Kaizen Discovery Inc. (TSX-V:KZD) announced today that it has entered into a strategic financing agreement with ITOCHU Corporation of Japan to advance Kaizen’s exploration efforts at its Pinaya Copper-Gold Project in southeastern Peru. Under the terms of the agreement, ITOCHU will provide Kaizen with up to C$2.5 million in initial exploration funding for Pinaya, in exchange for an indirect 20% stake in the project.

The financing agreement calls for ITOCHU to pay the C$2.5 million to Kaizen in three payments.

• The first payment of C$625,000 is to be made upon closing of the transaction, which is expected in early April 2016. This payment will give ITOCHU an initial 5% interest in Kaizen’s subsidiary, Kaizen Peru Holdings Ltd., the indirect holder of the Pinaya Project. Kaizen will retain the remaining 95%.
• ITOCHU’s second payment of C$625,000, for another 5% interest in Kaizen Peru Holdings, is conditional on Kaizen obtaining local community approvals for the lease and surface rights for the Pinaya Project and obtaining all necessary approvals to establish and operate the exploration camp, within two years of the initial payment. Kaizen recently signed surface-rights agreements with local landholders, securing access to key, geologically prospective parts of the project area.
• The third payment of ITOCHU’s investment is conditional on Kaizen obtaining the necessary environmental permits, water and electricity rights required to conduct exploration drilling on the Pinaya Project within two years of the initial payment. Subject to fulfillment of this condition, ITOCHU will pay Kaizen C$1.25 million to bring its aggregate interest in Kaizen Peru Holdings to 20%.

Kaizen has agreed to match ITOCHU’s exploration funding, which will bring total funding to C$5 million for the company’s planned first phase of exploration at Pinaya. Kaizen expects that the C$5.0 million will cover approximately two years of exploration work at the project.

“This strategic investment by ITOCHU represents a significant milestone in the progress of Kaizen’s exploration efforts in Peru’s emerging Andahuaylas-Yauri Porphyry Belt. It also represents a strong endorsement of the quality and potential of the Pinaya Project,” said Peter Meredith, Chairman of Kaizen Discovery.

“We now have a sizeable exploration budget to conduct an aggressive, comprehensive exploration program at Pinaya to test the project’s potential to host large-scale, copper-gold porphyry and skarn systems, building on the existing resources.”

Kaizen acquired 100% of the Pinaya Project from AM Gold in October 2015. The project covers 192 square kilometres and includes more than 25 kilometres of strike length within the Andahuaylas-Yauri Porphyry Belt in Peru’s provinces of Caylloma and Lampa. This belt hosts numerous productive and world-class porphyry and skarn systems, including Las Bambas, Tintaya, Constancia and Haquira.

A framework agreement entered into between Kaizen and ITOCHU in January 2014 established a collaborative working arrangement under which both companies agreed to evaluate opportunities to explore and develop selected, high-quality, international mineral projects.

To view Figure 1: Location of the Pinaya Copper-Gold Project in Peru visit: http://media3.marketwire.com/docs/1049251a.jpg

To view Photo 1: View from the highest point on the property, looking south across the resource area visit: http://media3.marketwire.com/docs/1049251b.jpg

The initial C$1.25 million of Kaizen’s C$2.5 million funding is due on or before the earlier of (i) one year after the date of ITOCHU’s initial investment; or (ii) completion of ITOCHU’s third-tranche payment. Kaizen’s second C$1.25 million is due two years after the date of completion of ITOCHU’s initial investment. Following Kaizen’s C$2.5 million funding, both Kaizen and ITOCHU become subject to customary cash call obligations and dilution should a party not fund its then pro rata amount of any future funding.

ITOCHU also will obtain rights with respect to approvals of annual exploration and development plans for the Pinaya Project, budgets and capital expenditures, but only after such time as ITOCHU has obtained 10% share ownership following its second-tranche investment. ITOCHU also has the right to withdraw from the Pinaya Project after two years, and the right to put its shares in Kaizen Peru Holdings back to Kaizen at any time for a payment that may include a pro rata portion of any unspent funds. Conversely, Kaizen has the right to bring in a third-party investor provided that investment does not exceed 20% of the issued and outstanding shares of Kaizen Peru Holdings and the proceeds are for no less than C$2.5 million.

About Kaizen Discovery

Kaizen is a Canadian mineral exploration and development company. Kaizen has a collaboration agreement with ITOCHU Corporation of Japan and has access to HPX TechCo’s proprietary, geophysical, Typhoon technology under a dedicated services agreement. Kaizen’s long-term growth strategy is to work with Japanese entities to identify, explore and develop high-quality mineral projects that have the potential to produce and deliver minerals to Japan’s industrial sector.