Northern Empire Stornoway set merger

Vancouver – Earlier this month, BHP Billiton (BHP-N) picked up a 20% stake in the Aviat diamond project in Nunavut by agreeing to pay the Hunter Exploration Group, a private exploration and prospecting firm, a tidy sum of $7.1 million. The move not only brought financial clout to the promising project but also set the stage for majority holders, Northern Empire Minerals (NEM-V) and Stornoway Ventures (SWV-V) to streamline assets through a merger.

Under the proposal, each Stornoway share will fetch 0.8734 of a Northern Empire share. At the end of the day, Stornoway shareholders will hold approximately 48.6% of the combined company’s 40.8 million issued and outstanding shares.

The merger will consolidate Northern Empire’s and Stornoway’s respective 35% interests in the Aviat Project, located on the Melville Peninsula in Nunavut. The combined company, with a 70% interest in Aviat, will have greater control over the exploration and development of the 7 million acre Aviat Property where compelling evidence points to the existence of a new kimberlite province. The combined company also holds ground in the Churchill and Coronation areas of Nunavut, as well as the Otish Mountain area of Quebec.

The CEO of Stornoway, Eira Thomas will head the new company, while John Robins, president of Northern Empire and Catherine McLeod-Seltzer, president of Stornoway assume the roles of Co-Chairmen of the combined company.

“This transaction represents a key step in the creation of a premiere, world class diamond exploration company and we are confident that the combined company will attract interest from a broader group in the investment community and make ongoing exploration easier to finance,” says Catherine McLeod-Seltzer.

Both Stornoway and Northern Empire expect to hold shareholders’ meetings in mid July to consider the transaction.

Aviat was established in 2002 as a joint venture consisting of Stornoway, Northern Empire and Hunter Exploration, and its mandate is to explore the Melville Peninsula region for diamonds. Each of Stornoway and Northern Empire is earning a 35% interest in the Aviat properties by spending a total of $2 million on exploration before Oct. 1, 2005. Both Stornoway and Northern Empire hold a 30-day right of first refusal on the sale of Hunter’s interest. At last report, the two Northair Group companies said they are considering their options.

Earlier this year, the joint venture unveiled strong microdiamond counts from a new kimberlite discovery, dubbed AV-1, that was found virtually on the last day of the 2002 summer field program. The discovery occurred during regional follow-up work on anomalous G10 kimberlite indicator mineral till samples. A 186-kg composite surface sample of AV-1 returned 228 microdiamonds. The Aviat joint venture recovered several stones larger than a 1-mm square mesh screen size and two stones exceeding 2 mm.