Lappland Goldminers proposes a composition agreement to its creditors followed by a set off share issue and preferential rights issue

·
The Board of the Company proposes a composition agreement with the holders of
the convertible loan and its other subordinated creditors based on each creditor
receiving 30% of his/her outstanding claim.

  ·
The Board of the company proposes that the holders of the convertible loan are
offered to set off their outstanding claims after the proposed composition
agreement against new shares in the company to a subscription price of SEK one
(1).

  ·
The Board of the company proposes a new share issue of maximum SEK 42 million,
with preferential right for the existing shareholders with the aim to be fully,
or to the greater part, underwritten.
The Board of directors of Lappland Goldminers AB (publ) (the "Company") has
prepared a proposed composition agreement, mainly with the content that the
subordinated creditors are offered full payment to a maximum amount of SEK 6,000
SEK and an additional 30 percent of the outstanding claim exceeding SEK 6,000.
The Company’s subordinated creditors are mainly the holders of the convertible
loan, whose claims in the composition amount to about SEK 124 million. The Board
of the Company intends to submit an application for a composition agreement to
the District Court of Lycksele shortly.

The execution of the proposal is subject to a decision at an Extra General
Meeting (EGM) to carry out a set off issue directed towards the holders of the
convertible loan that still are receiving parties under the composition
agreement, who will be offered to set off of their remaining convertible loan
after the composition (maximum SEK 35.2 million) against newly issued shares in
the Company at a subscription price of SEK (1) one per share.

In order to carry out the composition and connected payments and to raise
capital to fund going concern of Lappland Goldminers the Board also proposes
that a subsequent, fully or partly underwritten, rights issue is executed. The
proposed amount of the rights issue will be maximum SEK 42 million with
preferential rights for both the existing shareholders and the new shareholders
that may be added by the set off issue.

The composition agreement along with the new share issues will make it possible
for the concerned companies within the Lappland-Group to leave the on-going
restructuring process with a significantly improved financial position aiming to
create a more long term increase of the value related to the assets of the
Group.

 1.
Background and motives

Lappland Goldminers is the parent company of a group consisting of the wholly
owned Swedish subsidiaries Lappland Goldminers Fäboliden AB and Lappland
Goldminers Exploration AB together with the wholly-owned Finnish subsidiary
Lappland Goldminers Oy. The Group's main activity consists of gold production in
northern Finland in the so-called Pahtavaara mine operated and owned by its
wholly owned Finnish subsidiary Lappland Goldminers Oy. In addition to the mine
in Finland, the Group owns a gold project in Fäboliden in northern Sweden. For
further information regarding the Fäboliden project and the previously completed
feasibility study (Definitive Feasibility Study) please see the Company's
website (www.lapplandgoldminers.com).

The parent company and Lappland Goldminers Fäboliden AB, together with Lappland
Goldminers Oy are in a restructuring process since May/June 2013. Lappland
Guldprospektering AB is a dormant company.

The corporate restructuring program in Lappland Goldminers Oy including, among
other things, a composition agreement of 50%, was approved in January 2014 by
the Helsinki District Court. The program includes a conditional debt reduction
of approximately SEK 30 million. The restructuring program under the decision by
the court has a duration of five years.

The Board believes that the Company and its projects have good potential to
create long-term value for its shareholders, based on the current projects and
activities, provided that the financial situation of the Group will be improved.
The Company's financial position is primarily to be improved by a debt reduction
under the composition proposal and the subsequent share issues. The goal is that
this will give the company the necessary flexibility to take advantage of
existing opportunities for the development of the Company's assets.

The Company has, as a first step in the action plan adopted by the Board also
conducted extensive organizational and cost reduction measures as outlined
below.

  ·
Pahtavaara Gold mine

Lappland Goldminers Pahtavaara Gold mine in Northern Finland has produced
according to plan during autumn 2013. Between 30 and 45 kg of gold per month has
been shipped to smelter in Germany during the second half of the year. Full
scale production is expected to be achieved during the first half of 2014
resulting in an average production above the current production level.

Based on the current gold price, the Pahtavaara operation generates a small
surplus sufficient for limited reinvestment in exploration and amortization
under the current restructuring program. Additional investments in exploration
will be required to ensure long-term profitable production, which is expected to
be generated internally by the mine. Based on the latest years’ development of
the gold price, it is the Board's opinion is that the Pahtavaara mine has a good
potential to generate a positive cash flow if, and when, the gold market
recovers.

The mining activities have since beginning of the year been focused on the new
Karoliina mineralization, adjacent to the west of the existing mining
operations. A full scale test during the latter part of 2013 has demonstrated
higher grades with a recovery exceeding 80%. The board is convinced that the
extraction of this mineralization has a good potential to improve the Group's
result over the coming years.

The Pahtavaara mine is located in an interesting area for mineral exploration
and mining in Sodankylä in northern Finland with a couple of major mines in the
region along with a couple of the major mining companies represented among the
holders of the neighbouring exploration permits. The municipality invests in
creating good conditions for exploration and mining in the area. Large
investments have historically been made within the Pahtavaara project. The
Pahtavaara project is a viable producing mine with a capacity of more than
500,000 tons/year.

  ·
Fäboliden Gold project

The company announced in late 2012 a feasibility study (Definitive Feasibility
Study) conducted by Golder Associates for its wholly-owned gold project,
Fäboliden, showing a probable mineral reserve of approximately 20 million tons
with an average grade of 1.38 grams per ton, open pit, and 2.19 grams per ton in
underground mining. The project is considered by the Board to have significant
upside potential but has, in the current market for mineral projects and based
on the current gold price, not been possible to sell (wholly or partly) at an
acceptable price for the shareholders according to the Board. This could change
relatively quickly if the market for gold and exploration projects improves and
when the Group companies have come out of the pending restructuring processes.

The Fäboliden area is considered to have a good potential for further
exploration. The Board of the parent company considers the project to be an
interesting investment based on the net present value of more than SEK 1.3
billion according to the feasibility study at a gold price of 1,660 USD/oz.

  ·
The Company’s convertible debt of 2010/2013.

The company has an outstanding convertible debt at nominal value of SEK
121,996,120 due for payment on 30th of December 2013. The total debt
attributable to the convertible loan amounts to approximately SEK 124 million
including accrued interest during the period 1st April -24th of June 2013. The
Company it is not able to repay the convertible debt.

  ·
The restructuring process is a result of a too high indebtedness given current
production

Based on current gold production at Pahtavaara and the lack of other revenue
generating projects within the Group, the Board came to the conclusion during
the spring 2013 that the debts could not be carried by the Group’s projects.
Therefore the parent company Lappland Goldminers AB, the Finnish subsidiary
Lappland Goldminers Oy and the Swedish subsidiary Lappland Goldminers Fäboliden
AB were entered into a corporate restructuring process in May/June 2013.

As a result of the proposed composition agreement to the creditors under the
restructuring process in Sweden and Finland along with the subsequent offset
issue and rights issue , the Group's total debt burden will be reduced by
approximately SEK 160 million (of which approximately SEK 30 million is a
conditional write down of debts under the Finnish program) while the Group’s
total equity is strengthened.

The Company believes that the composition proposal, together with the subsequent
set-off issue and preferential rights issue, will provide the Company and the
Group with the necessary platform for a continued development of the Group's
assets.

  ·
Cost reductions in Lappland Goldminers

In parallel with the pending restructuring process, the Company has focused on
reducing the so-called overhead costs of staff, administration, offices etc.
After the already implemented and planned cost reduction measures have come in
to effect, the overhead expenditures within the parent company of the Group is
estimated to be reduced with SEK 8 million on an annual basis. The annual
overhead burn rate is estimated to be around SEK 4 million per year, financial
costs excluded, from the second half of 2014.

The Board’s proposal regarding the composition agreement, set off of the
convertible loan and the subsequent share issue with preferential rights to
existing shareholders:

Proposed composition agreement

  ·
The Board proposes a composition agreement with creditors under the current
restructuring process, offering full payment of all claims up to an amount of
maximum SEK 6,000 along with an additional 30% of each claim exceeding SEK
6,000. The creditors concerned by the proposed composition agreement consist
mainly of the holders of the Company's convertible loan 2010/2013.

The total convertible debt amounts to approximately SEK 124 million including
accrued interest as per June 24th 2013. Other subordinated debts concerned by
the proposed composition agreement amount to about SEK 5 million.

According to below, holders of a total claim of SEK 95 million of the
outstanding convertible loan have submitted written confirmations that they
accept the proposed composition agreement.

  ·
All subordinated creditors will receive a cash payment of a maximum of SEK
6,000, implying that those holding a claim under the convertible bond or other
unsecured debt that is equal to or less than SEK 6,000 may be paid in full on
his/her claim and therefore not take part in the composition agreement. This
means, among other things, that the number of creditors concerned by the
composition agreement is reduced from about 3,000 to about 500.

  ·
The proposal under the composition agreement offers 30 percent of the accrued
interest from the convertible loan up to June 24th 2013 (the commencement date
of the restructuring process). Unpaid interest for the period June 25th and
forward is written off under the composition agreement.

  ·
After the execution of the composition agreement the company has a remaining
outstanding debt related to the convertible loan of about SEK 35.2 million along
with SEK 1.5 million in other subordinated debts.

  ·
The realization of the composition agreement is subject to the set off issue.

Set off issue

  ·
The Board proposes that the Company directs a set off issue towards the holders
of the outstanding convertible loan. The set off issue implies a new issue of
maximum 35.2 million new shares at a subscription price of SEK 1.

  ·
The main part of the larger creditors under the convertible loan, with
aggregated holdings of about SEK 95 million prior to the composition and about
SEK 28 million after the composition, have submitted subscription confirmations
in writing to the Company confirming that they will second the proposed
composition agreement as well as to participate in the subsequent set off issue.
As a result, a minimum of 28,000,000 new shares will be issued at a subscription
price of SEK 1 in connection with the set off issue.

  ·
Those who choose not to participate in the set off issue will receive SEK 6,000
plus 30% of the amount of claims exceeding SEK 6,000 to be paid after the set
off issue and the subsequent rights issue is completed. It is the Board’s and
management’s assessment that the creditors who do not participate in the set off
issue should receive their entire claims after the completion of the composition
agreement during the summer of 2014 at the latest.

  ·
The set off Issue will be conducted after the composition proposal has been
determined by the district court. The set off issue is subject to (i) that the
next meeting of creditors at Lycksele district court approves the proposed
composition agreement, requiring approval of a minimum of 75% of the number of
creditors as well as 75% of the outstanding convertible loan amount of those
present (in person/by proxy) and voting at the creditors meeting, (ii ) that the
district court's decision of the composition agreement is legally adopted and
implemented.

  ·
The set off issue is planned to be executed during April/May 2014.

Share issue with preferential right for existing shareholders

  ·
The Board of Lappland Goldminers has, against the above background, an intention
to propose to an upcoming Extraordinary General Meeting to authorize the Board
to decide on a subsequent rights issue of about 34 - 42 million new shares at a
subscription price of minimum SEK 0.8 maximum SEK 1 per share. The rights issue
is subject to the implementation of the above described set off issue and the
proposed composition agreement.

  ·
The right to participate in the share issue with preferential rights will
include holders of “old” shares as well as the “new” shares issued as a result
of the set off issue. The record date for the right to participate in the
preferential rights issue will be set to a date after the execution of the set
off issue.

  ·
It is the Board’s intention to have the rights issue secured to the greatest
possible extent based on written subscription confirmations and guarantees. The
share issue will be executed regardless of if it is fully underwritten or not.

 1.
Flexibility and a continued possibility to develop the prioritized assets within
the Group

  ·
The proceeds from the rights issue together with debt reductions, which will
considerably strengthen the Company’s financial situation, are expected to
provide the Group with a good platform to continue operations and to continue
efforts to commercialize the Group's gold project in Fäboliden and to continue
to develop the operations of the Fäboliden project.

  ·
The Group’s strengthened financial position is also expected to contribute
significantly in the visualization and verification of the values related to the
assets held by the Group which thereby will strengthen the Company's negotiating
position. As a result of the implemented cost reduction measures in combination
with the capital contributions from the planned share issues the company will
have the flexibility and the resources of its own to await a future increase in
the Gold price.

To summarize, it is the view of the management and the Board that the Company
has an attractive underlying portfolio of asset which today is burdened by too
much debt. The proposed measures will create favourable conditions for long-term
production growth and value creation. To the extent that the measures proposed,
for yet unknown reasons, can not be implemented, the Board believes that the
Company has no ability to get out of the current restructuring process and in
such a case must file for bankruptcy proceedings, which will be considerably
worse for both shareholders and creditors.

Time table etc. for set off issue and preferential rights issue

Time table and other terms for the implementation of the set off issue will be
communicated in conjunction to the notification of the upcoming Extra General
Meeting. A prospectus describing the offer to participate in the set off issue
will be announced.

Time table, terms and prospectus referable to the preferential rights issue will
be presented as soon as possible after completion of the set off issue

Lappland Goldminers AB (publ)

For additional information, please visit: www.lapplandgoldminers.se or contact:

Sven Rasmusson, chairman of the Board                            Thomas
Häggkvist, acting CEO/CFO

Tel. +46 70-605 83 15
Tel. +46 70-552 26 22

sven.rasmusson@raspart.se
thomas.haggkvist@lgold.se