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 November 12, 2015 - 7:45 AM EST
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Goldstrike and Petro One Agree to Business Combination

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Nov. 12, 2015) - Goldstrike Resources Ltd. (TSX VENTURE:GSR) and Petro One Energy Corp. (TSX VENTURE:POP) are pleased to announce that they have entered into an agreement (the "Agreement") dated November 11, 2015 which provides for the acquisition by Goldstrike of all issued and outstanding shares of Petro One, to be carried out by way of a statutory arrangement involving Goldstrike, Petro One and the shareholders of Petro One (the "Arrangement"). 

The result of the Arrangement will be to create a combined entity with a solid financial base from which to advance Goldstrike's flagship mineral projects in Yukon, Canada. Shareholders of Goldstrike will benefit from Goldstrike's access to approximately $1,250,000 to advance those mineral exploration projects, significantly reducing its financial risk. Shareholders of Petro One will benefit from exposure to the tremendous upside potential for those projects at a time when it is not economically viable to allocate additional funds to the operation or further exploration and development of Petro One's oil and gas assets. It is anticipated, in addition, that shareholders of Petro One will have increased trading liquidity that has not been available to them of late.

Shareholders of both companies will benefit from access to additional, non-dilutive operating capital which may be derived from the sale of marketable securities currently owned by Petro One. Shareholders of both companies will also potentially benefit from additional financing which may be derived from the exercise of warrants and options proposed to be issued and re-priced as part of the Arrangement. Finally, all shareholders will benefit from economies realized though a reduction of overhead costs. The Arrangement will result in significant leverage for the combined entity.

Both companies have reserved the right to carry out financings and to entertain alternative transactions, subject to certain restrictions noted below.

Highlights of the Arrangement

The Arrangement is proposed to be carried out under the Business Corporations Act (British Columbia). Subject to acceptance by the TSX Venture Exchange (the "TSXV") and approval by the Supreme Court of British Columbia (the "Court"), on the effective date of the Arrangement the following transactions will be completed (collectively the "Transactions"):

  • Petro One shareholders will receive one Goldstrike share for each four shares of Petro One beneficially owned by them.
  • Holders of Petro One warrants exercisable to purchase an aggregate of 18,213,734 Petro One shares at prices of $0.375 and $0.80 will receive one Goldstrike warrant (each a "New GSR Warrant") exercisable to purchase one Goldstrike share for $0.15 until Oct. 7, 2016 for each of such Petro One warrants.
  • The exercise price of an aggregate of 10,684,279 Goldstrike warrants currently exercisable to purchase Goldstrike shares at prices between $0.25 and $0.80 until various dates up to June 15, 2016 will be reduced to $0.15.
  • The exercise term of outstanding Goldstrike warrants exercisable to purchase an aggregate of 4,000,000 Goldstrike shares for $0.10 until July 10, 2014 will be extended to Oct. 7, 2016.
  • All outstanding Petro One incentive stock options will be cancelled and Goldstrike will issue one stock option exercisable to purchase one Goldstrike share for $0.10 in respect of each four Petro One stock options which are cancelled, in each case exercisable until the original expiry date of the cancelled Petro One option.
  • The exercise price of all outstanding Goldstrike incentive stock options will be reduced to $0.10, without any change to their original expiry dates.
  • Goldstrike will acquire Petro One's 30% interest in the Lucky Strike property, giving it a 100% ownership interest, and issue warrants exercisable for two years to purchase 9,055,742 Goldstrike shares at the price of $0.10 each as consideration therefor.

The Agreement contemplates preparation of a definitive agreement for the Arrangement, but constitutes a binding agreement until such a definitive agreement is prepared. The Agreement does not provide for rights of dissent. 

Background

Discussions for the Transactions were initiated due to continuing poor market conditions for junior resource companies, particularly in the oil and gas sector, business synergies between the two companies (including joint ownership of the Lucky Strike property) and the potential to realize significant economies through the reduction of overhead costs. 

Goldstrike has elevated the 100% owned, district scale Plateau project to a new level with the discoveries resulting from its 2015 drill program, including drill hole PSGS1501 at the Goldstack Zone, which intersected 13.25 grams per tonne gold over 17.5 meters true width including 5.7 meters grading 35.88 grams (1.03 ounces) per tonne gold, and which remains (News Release September 9, 2015). Its tremendous success in the field has resulted in Goldstrike receiving several expressions of interest in the Plateau project, but Goldstrike thus far has not received an acceptable offer for financing or involvement in the project. The Transaction will provide it with access to the required capital to continue to move forward strategically and optimize the value of this unique gold discovery.

For its part, Petro One has approximately $1,210,000 in cash plus marketable securities with a current market value estimated to be in the range of $300,000. It was assigned NI 51-101 oil reserves in the proved and probable categories as of April 30, 2015, but none of its oil wells are economic at current world prices for oil and management is of the view that is not likely to change for some time and certainly not within a time frame that will work for Petro One. In addition, Petro One has accrued reclamation and abandonment obligations estimated to cost between $300,000 and $500,000. Accordingly, management of Petro One determined that Petro One should allocate its liquid assets away from oil and gas at this time. The Transaction accomplishes that objective, and Petro One will be able to either market its oil and gas assets or inventory them for future reconsideration following completion of the Transaction.

Terms of the Agreement

In addition to providing for the Transactions described above, the Agreement provides that:

1. The Transaction will be subject to: 
     
  (a) approval of the Arrangement by special resolution of the Petro One shareholders at a meeting to be held for that purpose;
  (b) approval of the Arrangement by the Court; and
  (c) acceptance by the TSXV of a filing to be made by Goldstrike.
     
2. Petro One's obligation to proceed with the Arrangement will, in addition to the conditions set forth above, be subject to: 
     
  (a) if required by the Petro One Board, receipt of an opinion to the effect that the Transaction is fair from a financial point of view to the Petro One shareholders in their capacities as Petro One shareholders;
  (b) the Goldstrike shares to be issued to Petro One shareholders in exchange for Petro One shares will not be subject to any hold period in Canada.
     
3. Goldstrike's obligation to proceed with the Arrangement will, in addition to the conditions set forth above, be subject to: 
     
  (a) if required by the Goldstrike Board, approval by special resolution of its shareholders at a meeting to be held for that purpose;
  (b) Goldstrike being satisfied with the results of a due diligence review of Petro One to be carried out within 30 days after the date of execution and delivery of the Agreement;
  (c) if required by the Goldstrike Board, receipt of an opinion to the effect that the Transaction is fair from a financial point of view to the Goldstrike shareholders in their capacities as Goldstrike shareholders.
     
4. Prior to completion of the Transaction ("Closing"), Petro One may not solicit offers for an alternative transaction involving its securities, but may raise additional funds by way of private placement at prices not less than $0.05, may dispose of any or all of its assets (except cash) and may accept any "superior proposal" subject to payment of a $50,000 break fee to Goldstrike. 
     
5. Prior to Closing, Goldstrike shall be entitled to: 
     
  (a) solicit and enter into any form of agreement with any person with respect to an alternative transaction (an "Alternative Transaction") involving the direct or indirect acquisition or disposition of all or any of Goldstrike's securities or any option, joint venture or other transaction involving, or any sale or other disposition of, all or any of Goldstrike's assets (in which event the parties will proceed with the Arrangement);
     
  (b) terminate the Agreement to complete an Alternative Transaction subject to payment of that amount which is equal to Petro One's actual out of pocket expenses incurred in connection with the Agreement, all advances made to or for the benefit of Goldstrike and a $50,000 break fee (in which event the parties will not proceed with the Arrangement);
     
  (c) raise additional funds by way of private placement at prices not less than $0.10, or such lower price(s) which may be acceptable to Petro One.
     
6. The Goldstrike shares and warrants held by Petro One on Closing will be transferred to a trust to be established for the purpose of holding and selling Goldstrike shares and exercising Goldstrike warrants (and selling the resulting Goldstrike shares), and then distributing the resulting funds to Goldstrike or its shareholders as beneficiaries of the trust, at the discretion of a trustee selected by Goldstrike. 
     
7. Each of Goldstrike and Petro One will bear its own costs in connection with this Agreement, but Petro One will advance to or for the benefit of Goldstrike (as a loan) such amounts as may reasonably by requested by Goldstrike to pay its costs incurred in those regards and, in addition, upon Goldstrike receiving written notice from the TSXV that the Transaction is conditionally acceptable to the TSXV, Petro One will loan and advance $100,000 to Goldstrike for its general working capital purposes. 

Goldstrike and Petro One have one common director and three officers in common, but the Agreement was negotiated at arm's length and does not constitute a "Related Party Transaction" under MI 61-101 or the Policies of the TSXV. Each of Goldstrike and Petro One has struck a special committee of directors to review the Agreement. The Arrangement has been approved by the "disinterested" directors of both companies and the directors of Petro One have agreed to waive the provisions of the company's shareholder protection rights plan and enter into a lock-up arrangement pursuant to which they will be committed to vote in favour of the Arrangement. No changes are proposed to be made to the Goldstrike Board on Closing.

About Goldstrike

Commencing in 2011 Goldstrike systematically explored thirty-three prospects in Yukon, ultimately leading to the discovery of its flagship "Plateau" property where numerous high grade grab samples, up to 18.66 ounces per ton, were taken from bedrock and subcrop along a newly discovered district scale gold mineralized trend (News Release October 30, 2012). Goldstrike has invested a total in excess of $18,500,000 on its Yukon projects to date, including over $5,700,000 on the Plateau project and an additional $2,500,000 on the Lucky Strike project.

Plateau South

Goldstrike's flagship Plateau South property in Yukon is an original discovery, and is 100% owned. It covers a district scale gold-mineralized system (the Yellow Giant Trend). Multiple high grade gold showings (rock grab samples up to 18.66 ounces per ton) are exposed along the Hess River valley over a strike length of more than 25 kilometres and a vertical extent of more than 1,000 metres, and significant drill results have been obtained in multiple holes (best intersection to date 13.25 grams per tonne gold over 17.5 metres in the Goldstack Zone, including 35.88 grams per tonne gold over 5.7 metres). Fifty per cent of the holes drilled in 2015 intersected grains of native gold in the core. The gold is coarse, and appears to be free milling.

There is no evidence of previous work on the property, and the company has advanced the project from a conceptual target to mineable widths in under 15 weeks of cumulative exploration on the ground. Numerous geological and geophysical targets along the Yellow Giant Trend have been identified for drilling, and planning is underway for the next phase of exploration.

The Plateau property is 100% controlled and consists of 1,597 quartz mining claims covering approximately 352.5 square kilometres in the Mayo Mining District. The property has excellent access, with four float-accessible lakes on or adjacent to the property, and an airstrip 12 kilometres to the south. The property is located within the traditional Territory of the Na Cho Nyak Dun First Nation, which has a settled land claim. The property remains largely unexplored, and has tremendous potential for additional high grade gold discoveries.

In recognition of the significance of this discovery, Goldstrike has been invited to give a technical presentation at the Yukon Geoscience Forum (November 14-19, 2015), and to display its Plateau drill core at the Cordilleran Roundup (January 26-28, 2016), as well as the Prospectors and Developers Association (PDAC) conference (March 6-9, 2016).

Further information and maps can be found at www.goldstrikeresources.com.

Lucky Strike

Goldstrike has invested over $2,500,000 to date and has significantly advanced the Lucky Strike property, located in the White Gold District of Yukon. During 2015, a series of limited hand pits in a new area located 7 kilometres northwest of the previously explored Lucky Shot zone was successful in outlining a 50 by 40 metre gold anomaly on a northwest trending structure that remains open. The rock samples contain dark blue - grey quartz veining in schist and orthogneiss that assayed up to 4.26 grams per tonne gold, and the zone remains open in all directions. Samples were consistently anomalous across the zone over a width of 40 metres, with numerous samples returning over 0.5 grams per tonne. Five kilometres to the northwest, soil sampling outlined a new 1,200 by 250 metre zone of strongly gold in soil anomaly, which returned values up to 1,989 parts per billion (1.99 grams per tonne) gold. The newly discovered 1200 by 250 meter gold in soil anomaly is coincident with a buried geophysical anomaly previously identified by airborne geophysical survey and remains open in all directions. Both new zones are considered to be strong gold targets with results similar to those seen with the initial discovery at Kaminak's Coffee Creek. Follow-up trenching in preparation for drilling is recommended (News Release September 28, 2015).

Goldstrike was also pleased to learn that Kaminak Gold Corp.'s proposed access road to Coffee Creek is planned to pass within six kilometres of the Lucky Strike property, which is anticipated to greatly enhance the prospects for further exploration and development of Lucky Strike. The Lucky Strike property is owned as to 70% by Goldstrike and as to the remaining 30% by Petro One. If the Arrangement is completed, Goldstrike will acquire Petro One's 30% interest and hold a 100% interest.

Further information and maps can be found at www.goldstrikeresources.com.

About Petro One

Petro One is in the business of acquiring, exploring and developing petroleum and natural gas resources as well as other mineral resource properties in western Canada. During its financial year ended April 30, 2015, it produced a total of 953.39 cubic metres (5,996 bbl) of light oil from three vertical wells and one horizontal well in its 100% owned Viking field at Milton, Saskatchewan, returning gross revenues of $452,257. As of April 30, 2015, McDaniel and Associates Consultants Ltd. assigned Petro One property gross proved and probable reserves of 113,900 barrels of light /medium oil, including 17,000 barrels of proved developed producing reserves, 9,500 barrels of probable developed producing reserves, and 87,500 barrels of probable undeveloped reserves.

However, Petro One has not been able to sustain profitable operations. All of the wells in Petro One's Milton field have produced oil, but operating economics vary greatly between wells and only 10A-15-30 -27W3 remained viable as world prices for oil declined. The Viking is known to be under pressured, with perched water that is not connected to an underlying aquifer, and weather, access and mechanical problems increase the water cuts and operating costs of the wells. More recently, Well 10A-15 has experienced issues with sand and water, and has been suspended until oil prices warrant reworking and testing the well. A water disposal well at Milton has been proposed to make more of these wells viable when oil prices improve, but in the meantime the company has no oil production.

Trevor J. Bremner, P. Geo., Chief Consulting Geologist and Goldstrike Board Member, is a qualified person, as defined by National Instrument 43-101, for Goldstrike's Yukon exploration projects and has supervised the preparation of, and reviewed and approved, the technical information in this release.

ON BEHALF OF THE BOARD, PETRO ONE ENERGY CORP.

Peter Bryant, President & Director

ON BEHALF OF THE BOARD, GOLDSTRIKE RESOURCES LTD.

Terrence E. King, President & Director

For further information, please visit the companies' websites or follow the companies' tweets.

Neither 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.

Forward-Looking Statements

Certain statements contained herein constitute forward-looking statements or information (collectively "forward-looking statements") within the meaning of applicable securities legislation, including, but not limited to management's assessment of future plans and operations, including: drilling plans and potential locations; expected production levels; development plans; reserves growth; production and operating sales and expenses; reservoir characteristics; the results of applying certain operational development techniques; certain economic factors; and capital expenditures.

Forward-looking statements are typically identified by words such as "anticipate", "estimate", "expect", "forecast", "may", "will", "project" and similar words suggesting future events or performance or may be identified by reference to a future date. In addition, statements relating to oil and gas reserves and resources are deemed to be forward-looking statements as they involve the implied assessment, based on certain estimates and assumptions, that the reserves or resources described, as the case may be, exist in the quantities predicted or estimated and can be profitably produced in the future. With respect to forward looking statements herein, the Company has made assumptions regarding, among other things; future capital expenditure levels; future oil and natural gas prices; ability to obtain equipment and services in a timely manner to carry out development activities; ability to market oil and natural gas successfully to current and new customers; the ability to obtain financing on acceptable terms; and the ability to add production and reserves through development and exploitation activities. Although the Company believes that the expectations reflected in the forward-looking statements contained herein, and the assumptions on which such forward-looking statements are made, are reasonable, there can be no assurance that such expectations will prove to be correct. Readers are cautioned not to place undue reliance on forward-looking statements included herein, as there can be no assurance that the plans, intentions or expectations upon which the forward-looking statements are based will occur. By their nature, forward-looking statements involve numerous risks and uncertainties that contribute to the possibility that the forward-looking statements will not occur, which may cause the Company's actual performance and financial results in future periods to differ materially from any estimates or projections. The forward-looking statements contained herein are made as of the date hereof. The Company does not undertake any obligation to, nor does it intend to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained herein are expressly qualified by this cautionary statement. In addition, readers are cautioned that historical results are not necessarily indicative of future performance.

King James Capital Corporation
Jeff Stuart
Investor Relations
(604) 805 0375
jstuart@kingjamescapital.com

Petro One Energy Corp.
604 566 9089
IR: 604 805 0375
604 564 8003
www.PetroOneEnergy.com
Twitter: www.twitter.com/PetroOneEnergy

Goldstrike Resources Ltd.
604 681 1820
IR: 604 805 0375
604 681 1864
www.GoldStrikeResources.com
Twitter: www.twitter.com/GoldstrikeRes


Source: Marketwired (November 12, 2015 - 7:45 AM EST)

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