Operations - Serbia
Last Updated: August 2010
SERBIAN ASSETS
Serbia
Background
The Republic of Serbia borders Bulgaria and Romania to the east, Macedonia and Albania to the south, Boznia-Herzegovina and Croatia to the west and Hungary to the north.
DPM has been exploring in Serbia since 2004 and is the largest holder of mineral exploration licenses in the country. Exploration targets within the licenses include porphyry copper-gold and molybdenum deposits, skarn-hosted base metal and gold, sediment-hosted epithermal gold, low sulphidation epithermal gold-silver and high sulphidation epithermal gold-silver-copper mineralization. The DPM exploration tenements are located within several significant mining districts in Serbia including the Timok Magmatic Complex (hosting the Bor and Majdanpek deposits), the Lece Magmatic Complex (hosting the Lece mine) and the Besna Kobila-Osgovo Metallogenic Belt (hosting the historic Mackatica molybdenum mine).
Taking the Serbian Assets Public
In response to the economic slowdown and the significant decrease in metal prices in the second half of 2008, DPM ceased all exploration and drilling activities on its Serbian properties in October 2008. The Company then undertook a very limited exploration and drilling program on its Serbian properties in 2009 and on September 10, 2009, announced that exploration within the Coka Kuruga Concession, in the Bor District of eastern Serbia, had confirmed two new gold discoveries in the Timok Magmatic Complex and along its western margin. Initial diamond drilling confirmed wide mineralized intercepts at the Coka Rakita porphyry gold target and on the Kraku Pestar hosted gold target area.
In early 2010, in order to realize the value of the Serbian properties for its shareholders, DPM made the decision to take the Serbian assets public through two transactions with TSXV listed entities.
On July 30, 2010, DPM completed the sale of its Timok and Potoj Cuka gold projects located in Serbia (the “Projects”). Pursuant to a business combination agreement dated April 28, 2010 among DPM, PJV Resources Inc. (“PJV”) and Rodeo Capital Corp. (now Avala Resources Ltd. ("Avala")), PJV has acquired DPM’s interest in the Projects through the acquisition of DPM’s Serbian subsidiary, Dundee Plemeniti Metali d.o.o., in exchange for consideration consisting of PJV units and US$1.6 million in cash, and a business combination has been effected by way of a three-cornered amalgamation, whereby PJV has amalgamated with a wholly-owned subsidiary of Avala. Upon the completion of the amalgamation, all of the securities of PJV (including the securities issued to DPM as part of the sale of its Projects, and the common shares and warrants of PJV issuable upon the exchange of the subscription receipts issued in the PJV financing transaction that closed on April 28, 2010), were exchanged for (or became exercisable for) securities of Avala on a one-for-one basis.
As a result of the business combination and exchange of the PJV subscription receipts, DPM holds 73,437,357 common shares and 36,718,679 warrants of Avala, a company listed on the TSX Venture Exchange. DPM was also issued special rights (the "Special Rights") to acquire up to an aggregate of 50,000,000 additional Avala common shares for no additional consideration, of which 25,000,000 are issuable upon a positive decision to proceed to a feasibility study on the Projects and an additional 25,000,000 are issuable upon a positive decision to bring all or part of the Projects into production. Upon completion of the business combination (and assuming no exercise of convertible securities) DPM holds approximately 50.3% of the outstanding Avala common shares or approximately 60.3% assuming the exercise of DPM's warrants (but assuming that no other convertible securities have been exercised and without factoring in the 50,000,000 Special Rights issued to DPM).
On February 23, 2010, DPM entered in to a non-binding letter of intent with Queensland Minerals Ltd. (“QML”), an exploration company listed on the TSXV, for the sale of its Surdulica molybdenum, Tulare copper/gold and Karmanica gold projects, and all other associated assets and liabilities, all located in Serbia. The letter of intent with QML has expired, however, DPM is continuing its discussions with QML with respect to a proposed sale.