WPC Resources has signed a non-binding letter of intent (LoI) with Mandalay Resources to acquire its 100%-owned subsidiary, Lupin Mines.

Lupin Mines was in production from 1982 to December 2004, and was put under care and maintenance in February 2005. Lupin owns the Lupin Gold mine and the Ulu Gold property.

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WPC Resources president Stephen Wilkinson said: "The acquisition of the Lupin gold mine and its attendant mill and processing plant, together with the Ulu gold property as a potential satellite source of mill feed, will be a major advancement for the WPC business plan.

"Our strategy is to build a significant gold producer, taking advantage of the ongoing market malaise to minimise purchase and capital costs while building on these high-grade and development stage projects."

"Our strategy is to build a significant gold producer, taking advantage of the ongoing market malaise to minimise purchase and capital costs."

Representing an arm’s-length transaction between the parties, the LoI supersedes the previous Ulu option agreement and includes various terms that are subject to any necessary regulatory, territorial government and shareholder approvals.

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Mandalay will ensure that the required permits are in place to maintain the properties in their present good-standing, prior to transaction closure.

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WPC will pay C$3m ($2.48m) in cash to Mandalay, issue 18 million common shares arranged as six million upon deal closure and six million on the LoI anniversary for the next two years. In addition, Mandalay will be offered financing opportunities to ensure that the company retains at least a 10% equity interest in WPC.

The transaction is expected to close on or before 15 May.

Situated about 400km north of Yellowknife on the western side of Contwoyto Lake, Lupin Gold mine consists of five contiguous mining leases covering 6,758ha.

By 2011, there had been about 1.7km of underground development at the Ulu gold property and about 136km of diamond drilling.