm the joint venture agreement entered into by the Company and Material Japan Inc. (“Material Japan”) on March 15, 2019 and its amendment on August 1, 2019 (together, the “Joint Venture”) and (ii) approve the termination of the Joint Venture and the terms of the joint venture reimbursement agreement (the “Reimbursement Agreement”). Accordingly, on the date hereof, the Company:

• - made a cash payment of CAD$25,000 to Material Japan;

  - in lieu of payment of an amount of CAD$500,000, issued 10,000,000 common shares of the Nippon Dragon to Material Japan, at a deemed price per common share of $0.05. The common shares issued to Material Japan are subject to a four-month hold period expiring on March 9, 2022.

  - as to the balance of the consideration payable under the Reimbursement Agreement in an amount of CAD$1,975,000, a three-year unsecured non-transferable convertible debenture (the Debenture”) was issued to Material Japan for the same amount bearing interest at a rate of 5% per annum, calculated and payable on a quarterly basis. The terms of the Debenture provide that, (i) during the first year, Nippon Dragon has the option to only pay the accrued interest on a quarterly basis; (ii) if the Debenture has not been repaid in full by the end of the first year, Nippon Dragon shall make a minimum quarterly payment of CAD$123,436.50 plus interest during the second year of the term of the Debenture; (iii) if the Debenture has not been repaid in full by the end of the second year, MJ shall have the right to either (a) continue to receive cash payments under the convertible debenture until the expiry of the term of the Debenture; or (b) immediately convert the balance of the amount owed into common shares of Nippon Dragon at a deemed price per share of $0.10 per share. Furthermore, for the avoidance of doubt, any payment of accrued interest in common shares of the Company shall be subject to agreement between the parties, the required corporate approvals and regulatory approvals, as may be required.

The Reimbursement Agreement and the consideration payable in accordance therewith, remains subject to the approval of the TSXV.

Following the issuance of the 10,000,000 common shares of the Company to Material Japan, it will hold 29,056,447 common shares of the Company, representing 13.57% of the issued and outstanding common shares of the Company on the date hereof. Furthermore, the issuance of the Debenture could result in the creation of a new “control person”, as such term is defined by the TSXV, which was approved by the disinterested shareholders of the Company at the Meeting. Following the issuance of the Debenture, the Debenture could entitle Material Japan to receive 19,750,000 common shares of the Company, representing 20.88% of the issued and outstanding common shares of the Company, assuming completion of the RM2C Settlement. This amount excludes and securities issuable to Material Japan in settlement of any interest owing on the principal amount of the Debenture.

Update

Until such time as the Purchase Price has been paid in full and title to the Projects have been transferred, Labyrinth will be granted operational control over the Projects.For a period of 48 months following the Commencement Date, Nippon Dragon will be granted access to certain areas of the Projectsto enable Nippon Dragon to further demonstrate its patented “thermal fragmentation” technology (“Dragon Technology”).Nippon Dragon may extract product from the existing stockpile (estimated at approximately 3,000 tonnes) on the Rocmec project (with no maximum on the amount which may be extracted) and to retain 100% of any revenue received on the sale product so extracted (less any costs incurred by Labyrinth in relation to such extraction, if any), in return for granting Labyrinth a net smelter royalty of 10% on any gold extracted from the projects after the first 900 ounces.

Following the Transaction, Nippon Dragon intends to focus on its Courville/Maruskagold exploration project (the “Courville Project”), which is located in the Courville township, 32 kilometres northeast of Val d’Or, where itintends to focus on the application of its Dragon Technology.

 

About Nippon

Nippon is active in the exploration and the development of gold resources in Quebec. [●]Nippon also has an exclusive license for the Thermal Fragmentation mining process.

 

The company’s growth strategy is based on:

- The development of its gold deposits with the objective of producing revenue from its operations;

- Increasing the value of its mining assets by prioritizing its exploration targets; and

- The commercialization and employment of its thermal fragmentation technology.

On behalf of the Board,

 

Fabien Miller, Eng., M.Sc.

Director

514-892-1935

Neither TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSV) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Information

This news release contains "forward-looking information" within the meaning of the applicable Canadian securities legislation that is based on expectations, estimates, projections and interpretations as at the date of this news release.  The information in this news release about the closing of the Transaction; the approval of the TSXV relating to the Transaction; and any other information herein that is not a historical fact may be "forward-looking information".

Any statement that involves discussions with respect to predictions, expectations, interpretations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "interpreted", "management's view", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information. This forward-looking information is based on reasonable assumptions and estimates of management of Nippon Dragon at the time such assumptions and estimates were made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Nippon Dragon to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Such factors include, but are not limited to, Nippon Dragon’s ability to complete the Transaction; delays in obtaining or failures to obtain required governmentalor other project approvals; uncertainties relating to the availability and costs of financing needed in the future; changes in equity markets; inflation; fluctuations in commodity prices; delays in the development of projects; other risks involved in the mineral exploration and development industry; and those risks set out in Nippon Dragon’s public documents filed on SEDAR (www.sedar.com) under Nippon Dragon's issuer profile.

Although Nippon Dragon believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information, which only applies as of the date of this news release, and no assurance can be given that such events will occur in the disclosed timeframes or at all. Nippon Dragon disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

______________________________________________________________________________Ressources Nippon Dragon Resources Inc. 7055 Taschereau Blvd., suite 500, Brossard (Québec) J4Z 1A7 Tel: (450) 510-4442    www.nippondragon.com