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PIONEER METALS CORPORATION
Box 12151 Nelson Square, Suite 1007 – 808 Nelson Street
Vancouver, B.C., Canada V6Z 2H2
NEWS RELEASE
October 24, 2001
Trading Symbol: PSM-T
Pioneer Metals Corporation (“Pioneer”) is pleased to announce that Pioneer and Cameco Corporation (“Cameco”) have entered into an agreement to form a new public company, UEX Corporation (“UEX”). UEX will focus on uranium exploration in the Athabasca Basin area of Saskatchewan, which hosts the world's largest, high-grade uranium deposits. The formation of UEX is considered timely as both Pioneer and Cameco expect uranium markets will continue to strengthen.
The Board of Directors of Pioneer has approved a proposed plan of arrangement (“the Plan”) under which Pioneer's interests in all of its uranium exploration properties, including the Riou Lake Uranium Project, will be transferred to UEX. Cameco will transfer to UEX its Hidden Bay advanced exploration properties for a 40% interest in the new company while Pioneer shareholders will collectively hold a 60% interest.
UEX intends to raise funds for exploration activities and operating costs through a private placement offering of its securities to institutional and other investors. Pioneer and Cameco will commit to a $500,000 lead order to purchase shares of UEX under the private placement.
“This new company will be the pre-eminent pure uranium exploration investment,” said Stephen Sorensen, Pioneer's president and C.E.O. “What makes UEX unique is starting off with a balanced property portfolio that includes both the potential for world class unconformity-style uranium deposits as well as prospects for smaller uranium deposits closer to production.”
UEX has agreed to enter into a Service Agreement with Cameco under which Cameco will provide geological services to UEX with respect to the Hidden Bay claims through employees of Cameco that are familiar with the property. The Service Agreement will be in effect until December 31, 2003. Cameco has retained a first right of refusal to provide financing required by UEX for development of a mine and the first right to mill ore from the Hidden Bay assets at their nearby Rabbit Lake operation. Cameco will have the right on behalf of UEX to market UEX's share of any uranium production. Cameco, of Saskatoon, Saskatchewan, the world's largest supplier of uranium, is a public company whose shares trade on the New York and Toronto Stock Exchanges.
Under the Plan, shares in UEX will be distributed to Pioneer shareholders as of a record date to be determined after the special meeting of shareholders on the basis of one common share of UEX for each common share of Pioneer. UEX will become a reporting issuer under applicable Canadian securities laws. Implementation of the Plan is subject to approval by Pioneer's shareholders by special resolution at the shareholders meeting, the date of which will be announced shortly. The Plan is also subject to receipt of all required exemptive relief and regulatory approvals including the approval of the Toronto Stock Exchange (“TSE”) and the British Columbia Supreme Court and the common shares of UEX being listed on the TSE or the Canadian Venture Exchange.
Pioneer will retain the balance of its assets including its 100% owned Puffy Lake Gold Mine in Manitoba, the Nokomis Lake Gold Project in Manitoba, the Bonito Gold/Silver Project in New Mexico, two copper-gold exploration properties in British Columbia and approximately $1.67 million in working capital (as of June 30, 2001). Pioneer also has available approximately $20 million of unrestricted tax pools. After the completion of the Plan, Pioneer will continue its efforts to exploit these gold and base metals assets.
Pioneer believes that its share price does not fully reflect the value of its uranium assets and that the implementation of the Plan and the creation of a dedicated uranium exploration company should enhance shareholder value. The Plan will also provide Pioneer shareholders with additional investment choices and flexibility.
The board of directors of UEX will initially consist of four directors - Stephen Sorensen, Graham Thody and Peter Kalbfleisch, the present directors of Pioneer, and Colin Macdonald, Cameco's Vice-President of Exploration. Stephen Sorensen will be the president and Chief Executive Officer of UEX and after implementation of the Plan will beneficially own 12.96% of the shares of UEX. Mr. Sorensen is the single largest shareholder of Pioneer and owns 21.6% of its shares. He will retain his current positions with Pioneer.
Hidden Bay Project
The Hidden Bay Project consists of 44,000 hectares and represents about 80% of the original Rabbit Lake project, located immediately west of Wollaston Lake. This area was the site of some of the first major uranium discoveries in the Athabasca Basin, and since 1975 has produced 140 million lbs. U3O8 from seven deposits on Cameco's Rabbit Lake project. Hidden Bay project lands have significant discovery potential for at least three types of economically significant uranium deposits. Since the Athabasca sandstone cover is either absent or very thin (less than 150m) over the entire project, smaller and lower grade uranium targets have the potential to be economically developed. Up to date geological knowledge of the neighboring Rabbit Lake and Eagle Point styles of economic uranium deposit will be integrated into effective exploration programs on the Hidden Bay project.
Pioneer Uranium Assets
The Riou Lake, Black Lake and Serendipity Lakes Uranium Projects are located on the northern rim of the Athabasca Basin near Stony Rapids, Saskatchewan. The projects have common boundaries and form a land package totalling 65,612 hectares. Pioneer began exploration on its claims in 1997 and soon realized the area held potential for hosting a large unconformity-style uranium deposit, similar to Cigar Lake or McArthur River. In 1999, Cameco entered into an option agreement with Pioneer on the Riou Lake Project on a six-claim block known as the PM Claims. In 2000, Pioneer entered into an option agreement on the Black Lake Project with UEM Inc., a company owned equally by Cameco and Cogema Resources Ltd. In 2001, Pioneer signed an option agreement with D.F. Exploration Uranium Ltd. on the Serendipity Lakes Project. Total expenditures on all three projects by all operators since 1997 exceed $5.8 million. The results of Pioneer's exploration to date are encouraging and support the hypothesis that an unconformity-style uranium deposit could be present on any one of the three project lands.
An annual exploration budget of $2 million should meet initial exploration objectives at the Riou Lake and Hidden Bay projects. UEX management expects exploration budgets to increase in the future as new exploration properties are acquired.
ON BEHALF OF THE BOARD OF DIRECTORS OF PIONEER METALS CORPORATION
“signed”
Stephen H. Sorensen
President and Chief Executive Officer