Paragon Minerals announces merger and private placement with Canadian Zinc Corporation

    




 TSX Venture Exchange Symbol: PGR Shares Issued: 53,649,254 

 VANCOUVER, July 31, 2012 /CNW/ - Paragon Minerals Corporation  ("Paragon") is pleased to announce that it has entered into a definitive agreement  (the "Arrangement Agreement") with Canadian Zinc Corporation  ("Canadian Zinc") whereby Canadian Zinc will acquire all of the outstanding common shares of  Paragon in exchange for common shares of Canadian Zinc by way of a  statutory plan of arrangement (the "Arrangement").  The Arrangement is  subject to approval by the Paragon shareholders, regulatory and court  approvals, and other customary closing conditions. 

 Pursuant to the Arrangement Agreement: 




        --  Paragon shareholders will receive, in exchange for each Paragon
            share held, 0.136 shares of Canadian Zinc (the "Exchange
            Ratio"). The consideration represents a total of CDN$0.061 per
            Paragon share, based on the volume weighted average price of
            Canadian Zinc shares on the TSX for the 30 trading days ended
            July 20, 2012 and a  premium of 52% to the volume weighted
            average price of Paragon shares on the TSX-Venture for the same
            period.

        --  In addition, all outstanding options and warrants to purchase
            Paragon common shares will be exchanged for replacement options
            and warrants to purchase Canadian Zinc common shares and will
            be exercisable to purchase that number of Canadian Zinc common
            shares at an exercise price each determined by reference to the
            Exchange Ratio.





 On signing of the Arrangement Agreement, Canadian Zinc has also agreed  to immediately purchase, in a non-brokered private placement financing,  7,000,000 Paragon common shares at a price of $0.07 per share for a  total consideration of $490,000 (the "Private Placement"). The closing  of the Private Placement will be as soon as practicable after  acceptance by the TSX Venture Exchange and receipt of other required  regulatory approvals for the Private Placement. 

 John Kearney, Canadian Zinc's Chairman and CEO commented, "The merger is  consistent with Canadian Zinc's strategy of building a growth focused  base metal producer in North America and represents an excellent value  opportunity for shareholders of both companies.  We believe that the  addition of Paragon's advanced exploration assets like the South Tally  Pond VMS project in central Newfoundland is a major step towards  achieving our strategy of creating a strong intermediate base metal  company with an attractive growth profile focused on enhancing  shareholder value". 

 Michael Vande Guchte, President and CEO of Paragon, commented, "Canadian  Zinc is a well-funded Canadian exploration and development company that  is in the process of putting its high grade Prairie Creek  silver-lead-zinc deposit into production. Given the prevailing market  conditions, it is the Board and management's view that Paragon  shareholders will benefit from Canadian Zinc's financial strength and  development expertise in unlocking shareholder value in Paragon's base  metal assets. The transaction provides Paragon shareholders with the  opportunity to participate in the future potential of a near-term  producer with a portfolio of production, development and exploration  assets". 

 Canadian Zinc's 100%-owned Prairie Creek Mine is a silver-lead-zinc  development project located in the Northwest Territories, 500 km west  of Yellowknife.  The Prairie Creek deposit has the potential to be a  significant zinc-lead-silver producer, based on NI 43-101Mineral  Resource estimates which include: 




        --  Measured & Indicated Resource:5.43 million tonnes grading 10.8%
            zinc, 10.2% lead, 160 g/t silver, and 0.31% copper.
        --  Inferred Resource: 6.24 million tonnes grading 14.5% zinc,
            11.5% lead, 229 g/t silver and 0.57% copper using a 8% zinc
            equivalent cut-off.  





 A portion of the Mineral Resources was converted to a Mineral Reserve Estimate of 5.2 million tonnes grading 9.4% zinc, 9.5%  lead and 151 g/t silver.  A prefeasibility study completed by SNC Lavalin for Canadian Zinc in  June, 2012 indicates a pre-tax net present value ("NPV") of $253  million using an 8% discount, with an internal rate of return ("IRR")  of 40.4% and payback period of 3 years based on long-term metal price  projections of $1.00/lb zinc, $1.00/lb lead, $26.00/oz silver (see  Canadian Zinc press release dated June 27, 2012). The Prairie Creek  deposit remains open for expansion.  Please note that mineral resources  that are not mineral reserves do not have demonstrated economic  viability. 

 Paragon's key asset, the 100%-owned South Tally Pond VMS project is  located in a proven mining district in central Newfoundland,  immediately southwest of Teck Resources Limited's Duck Pond Cu-Zn mine  and mill complex.  In January 2012, Paragon announced an initial  NI43-101 Mineral Resource Estimate on the South Tally Pond Lemarchant  VMS deposit (see Paragon press release dated January  23, 2012 and  related technical report entitled "NI 43-101 Technical Report and  Mineral Resource Estimate on the Lemarchant Deposit, South Tally Pond  VMS Project, Central Newfoundland, Canada" and dated effective March 2,  2012). The resource estimate includes: 




        --  Indicated Resource: 1.24 million tonnes grading 5.38% zinc,
            1.19% lead, 0.58% copper, 1.01 g/t gold and 59.17 g/t
            silverusing a 7.5% zinc equivalent grade cut-off
        --  Inferred Resource: 1.34 million tonnes at 3.70% zinc, 0.86%
            lead, 0.41% copper, 1.00 g/t gold and 50.41 g/t silverusing a
            7.5% zinc equivalent grade cut-off





 The Lemarchant Deposit remains open along strike and to depth, and there  are numerous, other untested priority VMS targets on the property. 

 Transaction Benefits 




        --  Implements Canadian Zinc's strategy of building a base metal
            producer with a combined portfolio of operating mines and
            pipeline of high-potential growth projects in mining friendly
            jurisdictions.
        --  Further asset diversification in a proven mining area.
        --  Financial strength to review potential for consolidating
            resources in central Newfoundland.
        --  Establish a pipeline of zinc deposits for the time when it is
            believed the zinc price will see significant upside
            improvement.




 Highlights for Paragon Shareholders 




        --  Opportunity to participate in the future potential of a
            growth-oriented base metal company.
        --  Exposure to an exceptional portfolio of near producing,
            development, and exploration base metal assets.
        --  A platform through which to participate in future sector
            consolidation.
        --  Increased trading liquidity through ownership of Canadian Zinc
            shares.





 Transaction Overview 

 The proposed transaction will be carried out by way of a court-approved  plan of arrangement whereby Canadian Zinc will acquire all of the  issued and outstanding common shares of Paragon.  Paragon will become a  wholly owned subsidiary of Canadian Zinc. 

 Paragon shareholders will be entitled to receive, in exchange for each  Paragon share held, 0.136 shares of Canadian Zinc. The proposed  transaction is subject to certain customary conditions including the  approval of not less than 66-2/3% of the votes cast at a special  meeting of Paragon security holders that is expected to be held in  September 2012.  Approval will also be required from the majority of  votes cast by "disinterested" shareholders pursuant to Multilateral  Instrument 61-101 Protection of Minority Security Holders in Special Transactions. 

 Pursuant to the terms of the Arrangement Agreement, the proposed  transaction is also subject to applicable regulatory approvals and the  satisfaction of certain closing conditions customary for transactions  of this nature. The Arrangement Agreement also provides for, among  other things, customary board support and non-solicitation covenants  from Paragon (subject to customary "fiduciary out" provisions that  entitle Paragon to consider and accept a superior proposal).  The  Arrangement Agreement also provides for the payment of a break fee of  C$150,000 to Canadian Zinc on the occurrence of certain termination  events. 

 After giving effect to the Arrangement, Canadian Zinc and Paragon  shareholders will own approximately 95.5% and 4.5%, respectively, of  the Canadian Zinc issued and outstanding common shares. 

 The Paragon Board of Directors have determined that the proposed  transaction is in the best interest of Paragon, is fair to the Paragon  shareholders, and intend to recommend in the Information Circular that  Paragon shareholders vote in favour of the proposed transaction. The  Paragon Board of Directors' determinations are based on the  recommendations of a special committee of independent Paragon  directors; Roman Friedrich & Company Ltd., Paragon's financial advisor;  and Evans & Evans Inc, the fairness opinion provider to the special  committee.  Evans & Evans have provided an opinion to the effect that  the consideration to be received by Paragon shareholders is fair from a  financial point of view. Paragon's directors and senior management  representing, in aggregate, approximately 2.7% of Paragon's issued and  outstanding shares, have entered into customary voting support  agreements pursuant to which, among other things, they have agreed to  vote their Paragon shares in favour of the proposed transaction. 

 If it is approved by shareholders of Paragon, the proposed transaction  is expected to be completed in September 2012 and is subject to certain  customary conditions, including receipt of all necessary court, TSX,  TSX-Venture and shareholder approvals. The terms and conditions for the  proposed transaction will be summarized in the Paragon Management  Information Circular to be mailed to Paragon shareholders in August  2012. Copies of the Arrangement Agreement, the Management Information  Circular, and certain related documents and agreements will be filed  with Canadian securities regulators and will be available at the SEDAR  website at www.sedar.com under Canadian Zinc and Paragon profiles, as applicable. 

 Advisors 

 Roman Friedrich & Company is acting as financial advisor to Paragon and  its board of directors and a success fee is payable upon closing of the  transaction to Roman Friedrich & Company in respect to the Arrangement  Agreement.  Evans & Evans Inc is acting as fairness opinion provider to  the special committee of the board of directors of Paragon. Paragon's  legal counsel is Davis LLP.  Canadian Zinc's legal counsel is DuMoulin  Black LLP. 

 About Canadian Zinc Corporation 

 Canadian Zinc Corporation is a Toronto-listed junior exploration and  development company trading under the symbol CZN on the Toronto Stock  Exchange, under "CZICF" on the Over the Counter OTCOB in the US, and  under the symbol "SAS" on the Frankfurt Exchange.  The company's main  project is the Prairie Creek Zinc, Silver, Lead Mine in the Northwest  Territories, Canada with Measured and Indicated Resources of 5.43  million tonnes grading 10.8% zinc, 10.2% lead, 0.31% copper and 160 g/t  silver and Inferred resources of 6.24 million tonnes grading 14.5%  zinc, 11.5% lead, 0.57% copper and 229 g/t silver. A portion of the  Mineral Resources was converted to a Mineral Reserve Estimate of 5.2  million tonnes grading 9.4% zinc, 9.5% lead and 151 g/t silver. For  further information on Canadian Zinc visit the website at www.canadianzinc.com 

 About Paragon Minerals Corporation 

 Paragon Minerals Corporation is a Canadian-based mineral exploration  company focused on gold and base-metal exploration in Newfoundland and  northwest Ontario.  Paragon's flagship project is the 100%-owned South  Tally Pond VMS project where it is advancing a significant precious  metal rich massive sulphide deposit located in producing base metal  mining district in central Newfoundland. Paragon is also exploring a  portfolio of gold properties through partner and company-funded  exploration programs. 

 PARAGON MINERALS CORPORATION 

 "Michael J. Vande Guchte" 

 _______________________________ President & CEO 

  

 Qualified Person: This news release has been prepared under the supervision of Michael J.  Vande Guchte, P.Geo., who serves as the qualified person under National  Instrument 43-101 for Paragon Minerals Corporation. 

 Forward-looking Statements: This news release contains certain statements that may be deemed  "forward-looking statements".  All statements in this release, other  than statements of historical fact, that address events or developments  that Paragon expects to occur, are forward looking statements.   Forward-looking statements are statements that are not historical facts  and are generally, but not always, identified by the words "expects",  "plans", "anticipates", "believes", "intends", "estimates", "projects",  "potential" and similar expressions, or that events or conditions  "will", "would", "may", "could" or "should" occur.  Forward-looking statements in this document include statements regarding  current and future exploration programs, activities and results,  resource and reserve estimates and other projections based on such  estimates, and statements regarding approvals for, and completion of,  the proposed plan of arrangement.  Although Paragon believes the expectations expressed in such  forward-looking statements are based on reasonable assumptions, such  statements are not guarantees of future performance and actual results  may differ materially from those in forward-looking statements.   Factors that could cause the actual results to differ materially from  those in forward-looking statements include market prices, exploitation  and exploration success, continued availability of capital and  financing, inability to obtain required regulator, shareholder or  governmental approvals and general economic, market or business  conditions.  Investors are cautioned that any such statements are not  guarantees of future performance and actual results or developments may  differ materially from those projected in the forward-looking  statements. Forward-looking statements are based on the beliefs,  estimates and opinions of Paragon's management on the date the  statements are made. Except as required by securities laws, Paragon  undertakes no obligation to update these forward-looking statements in  the event that management's beliefs, estimates or opinions, or other  factors, should change. These statements are based on a number of  assumptions, including, among others, assumptions regarding general  business and economic conditions, the timing of the receipt of  regulatory, shareholder and governmental approvals for the transactions  described herein, the ability of Paragon and other relevant parties to  satisfy stock exchange and other regulatory requirements in a timely  manner, the availability of financing for Paragon's proposed  transactions and exploration and development programs on reasonable  terms and the ability of third-party service providers to deliver  services in a timely manner. The foregoing list of assumptions is not  exhaustive.  Events or circumstances could cause results to differ  materially. 

 Information concerning Estimates of Indicated and Inferred Resources:  This news release uses the terms "indicated resources" and "inferred  resources".  Paragon advises investors that although these terms are  recognized and required by Canadian regulations (under National  Instrument 43-101 Standards of Disclosure for Mineral Projects), the  U.S. Securities and Exchange Commission does not recognize them.  Investors are cautioned not to assume that any part or all of the  mineral deposits in these categories will ever be converted into  reserves.  In addition, "inferred resources" have a great amount of  uncertainty as to their existence, and economic and legal feasibility.  It cannot be assumed that all or any part of an Inferred Mineral  Resource will ever be upgraded to a higher category. Under Canadian  rules, estimates of Inferred Mineral Resources may not form the basis  of feasibility or pre-feasibility studies, or economic studies except  for Preliminary Assessment as defined under 43-101.  Investors are  cautioned not to assume that part or all of an inferred resource  exists, or is economically or legally mineable. 

 "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." 

   

Paragon Minerals Corp.


CONTACT:  For more information, please visit the company website or contactMichael Vande Guchte at [phone]. 


    

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