Duluth Metals and Franconia Minerals Enter into Arrangement Agreement; Consolidates Position in the Duluth Complex, Minnesota

    - Integrates Contiguous Properties Into a Common Ownership

    - Delivers Significant Project Synergies

    - Adds Qualified Resources, Surface Rights and Exploration Lands

    - Provides Increased Upscaling Potential and Development Optionality

    - Demonstrates Strength of Strategic Partnership With Antofagasta plc

Duluth Metals Limited ("Duluth") (TSX: DM) (TSX:DM.U), and Franconia Minerals Corporation ("Franconia") (TSX: FRA) are pleased to announce today that they have entered into an arrangement agreement (the "Arrangement Agreement") pursuant to which Duluth will acquire 100% of the outstanding common shares in the capital of Franconia by way of a plan of arrangement under the Business Corporations Act (Alberta) (the "Transaction"), the details of which are set forth in the Arrangement Agreement.

Franconia shareholders will have the option to receive cash (on the basis of C$0.90 per Franconia share), Duluth shares (on the basis of 0.328 Duluth shares per Franconia share) or any combination of cash and Duluth shares, subject to pro-ration, with an aggregate maximum cash consideration of C$37,979,189 and an aggregate maximum of 13,841,304 Duluth shares. Based on the December 17, 2010 closing prices and trading on the Toronto Stock Exchange, the average value of the offer is approximately C$0.91 per Franconia share, which represents a premium of 46.6% to Franconia's last closing price of C$0.62 and a premium of 48.4% to Franconia's 20-day volume weighted average trading price of approximately C$0.61. Based on Duluth's closing share price on December 17, 2010, the total value of this transaction would be approximately C$77 million.

Franconia's principal assets are a 70% interest in the Birch Lake, Maturi and Spruce Road deposits in northeastern Minnesota through the Birch Lake Joint Venture ("BLJV"). Franconia announced in November 2010 its intention to increase its ownership at the Birch Lake Project to 82% under the terms of the BLJV agreement. As a result of the Transaction, Franconia's assets are expected to be rolled into Twin Metals Minnesota LLC ("TMM"), a Duluth (60%) and Antofagasta PLC ("Antofagasta") (40%) joint venture which includes the Nokomis deposit, one of the world's largest undeveloped deposits of copper, nickel and precious metals. Some of Franconia's deposits and their land holdings are contiguous with those of TMM, and the acquisition will consolidate TMM's position in the Duluth Complex region in northeastern Minnesota. As such, Antofagasta will contribute approximately C$30,000,000 in cash to Duluth's acquisition of Franconia in order to, in part, maintain the 60% and 40% interests of Duluth and Antofagasta, respectively, in TMM.

Fairness Opinion and Unanimous Board Approval

Prior to executing the Arrangement Agreement, the board of directors of Franconia obtained an opinion from Gryphon Partners, Franconia's financial advisors, that the consideration to be received by Franconia shareholders pursuant to the Transaction is fair, from a financial point of view, to the Franconia shareholders.

The board of directors of Franconia has unanimously approved the transaction and all directors and senior officers of Franconia, collectively holding approximately 3.8% of the issued and outstanding shares of Franconia, have entered into support and voting agreements and have agreed to vote their shares in favour of the Transaction at the special meeting of Franconia shareholders.

Arrangement Matters

The Transaction is subject to the approval of at least two-thirds of the votes cast by Franconia shareholders at a special meeting of Franconia shareholders, which is expected to be held in February 2011. Completion of the Transaction is also subject to the approval of the Court of Queen's Bench of Alberta, the Toronto Stock Exchange, the receipt of all other necessary regulatory and third party approvals, and other customary conditions. In the event that the Transaction is not completed under certain circumstances, Franconia has agreed to pay Duluth a termination fee equal to C$3 million. Franconia has provided Duluth with certain other customary rights, including a right to match competing offers. Full details of the transaction will be included in the management information circular of Franconia to be mailed to Franconia securityholders in due course.

Duluth Private Placement

In connection with the Transaction, Antofagasta has subscribed for 7,604,563 subscription receipts issued by Duluth, by way of private placement, at a price of C$2.63 per subscription receipt for aggregate gross proceeds of C$20,000,000, with each such receipt entitling the holder thereof to one common share of Duluth upon receipt of the final court order approving the Transaction.

Franconia Private Placement

In addition, Duluth and Franconia have entered into a subscription agreement pursuant to which Duluth has subscribed for and will purchase 3,906,250 common shares of Franconia representing approximately 5.3% of Franconia's outstanding common shares at a price of C$0.64 per share in a private placement for total gross proceeds to Franconia of C$2,500,000, of which C$1,000,000 will be provided to Duluth by Antofagasta. In the event that the Transaction is not completed, Duluth has agreed with Antofagasta that Duluth will transfer 40% of such Franconia common shares to Antofagasta. The proceeds of the private placement will be used to fund a land purchase option with Minnesota Power, as well as for general working capital purposes. The closing of the private placement is subject to the approval of the Toronto Stock Exchange and is expected to be completed on or about December 23, 2010. The common shares, when issued, will be subject to a trading restriction of four months from the date of issuance.

"The addition of Franconia's assets to those of TMM creates the potential for significant synergies and represents the logical consolidation of contiguous deposits along the same mineral trend," said Christopher C. Dundas, Chairman and CEO of Duluth and Chairman of TMM. "In addition to creating a development project of larger size, scale and mine life, we will be able to generate considerable efficiencies through shared infrastructure, including milling and processing facilities."

"Further, this transaction demonstrates the strength and upside of the strategic partnership between Duluth and Antofagasta. Through our joint venture, we are consolidating within the Duluth Complex and bringing both the financing and execution capability necessary to develop these promising projects," said Dundas.

"We are very pleased to enter into this agreement with Duluth," said Brian Gavin, President and CEO of Franconia. "With the proximity of our properties, the Duluth and Antofagasta joint venture of TMM is the natural partner for Franconia. As a result of this transaction, Franconia shareholders will benefit from immediate liquidity at an attractive premium, and will also gain future upside potential as shareholders of Duluth, a company which provides a strong platform for growth both from a financial and project development perspective. The Board of Franconia unanimously supports and recommends that Franconia shareholders approve this transaction."

"Franconia's assets are an excellent fit with the Nokomis deposit and we are very pleased to enter into this agreement through TMM, our joint venture with Duluth," said Marcelo Awad, CEO of Antofagasta Minerals SA. "We are looking forward to advancing the development of these promising assets."

A map showing the land consolidation is found on the Duluth Metals website at http://www.duluthmetals.com under this press release.

Franconia's assets (82% effective ownership) are contiguous with those of TMM and share similar geology. The Birch Lake deposit(1) consists of 176.8 million tonnes of Indicated Resources grading 0.528% copper, 0.169% nickel, 0.101% cobalt, 0.239 g/t platinum, 0.515 g/t palladium, 0.117 g/t gold for a copper equivalent (CuEq*) grade of 1.177%, plus an additional 39.9 million tonnes of Inferred Resources grading 0.496% copper, 0.157% nickel, 0.009% cobalt, 0.210 g/t platinum, 0.431 g/t palladium, 0.103 g/t gold for a CuEq* grade of 1.083%. The Maturi deposit(2) contains an Inferred Resource of 119.9 million tonnes grading 0.67% copper, 0.25% nickel, 0.02% cobalt, 0.25 g/t palladium, 0.09 g/t Platinum and 0.04 g/t gold; and the Spruce Road deposit(3) contains an Inferred (underground) Resource of 124 million tonnes grading 0.59% copper and 0.21% nickel. Franconia also has a 15,000-acre land package. (See footnotes at end of release.)

Currently the NI 43-101 compliant Nokomis(4) deposit contains 550 million tonnes of Indicated Resources grading 0.639% copper, 0.200% nickel, 0.660 grams per tonne TPM (platinum-palladium-gold) for a copper equivalent (CuEq**) grade of 1.51%, plus an additional 274 million tonnes of Inferred Resources grading 0.632% copper, 0.207% nickel, 0.685 grams per tonne TPM for a CuEq** grade of 1.53% (more information available at http://www.duluthmetals.com and footnotes at end of release). Minnesota has more than a century of mining history and the Nokomis development project is located near major international ports and excellent mining infrastructure such as power, well-developed roads, railway networks, supply-equipment centers and a local labor force.

Over the next 36 months, TMM is advancing development activities at its Nokomis deposit, moving through pre-feasibility towards a bankable feasibility study. TMM has a dedicated budget of US$130 Million to finance these development activities.

The joining of land positions between TMM and Franconia Minerals gives TMM over 25,000 acres of land/mineral interests within and adjacent to the northern South Kawishiwi Intrusion. Four deposits with NI 43-101 compliant Mineral Resources have been delineated: the Spruce Road Deposit; the Nokomis Deposit; the Maturi Deposit, and the Birch Lake Deposit.

David Oliver, P. Geo. is the Qualified Person for Duluth and Site Manager for TMM, in accordance with NI 43-101 of the Canadian Securities Administrators, and is responsible for Duluth's technical content of this press release and quality assurance of the exploration data and analytical results. Duluth's financial advisor is UBS Securities Canada Inc. and its legal advisor is Stikeman Elliott LLP.

Brian Gavin, P. Geo., President and CEO of Franconia, is the Qualified Person for Franconia in accordance with NI 43-101 of the Canadian Securities Administrators who has had responsibility for the overall coordination and supervision of Franconia's projects and of the preparation of Franconia's scientific and technical information contained in this Press Release.

Franconia's financial advisor is Gryphon Partners and its legal advisor is Cassels Brock & Blackwell LLP.

Investor Call

A conference call with senior management of Duluth and Franconia for the investment community has been scheduled for Monday, December 20 at 10:00 a.m. EST. Christopher Dundas, Chairman and CEO of Duluth Metals, Vern Baker, President of Duluth Metals and Brian Gavin, President and CEO of Franconia Minerals, will provide comments and be available to answer questions during the call. To participate in the call, please dial five minutes prior to the call:

    US/Canada
    Dial-in #: (888) 231-8191
    Int'l/Local
    Dial-In #: (647) 427-7450
    Webcast URL:
    http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=3349060

An archived recording of the webcast will also be available on the Duluth Metals website at http://www.duluthmetals.com.

Footnotes

(1 see Franconia's company profile on Sedar at http://www.SEDAR.com for the December 1, 2010 Technical Report on the Resource Estimate Update of The Birch Lake Property, Minnesota, U.S.A by Scott Wilson Roscoe Postle Associates; Cut-off $30 NSR. * Copper equivalent (CuEq%) = Cu% + 2.16 x Ni% + 2.03 x Co% + 0.21 x Au g/t + 0.64 x Pt g/t + 0.17 x Pd g/t based on metal prices and expected process recovery.)

(2 see Franconia's company profile on Sedar at http://www.SEDAR.com for the October 20, 2006 Technical Report on the Preliminary Assessment of the Birch Lake and Maturi Deposits, Minnesota, U.S.A by Scott Wilson Roscoe Postle Associates)

(3 see Franconia's company profile on Sedar at http://www.SEDAR.com for the November 15, 2007 Technical Report on the Resource Estimate for the Spruce Road Deposit, Minnesota, U.S.A by Scott Wilson Roscoe Postle Associates; Cut-off grade 0.5% Cu.)

(4 see Duluth's company profile on Sedar at http://www.SEDAR.com for the January 8, 2009 Scott Wilson RPA Preliminary Assessment on the Nokomis Project, Minnesota, U.S.A., Cut-off grade at 1.0% CuEq, **Copper equivalent (CuEq%) = Cu% + 3.03 x Ni% + 0.63 x Co% + 0.30 x Au g/t + 0.76 x Pt g/t + 0.24 x Pd g/t)

About Duluth Metals

Duluth Metals is committed to acquiring, exploring and developing copper, nickel and platinum group metal (PGM) deposits. Duluth Metals has a joint venture with Antofagasta plc on the Nokomis Project, located within the rapidly emerging Duluth Complex mining camp in north-eastern Minnesota. The Duluth Complex hosts one of the world's largest undeveloped repositories of copper, nickel and PGMs, including the world's third largest accumulation of nickel sulphides, and one of the world's largest accumulations of polymetallic copper and platinum group metals. Aside from the joint venture, Duluth Metals retains a 100% position on approximately 31,000 acres of mineral interests on exploration properties adjacent to and nearby the Nokomis joint venture.

About Twin Metals Minnesota LLC

Twin Metals Minnesota LLC is a joint venture company, which is 60% owned by Duluth Metals and 40% by Antofagasta plc. The joint venture's principal asset is called the Nokomis Project, located within the Duluth Complex mining camp in north-eastern Minnesota.

About Franconia Minerals

Franconia Minerals Corporation is currently focused on the development of the Duluth Complex copper-nickel-platinum-palladium project - consisting of the Birch Lake, Maturi and Spruce Road deposits - in this highly prospective region of northeastern Minnesota. Underground mining at Birch Lake will minimize the surface impact of the operation. Also, storage of mine wastes underground would further minimize the surface impact. Additional resources at the Birch Lake project include Inferred Resources at the Maturi deposit (see news release of September 6, 2006) and at the Spruce Road deposit (see news release of December 3, 2007). Independent reports prepared to NI 43-101 standards by Scott Wilson RPA are available at http://www.SEDAR.com and http://www.franconiaminerals.com.

This document may contain forward-looking statements (including "forward-looking statements" within the meaning of the US Private Securities Litigation Reform Act of 1995) relating to Duluth's operations or to the environment in which it operates. Such statements are based on operations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to predict and may be beyond Duluth's control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in forward-looking statements, including those set forth in other public filings. In addition, such statements relate to the date on which they are made. Consequently, undue reliance should not be placed on such forward-looking statements. Duluth disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, save and except as may be required by applicable securities laws.

    For further information:

    Duluth Metals:
    Mara Strazdins, Director of Corporate Communications
    Office: +1(416)369-1500
    [email protected]
    Web Page: http://www.Duluthmetals.com

    Franconia Minerals:
    Toronto: Greg Taylor: Office: +1(905)337-7673 / Mobile: +1(416)605-5120
    [email protected]

    (DM. DM.U.)

SOURCE Duluth Metals Limited