Duluth Metals Announces Dividend of Special Warrants of Duluth Exploration Limited to its Shareholders

TORONTO, July 28, 2011 /PRNewswire/ --

Duluth Metals Limited ("Duluth Metals" or the "Company") (TSX: DM) today announced that it proposes to distribute to its shareholders of record as of August 23, 2011 ("Shareholders of Record") a dividend consisting of special warrants ("Special Warrants") automatically convertible to common shares of Duluth Exploration Limited, a wholly owned Canadian subsidiary of the Company ("DEL").

The Company will acquire the Special Warrants through a private placement transaction with DEL whereby the Company will subscribe for 8,500,000 units in the capital of DEL (each a "DEL Unit") at a price of $0.50 (Canadian) per DEL Unit for gross subscription proceeds of $4,250,000. Each DEL Unit will consist of one common share in the capital of DEL and one Special Warrant. The Company proposes to dividend these Special Warrants to the Duluth Shareholders of Record as a means of creating shareholder value and to allow its shareholders to participate in a new spin-off entity of the Company which will, through a wholly owned subsidiary of DEL, pursue exploration and development activity on certain mineral exploration properties of the Company located in the State of Minnesota (the "DMC Properties").  The DMC Properties are currently held by DMC (USA) LLC ("DMC"), an indirect wholly owned subsidiary of Duluth Metals, and described in more detail below.

Under the terms of the proposed distribution plan, Duluth Metals Shareholders of Record will receive a dividend-in-kind of one Special Warrant for every 15 common shares of Duluth Metals held as of the close of business on August 23, 2011. The Special Warrants will not be transferable and it is not expected that there will be a public market for the Special Warrants.  Each Special Warrant will be automatically convertible to one common share of DEL with no further consideration required on the part of the holder upon the occurrence of a liquidity event (the "Liquidity Event") on or before January 18, 2013 (the "Liquidity Event Deadline"), which Liquidity Event shall consist of the occurrence of both:

     (a) the completion of a National Instrument 43-101 ("NI 43-101")
         compliant Technical Report prepared by an independent Qualified
         Person (as such term is defined in NI 43-101) in respect of the DMC
         Properties; and

     (b) any one of the following:

         (i)     a significant financing of not less than $16,000,000 and
                 the listing of DEL's common shares on a Canadian, UK or US
                 stock exchange;

         (ii)    a "reverse take-over" with a company listed on a Canadian,
                 UK or US stock exchange; or

         (iii)   satisfaction of all of the following conditions: (i) the
                 filing and obtaining of a receipt for a final prospectus
                 by DEL which prospectus shall qualify the distribution of
                 DEL's common shares issuable pursuant to the prospectus;
                 (ii) the filing of an application for and obtaining of a
                 conditional listing or quotation of the DEL common shares
                 on a Canadian, UK or US stock exchange; and (iii)
                 satisfaction of the conditions of such conditional listing
                 or quotation,
         in each case, with the common shares of DEL issuable upon the
         automatic conversion of the Special Warrants being freely tradeable.

Failure to complete the Liquidity Event by the Liquidity Event Deadline will result in the cancellation of the Special Warrants and DEL will continue to be a wholly owned subsidiary of Duluth Metals.

DEL holds 100% of the common stock of Duluth Exploration (USA) Inc. ("Duluth USA"), which is a Delaware company that will enter into an earn-in agreement (the "Earn-In Agreement") with DMC.  Pursuant to the terms of the Earn-In Agreement, Duluth USA will contribute or spend an aggregate of up to US$20,000,000 towards exploration and development programs of DMC over a period of two years. Duluth USA will initially contribute or spend US$4,000,000 towards DMC's initial exploration program and will earn a 20% interest in the capital of DMC for such contribution or expenditure. Thereafter, Duluth USA can make further contributions of up to US$16,000,000 to earn additional interests, to a maximum 80% interest, in the capital of DMC. Duluth USA is expected to fund its contributions or expenditures under the Earn-In Agreement with DMC through a combination of debt and equity.  Duluth Metals will put in place a line of credit between Duluth Metals and DEL to ensure continuity of the exploration program between DEL's initial US$4,000,000 contribution and completion of the Liquidity Event.  It is a condition to the completion of a Liquidity Event and the conversion of the Special Warrants into DEL common shares that DEL enter into an agreement with Twin Metals Minnesota LLC and Antofagasta plc pursuant to which (i) a disposition of any of the DMC Properties will continue to be subject to a right of first refusal that currently exists in favour of Antofagasta plc, and (ii) an acquisition of additional properties within an area of interest will be subject to a right of first refusal in favour of Twin Metals Minnesota LLC.

About the DMC Properties

DMC holds approximately 37,000 acres of grassroots exploration interests in the Duluth Complex. These properties were acquired on the basis of Duluth Metals' expertise on the mineral potential of mafic intrusions in general and the Duluth Complex in particular.  The lands fall into two categories: (i) certain interests in State and private lands that DMC controls under long term leases with the right to explore, and (ii) certain interests in Federal lands under application with the Bureau of Land Management for prospecting permits. Currently the Company is actively conducting exploration on approximately 10,000 acres of its State and private exploration interests. An extensive airborne electromagnetic geophysical survey has been completed as well as detailed interpretation of the geophysical data.  Drilling is scheduled to start this month on selected State and Private exploration lands. Exploration will concentrate on three styles of mineralization within the Duluth Complex, including Nokomis-style copper-nickel-platinum group metal-rich disseminated sulphides, magma conduit-hosted-nickel-rich massive sulphides, and platinum-palladium reef style targets. DMC is a wholly owned subsidiary of Duluth Metals (Canada) ULC which in turn is a wholly owned subsidiary of the Company.

The foregoing transaction is subject to market conditions and the approval of the Toronto Stock Exchange and other required regulatory and stock exchange approvals.

About the Companies

Duluth Metals Limited 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 Twin Metals Project (formerly the Nokomis Project), located within the 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 currently owns, through its 100% ownership of DMC, a 100% position on approximately 37,000 acres of mineral interests on exploration properties adjacent to and nearby the Twin Metals Project.

Duluth Exploration Limited will, through its shareholdings in Duluth Exploration (USA) Inc., be a company focused on exploration and development of those properties held by DMC (USA) LLC in the Duluth Complex.

DMC (USA) LLC is a company committed to the exploration and development of certain properties located in the Duluth Complex. DMC (USA) LLC is a wholly owned subsidiary of Duluth Metals (Canada) ULC, which in turn is a wholly owned subsidiary of Duluth Metals Limited.

This press release contains forward-looking statements (including statements which may constitute "forward looking information" within the meaning of applicable Canadian securities laws) relating to Duluth Metals's operations, the environment in which it operates, its mineral properties and the transactions described in this press release. 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 Metals's control. A number of important factors could cause actual outcomes and results to differ materially from those expressed in forward-looking statements, including market conditions, the failure to receive the approval of the Toronto Stock Exchange, or other required regulatory and stock exchange approvals, for the transactions described in this press release and other factors set forth in other public filings of Duluth Metals. 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 Metals 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:
Mara Strazdins
Director of Corporate Communications
Telephone: +1(416)369-1500 ext. 222
Email: [email protected]

Vern Baker
President
Telephone: +1(651)389-9990
Email: [email protected]
Webpage:  http://www.duluthmetals.com

SOURCE Duluth Metals Limited