American Resource Corp. and Rea Gold Corp. propose merger

Business Wire, Jan 10, 1996

GREENBRAE, Calif.--(BUSINESS WIRE)--Jan. 10, 1996--American Resource Corp. (ARC) (NASDAQ:AREE) and Rea Gold Corp. (Rea) (NASDAQ:REOGF; TSE:REO) are pleased to announce an agreement-in-principle to merge the two companies.

The combined companies have working capital, including investments in equity securities at fair market value, of approximately US $40 million, a market capitalization of approximately US $160 million based upon current share prices, and mineable gold reserves of approximately 1.7 million ounces (55 tonnes).

Under the terms of the proposed merger, ARC will merge with Rea Mining Corp., Rea's wholly owned United States subsidiary. ARC shareholders will receive 2.24 shares of Rea for each ARC share held. W. James Hogan, currently president and chief executive officer of Rea, will become chairman of Rea.

Ian Smith, currently chairman, president and chief executive officer of ARC, will become president and chief executive officer of Rea. The proposed merger is subject to completion of due diligence investigations by the two companies, documentation, and shareholder and regulatory approvals.

The board of Rea will be restructured with equal representation from Rea and ARC with independent directors to be announced at a later date.

The transaction is expected to close on or before May 15. Completion of the proposed transaction will result in the former ARC shareholders holding approximately 40 percent of the Reashares then outstanding.

Rea operates the Mt. Hamilton open pit heap leach gold mine near Ely, Nev. Rea reports mineable reserves of 8.4 million tons (7.63 million tonnes) grading 0.047 ozs/ton (1.61 g/t) containing 395,000 ounces (12,285 kg). Rea recently announced a production decision on the Bissett Gold Project in Manitoba.

Rea reports mineable reserves at 3.1 million tons (2.82 million tonnes) grading 0.258 ozs/ton (8.84 g/t) containing 812,000 million ounces (25,253 kg). Detailed discussions with potential lenders regarding the debt portion of project financing for Bissett are progressing. Bissett is currently in the 5th month of an 18-month development program.

ARC, which is based in Greenbrae, controls gold exploration concessions over some 1,200 square miles (3,000 square kilometers) in Uruguay, covering the major prospective Greenstone belts in that country. In northern Uruguay, ARC is developing the San Gregorio gold deposit.

A detailed Feasibility Study completed by Mineral Resources Development Inc. in 1994 estimated in-situ mineable reserves (proven and probable) of 5.57 million short tons (5.057 million tonnes) grading 0.0755 ozs/ton (2.588 g/t) containing 420,933 ounces (13,091 kg).

Discussions with potential lenders regarding the debt portion of San Gregorio project financing are at an advanced stage. Construction is expected to start in February.

Rea Gold Corp. is a Canadian mining company engaged in the acquisition, development and operation of precious metal properties in Canada and the United States. The common shares of Rea are traded on the Toronto Stock Exchange and trade under the symbol REO and are listed on the NASDAQ under the symbol REOGF.

American Resource Corp. is a California-based gold exploration and development company with large exploration concessions and operations in Uruguay. ARC shares trade on NASDAQ under the symbol AREE. The merged company will maintain its listings on the TSE and NASDAQ.

CONTACT: American Resource Corp., Greenbrae

Ian B. Smith, 415/461-6868

or

Rea Gold Corp., Vancouver

W. James Hogan, 604/684-7527