Vancouver, December 18, 2017Wolf Wiese, CEO of Golden Dawn Minerals Inc. (TSX-V: GOM; FRANKFURT: 3G8A; OTC: GDMRF) (the “Company” or “Golden Dawn”), announces that, subject to regulatory approval, the Company has signed an option agreement with Huakan International Mining Inc. (“Huakan”) to acquire the mineral properties and assets generally known as the J&L Property, located in the Revelstoke Mining Division, Southeastern British Columbia, 600 km east of Vancouver, Canada. Golden Dawn considers the J&L Project as a stand-alone project, fully independent from and not interfering with its Greenwood Precious Metals Project. It represents a further implementation of Golden Dawn’s strategy of acquiring significant advanced-stage to near-production mineral properties with its ancillary assets.

Historic Mineral Resource Estimate for the J&L Property (as reported by Huakan Int’l Mining Inc. on September 18, 2012)

 

It should be noted that a qualified person has not done sufficient work to verify the historical estimate of mineral resources. Golden Dawn is not treating this historical estimate as current mineral resources or mineral reserves. Significant work needs to be done to upgrade or verify the historical estimate as current mineral resources or mineral reserves. Despite this, Golden Dawn considers these historical resources to be relevant and reliable, as they have been reported by Huakan in 2012 in a NI 43-101 technical report. To the best of the knowledge, information, and belief of Golden Dawn, there is no new material scientific or technical information that would make the disclosure of the mineral resources inaccurate or misleading.

While preparing/publishing these resource estimates, Huakan has made the cautionary statements as follows:

The J&L Property Location, History and Infrastructure

The J&L Property is located 35 km north of Revelstoke in British Columbia, Canada. The property consists of 20 mineral tenure claims and 10 crown granted claims for a total of 3,051.73 ha. It has been explored intermittently during the 20th century by a number of operators. In total, 311 drill holes (40,886 m) have been completed, together with about 3 km of underground development. In 2010, a 100% unencumbered interest in the property was acquired by Huakan (formerly, Merit Mining Corp.) after making payments totaling $10.79 million. Huakan completed extensive drilling and drifting on the property, advancing it to the point of a Preliminary Economic Assessment (“PEA”) in 2012; however, in 2014 further work ceased due to deteriorating market conditions in the metal sector.

The J&L Property has well-established road access via paved highways and forestry roads; it has an easy access to railroad, with a 100%-owned rail siding and load-out facility in Revelstoke. The power source could be provided by transmission from Revelstoke and Mica Major hydro-generation facilities. The Property infrastructure includes mine buildings (40-person camp, maintenance buildings and workshops) and an underground mining equipment fleet.

The J&L Property Geology and Mineralization

The J&L Property incorporates several paralleling to en-echelon, shear-hosted, replacement-style, 2-3 m to 15 m wide, moderately-dipping (55o), gold-silver-lead-zinc-bearing sulfide-rich mineralized zones, which are considered to possibly be of the distal intrusion-related style. Main sulfide minerals include pyrite, arsenopyrite, galena, bournonite, freibergite, sphalerite, and chalcopyrite. Both sulfide-related (refractory) and native (free) gold are present. The drilled extent of the mineralized zones is up to 1.5 km along strike and up to 0.85 km downdip; they remain open for further expansion. The largest known mineralized zones include the Main, Footwall and Yellowjacket Zones; the Main Zone was traced up to 3 km along strike on surface.

Historic Mineral Resource Estimate for the J&L Property.

In 2010, Merit/Huakan commenced a 2,000 m underground drill program with the objectives of verifying historic drilling and broadening the Main Zone resource. The program was expanded to 7,897 m with the completion of 60 cored holes by February, 2011. In 2012, Merit drilled an additional 45 underground holes, and then further expanded the program by completing the Phase 2 exploration, with an additional 6,700 m of drilling from underground. Huakan also initiated metallurgical testing on drill core samples, including heavy media separation, grinding, several stages of flotation and pressure oxidation, and bioleaching on a portion of the flotation products prior to cyanidation. Subsequently, as a result of its Phase 2 exploration, a mineral resource estimate was announced in a news release by Huakan dated September 18, 2012, which included the Main, Footwall and Yellowjacket Zones. This estimate was restated by Huakan in a later news release dated January 21, 2014.

The historic mineral resource estimate presented above is taken from a Huakan news release dated January 21, 2014. The estimate is reported herein as historical resources in accordance with the requirements of NI 43-101, as these resources were prepared before Golden Dawn entered into this agreement to acquire an interest in the property that contains the deposit.

 

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Golden Dawn Option Agreement

Pursuant to the terms of the option agreement (the “Option Agreement”), Huakan granted Golden Dawn options to acquire 100% ownership in the J&L Project and to acquire 100% ownership of Huakan, subject to the terms and conditions outlined below:

FIRST OPTION

At the time (the “Effective Date”) of the execution of this Option Agreement, Wolf Wiese, on behalf of Golden Dawn, shall transfer to Huakan one (1) million common shares (“Common Shares”) in the capital of the Company. Golden Dawn Minerals Inc. will be the operator of the project.

In order to exercise the First Option, Golden Dawn shall pay Huakan $8 million in cash, issue Huakan fifteen (15) million Common Shares (the “First Option Shares”) and undertake the exploration activities and prepare the reports as set out in the Sections below within the times stipulated:

1 Golden Dawn shall prepare an updated preliminary economic assessment (the “UPEA”) on the Property in accordance with National Instrument 43-101 (“NI 43-101”). As anticipated by Golden Dawn, in conjunction with or as a result of preparation of the UPEA, the UPEA shall:

(i) develop a base case mining and processing scenario on the Property.

(ii) have preliminary feasibility study (PFS) level metallurgical test work carried out (approximately four months to receive results).

(iii) identify alternative processes, the facilities required, and their locations.

(iv) include the Yellowjacket Zone resources.

Golden Dawn has six months from the Effective Date to complete the UPEA and must incur a minimum of $250,000 in exploration expenses. Golden Dawn shall pay all of the costs incurred in preparation of the UPEA.

2 No later than six months after the Effective Date of the Option Agreement, Golden Dawn shall

(i) pay Huakan a further $1,000,000 in cash; and

(ii) issue Huakan three (3) million Common Shares as fully paid and non-assessable securities of the Company.

3. Provided that Golden Dawn has satisfied the prior obligations, Golden Dawn shall then incur no less than a further $6,000,000 in exploration expenditures within twenty-four (24) months of the completion of the UPEA or thirty (30) months of the Effective Date towards, among other things, preparation and completion of the Preliminary Feasibility Study (the “PFS”). Golden Dawn shall pay all of the costs incurred in the preparation of the PFS. As part of the PFS process, Golden Dawn shall carry out the following work on the Property:

  1. access the Yellowjacket Zone via cross-cut from the Main zone will be established.
  2. the cross-cut into the hanging wall of the Yellowjacket Zone will be driven as well as a hanging wall exploration drift.
  3. drill the Yellowjacket Zone to a minimum of indicated classification.
  4. extract a 1,000 – 10,000 tonne bulk sample from the Yellowjacket Zone for metallurgical testing and various ore sorting techniques.
  5. if economically feasible to start mining, whilst continuing with the PFS, operating costs and profits shall be split 40% to Huakan and 60% to Golden Dawn.
  6. additional diamond drilling in the Property to increase confidence and possibly expand the resource.
  7. take a bulk sample from the J&L Property large enough to test various ore sorting techniques including DMS (dense media separation).
  8. trade-off studies of the alternative processes routes identified in the UPEA including ore sorting techniques such as DMS.
  9. the PFS will investigate initial mining and economics of Yellowjacket Zone, then determine if toll processing or DSO (direct shipping of ore) is economical.

4 No later than the first day of the nineteenth (19th) month following the Effective Date, Golden Dawn shall pay Huakan a further $2,000,000 in cash and issue Huakan an additional four (4) million Common Shares, as fully paid and non-assessable securities.

5 On or prior to the 900th day from the Effective Date, Golden Dawn shall pay Huakan a further $5,000,000 in cash and issue Huakan an additional seven (7) million Common Shares, as fully paid and non-assessable securities.

6 Upon receipt of the cash payments and the issuance of the First Option Shares set out above, and completion of not less than $6,250,000 in exploration expenditures as set out above, the First Option shall have been deemed to have exercised in full and Golden Dawn shall have earned an undivided 51% interest in and to the J&L Project.

If Golden Dawn exercises the First Option, then Huakan shall have the right to nominate one person to be appointed to Golden Dawn’s board of directors. Golden Dawn provided Huakan a guarantee (the “Guarantee”) that the 15 million Common Shares issued to Huakan on exercise of the First Option shall have a minimum value of $10 million dollars. The Guarantee only applies to those First Option Shares that Huakan holds at the time (“Commencement”) of exercise of the First Option and the Guarantee continues for a period of twelve months (the “Guarantee Period”) and ceases at 11:59 p.m. (Vancouver time) on the first anniversary of Commencement. If, during the Guarantee Period, Huakan sells First Option Shares and the aggregate gross revenue received from such sales is less than an average price of $0.67 per First Option Share sold, then Golden Dawn shall pay (the “Additional Payment”) Huakan, at the time of exercise of the Second Option, an amount equal to the shortfall.

SECOND OPTION

Provided that Golden Dawn has exercised the First Option and earned a 51% undivided interest in and to the J&L Project, Golden Dawn shall be granted an option (the “Second Option”) pursuant to which Golden Dawn may earn a 100% interest in the J&L Project. In order to exercise the Second Option, Golden Dawn shall pay Huakan:

(i) $30 million (the “Second Option Payment”) in cash no later than the earlier of the first day of the forty-third (43rd) month following the Effective Date and the first day of the twelfth (12th) month following the exercise of the First Option (the “Second Option Expiry Date”). Huakan has the option to require Golden Dawn to pay the Second Option Payment one-half in cash ($15,000,000) and one-half through the issuance of $15 million dollars’ worth of Common Shares; and

(ii) any Additional Payment required pursuant to the Guarantee.

If Golden Dawn does not exercise the Second Option for any reason whatsoever, Golden Dawn’s interest in the J&L Project shall be automatically reduced from a 51% undivided interest to a 40% undivided interest and Huakan’s interest in the J&L Project shall be automatically increased from a 49% undivided interest to a 60% undivided interest, and Golden Dawn shall cease to be the operator of the property. If Golden Dawn does not exercise the Second Option, then Golden Dawn is not obligated to pay Huakan the Additional Payment.

ROYALTY

If Golden Dawn exercises the Second Option prior to the Second Option Expiry Date, Huakan shall be granted a 1.5% net smelter returns royalty (the “NSR”) payable on all proceeds from ore mined at the J&L Project. Golden Dawn shall prepare, on a semi-annual basis, a report showing the calculation of the NSR from the J&L Project and the basis of calculation and will deliver same to Huakan. Huakan shall have the right to review all books and records related to the calculation of the NSR and any payments due to Huakan thereunder.

THIRD OPTION

Provided that Golden Dawn has exercised the Second Option, Golden Dawn shall then be granted an option (the “Third Option”) to acquire 100% of the issued and outstanding common shares (the “Huakan Shares”) in the capital of Huakan for no additional consideration from the shareholders of Huakan.

Golden Dawn must provide written notice to Huakan within 30 days after its fully exercising the Second Option of its intention to exercise the Third Option. Huakan shall have four months (the “Re-organization Period”), at its sole right and discretion, to carry out a re-organization (the “Re-organization”) for the purpose of spinning off and transferring out or otherwise disposing of all of its assets, property or projects, whether tangible and intangible or personal and real, including but not limited to, the cash, securities, investment instruments, royalty interest (including the NSR) and all of other assets except for the J&L Project and the applicable tax loss carry forwards, tax pools and tax credits. At the conclusion of the Re-organization Period, Golden Dawn shall become the legal and beneficial owner of 100% of the Huakan Shares.

Golden Dawn’s Plans

Following the Option Agreement, as outlined above, Golden Dawn plans to initiate and complete an updated Preliminary Economic Assessment (the “UPEA”), which will be based on a verified and an updated resource estimate and current economic parameters. Subject to a positive UPEA and after permitting, further exploration of the J&L Property will be undertaken. This will include underground drilling aimed at upgrading inferred mineral resources to the indicated category after establishing an access decline and a drift at a deeper level. Large volume metallurgical testing will also be conducted. All this will constitute a base for a Pre-Feasibility Study. Additional exploration drilling aimed at resource expansion will be done along strike and downdip of the known mineralized zones, as well as in areas of potential parallel and blind zones.

Technical disclosure in this news release has been approved by Dr. Serguei Soloviev, P.Geo., a Qualified Person as defined by NI 43-101, and Chief Geologist for the J&L Project of Golden Dawn Minerals Inc.

On behalf of the Board of Directors,

GOLDEN DAWN MINERALS INC.

Wolf Wiese, President & CEO

For further information, please contact:

Corporate Communications

604-221-8936

allinfo@goldendawnminerals.com

This press release was prepared by management, who take full responsibility for its contents. Neither the TSX Venture Exchange nor its regulation services provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release. This document contains certain forward looking statements which involve known and unknown risks, delays, and uncertainties not under the Company’s control which may cause actual results, performance or achievements of the Company to be materially different from the results, performance, or achievements implied by these forward looking statements. We seek safe harbor.