Canadian Orebodies announces completion of purchase agreement of Haig Inlet Iron Ore Project

Tuesday, 21 Jun 2011

Canadian Orebodies Inc announce the closing of its previously announced non-arm length acquisition of a 10% legal and beneficial interest in the Inuit Owned Lands Mineral Exploration Agreement with Nunavut Tunngavik Incorporated which covers the Haig Inlet Iron Ore Project, located on the Belcher Islands, Nunavut, Canada. The acquisition was made pursuant to a Purchase Agreement that entitles Orebodies to acquire up to a 100% legal and beneficial interest.

Approvals obtained as conditions precedent to the Closing included

i). An ordinary resolution being passed by the disinterested shareholders of Orebodies approving the entering into and closing of the Agreement and the completion of all transactions and share issuances contemplated therein as previously announced by Orebodies in its press release dated April 13 2011
ii). Receipt of approval by NTI
iii). Receipt of approval by the TSX Venture Exchange

Pursuant to the Agreement, Orebodies has acquired a 10% interest in the NTI Agreement and issued an aggregate of 3,000,000 common shares to Donald McKinnon, Gordon McKinnon and Randall Salo. The Agreement is a non-arm length transaction as Mr Gordon McKinnon is President & CEO of Orebodies and Donald McKinnon is the Chairman and a director of Orebodies. The 3,000,000 common shares issued today pursuant to the Closing of the Agreement are subject to a hold period expiring on October 16, 2011.

In addition to, and pursuant to the Agreement, Orebodies is entitled to acquire the remaining 90% interest in the NTI Agreement by:

i). Issuing to the Vendors an aggregate of 4,000,000 common shares on June 15 2012 to earn an additional 15% interest in the NTI Agreement.
ii). Issuing to the Vendors an aggregate amount of 7,000,000 common shares on June 15 2013 to earn the remaining 75% interest in the NTI Agreement.

Alternatively, Orebodies may elect to not proceed with the further share issuances outlined above, in which case it will not be entitled to acquire the remaining interest in the NTI Agreement. Orebodies and the Vendors have today entered into a joint venture agreement which governs the activities of Orebodies and the Vendors in respect of the Property and the NTI Agreement, until such time as Orebodies may acquire a 100% interest in the NTI Agreement.

Orebodies and the Vendors have also entered into a 3% Gross Overriding Royalty agreement, pursuant to which 1/3rd of the GOR may be purchased at any time by Orebodies for USD 3,000,000 in the event that Orebodies has acquired the 100% interest in the NTI Agreement. If Orebodies has elected not to purchase a 100% interest in the NTI Agreement, the consideration for a purchase of such 1/3rd of the GOR shall be pro-rated to Orebodies' interest in the NTI Agreement at such time.

Furthermore, the GOR grants an aggregate USD 250,000 advance royalty, commencing on the earlier of
i). The date on which a production lease is entered into pursuant to the NTI Agreement
ii). On June 15 2017. If Orebodies does not hold the 100% interest in the NTI Agreement at such time as the advance royalty becomes payable, the advance royalty shall be pro-rated to Orebodies' interest in the NTI Agreement at such time.

A special committee comprised of all independent directors of Orebodies, which previously reviewed and unanimously approved Orebodies entering into the Agreement, also reviewed and unanimously approved Orebodies entering into
i). The JVA
ii). The GOR
iii). An Assignment and Amendment Agreement to the NTI Agreement, entered into with NTI and the Vendors, which documents Orebodies 10% interest in the NTI Agreement as at the date hereof.

As a result of the Closing, and further to the press release dated March 10 2011 in connection with the completion of a private placement of 15,000,000 subscription receipts, the gross proceeds from the sale of the Subscription Receipts previously deposited in escrow with an escrow agent until the satisfaction of certain conditions have been released to Orebodies.

Each Subscription Receipt will therefore be automatically converted into one unit of Orebodies without payment of additional consideration and without any further action by the holder thereof with each Unit consisting of one common share in the capital of Orebodies and one-half of one Common Share purchase warrant with each Warrant entitling the holder thereof to purchase one Common Share at a price of CAD 0.475 per Warrant Share for a period of 18 months from the date hereof.

In addition to the Cash Commission, Orebodies has previously issued to the Agents, in aggregate, 900,000 compensation options representing 6% of the number of Subscription Receipts sold in the private placement, with each such compensation option entitling the holder to purchase one Unit of Orebodies at a price of CAD 0.35 for a period of 18 months from the date hereof.

All securities issued today in connection with the completion of the private placement are subject to a hold period expiring on July 11 2011. The net proceeds released from escrow will be used by Orebodies to cover the expenses associated with the transactions described above and for general corporate purposes.