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Solomon to acquire 80% in 20 Mongolian projects
2005-03-02 16:02 ET - News Release
Mr. Lawrence Nagy reports
SOLOMON OPTIONS 20 GOLD AND BASE METAL PROJECTS IN MONGOLIA
Solomon Resources Ltd. has signed a memorandum of agreement with Gallant Minerals Ltd. to acquire up to an 80-per-cent interest in each of 20 gold and base metal projects in Mongolia.
Gallant Minerals Ltd. is a mineral exploration company founded in 1997 and controlled by Mohamed Al Fayed, owner of the Harrods Group of businesses of London, England. Since incorporation, Gallant's investment in exploration activity has been financed entirely from Mr. Al Fayed's personal resources. Gallant has been successful in identifying and acquiring a number of early-stage discoveries in Mongolia which it is now offering to experienced and capable partners for further exploration and development. Solomon is pleased to have the option to acquire a major interest in one or more of 20 quality, exploration projects in Mongolia including all of Gallant's most advanced gold properties.
Gallant owns and manages 38 exploration licences covering 188,000 hectares of land in Mongolia. The portfolio is divided into three major groups, based on the types of commodities sought and the level of exploration. The following table is a summary of the Gallant properties in Mongolia subject to the MOA.
GMML
Mongolia Area
properties Projects Licences (Ha)
Gold
projects 6 17 85,490
Porphyry
and base
metal
projects 6 10 32,187
Prospects 8 11 70,571
Totals 20 38 188,248
Property summaries
The highlights of the properties under option pursuant to the MOA include the following.
Bayantsagaan gold project
The Bayantsagaan gold project is located in the North Khentii gold belt, 80 kilometres northwest of Ulan Bator. It is centred over a kilometric-scale alteration zone with coincident geochemical and geophysical anomalies. The project is located 35 km southwest of the new Boroo gold mine (10.2 million metric tonnes at 3.5 grams per tonne gold, or 36 tonnes of gold) and has excellent infrastructure.
Gold mineralization was identified at Bayantsagaan during exploration carried out by a joint Mongolian-Hungarian expedition. The central target area contains an east-west-trending ridge, which is flanked to the north and south by alluvium-filled drainages containing small gold placer deposits. Gold mineralization, exposed on the ridge, is hosted by granitic rocks with silica-sericite-sulphide alteration. Surface rock chip sampling by Gallant has identified values up to 24 g/t gold.
An induced polarization geophysical survey identified a chargeability anomaly, reflecting greater than 1 per cent disseminated sulphide, which coincides with the strong geochemical anomalies, and persists to the south and west beneath alluvial cover. Historic drilling along the crest of the ridge line showed alteration and mineralization from surface to the ends of the holes at 100-to-200-metre depth. Assays were highly anomalous in gold but require confirmation. Historic drilling was completed in the north end of the main anomaly which is about 600 m by 1,000 m in size. Future exploration should focus on the coincident anomalies and the continuation of the IP chargeability anomaly beneath alluvial cover. Bayantsagaan is a high-priority drill target, with multimillion-ounce potential, located close to a new mining operation, with excellent infrastructure.
Nurag Uul gold project
The Nurag Uul project is located 100 km west of Dalandzadgad, the aimag capital, and 700 km south of Ulan Bator. Access to the property takes about 2.5 hours by gravel road, from Dalandzadgad, which has regular air service to Ulan Bator. Gold mineralization was discovered by generative exploration programs in year 2000 and subsequent work identified multigram gold values at surface, including a six-metre channel sample that assayed 52 g/t gold. Mineralization and alteration are exposed within an east-west-trending zone that is roughly 100 m wide and has been mapped over a 3,000-metre strike length. Gold mineralization occurs with silicified breccias and quartz vein systems that are exposed in a small range of hills, protruding through regionally extensive Cretaceous alluvial sediments. The gold zone trends directly under cover on the southwestern edge of the Paleozoic bedrock.
Initial drilling, completed in July, 2003, intercepted anomalous gold mineralization, in all holes, over a strike length of 430 m. Multiple zones of gold mineralization (at a cut-off of 0.1 g/t) were encountered in each of 11 holes, completed along six close-spaced fences.
Gold mineralization is continuous for 430 m along strike and remains open at both ends and at depth, below 140 m. Less than 30 per cent of the system's known strike length has been tested. The system disappears under shallow alluvial cover 100 m west of the drilling and becomes progressively less exposed east of the drilling. The logical next exploration step to advance this project would be a comprehensive IP survey along the entire gold system and its possible concealed extensions followed by another round of drilling to test all significant chargeability and resistivity targets.
Zos Uul gold project
The Zos Uul project is a grassroots discovery of sediment-hosted gold mineralization, located approximately 100 km north of the Bayan Obo rare-earth (iron-oxide-copper-gold) mine in China and 700 km southeast of Ulan Bator. Gold mineralization is present in many areas, with the highest value of 5.5 g/t over one metre from outcrop samples.
The project area contains a northeast-trending horst block with folded and highly faulted sedimentary rocks, intruded by felsic to intermediate intrusives. Gold mineralization occurs with jasperoid, silicified breccias and structures in calcareous siltstone, and alteration is accompanied by elevated concentrations of typical Carlin-suite trace elements. Systematic programs led to the targeting and completion of 11 trenches and nine drill holes. Drilling has intercepted widespread, subeconomic gold values. Recent ground magnetics surveys have confirmed the presence of prospective alteration zones, adjacent to known mineralization and extending under cover. Drill targets have been identified and are ready for testing.
The Gallant portfolio also includes six exploration projects that target copper-gold-molybdenum (Cu-Au-Mo) porphyry systems, held within 12 exploration licences.
The projects, at variable stages ranging from projects that have received phase I drilling to early-stage reconnaissance projects are listed below.
Exploration
Property target Licences Hectares
Bor
Khairkhan
(B1 Cu-Au
plus B2) porphyry 4 3,995
Oyut Cu-Mo
Ovoo porphyry 3 5,478
Sairyn Cu-Mo
Khundii porphyry 1 5,464
Toste Cu-Au
T-1 porphyry 1 4,790
Cu-Au-Mo
Tsakhir porphyry 1 12,460
Totals 10 32,187
Tsakhir copper-gold-molybdenum project
The Tsakhir project is located in Omnogobi aimag in south-central Mongolia, approximately 600 kilometres southwest of Ulan Bator and about 125 km from the aimag capital of Dalandzadgad. Tsakhir contains over 18 square kilometres of hydrothermal alteration, including a four-square-kilometre area containing strong sericite with local quartz-veinlet stockwork, iron-oxide filled stockwork, and elevated copper and molybdenum values within a polyphase breccia. Tsakhir contains a well-developed leached cap within a porphyry system.
Leached outcrops of breccia are exposed on the east side of a covered valley and contain elevated copper (greater than 100 parts per million) and molybdenum (greater than 300 parts per million). GMML completed one stratigraphic test hole within the breccia to examine the continuity of alteration and geology of the host rocks. Strong alteration was intersected from surface to the end of the hole at 141 m, with elevated copper, including up to four m at 0.12 per cent. The Tsakhir project lies within the South Gobi arc terrane that hosts the giant Oyu Tolgoi copper-gold deposit, located 300 km to the east. The Tsakhir project contains a well-defined copper-gold porphyry target, which has good potential for supergene enrichment.
Toste T1 copper-gold project
The Toste project is located approximately 140 km north of the railhead at Ejin Qi, China, and 300 km southwest of Dalanzadgad, the aimag capital. The project contains a 20-square-kilometre area of porphyry and high-sulphidation-style alteration, which surrounds a two-square-kilometre leached cap.
Initial exploration targeting gold within quartz-alunite alteration and incorporated systematic programs leading to the targeting and completion of 14 drill holes within the high-sulphidation assemblages. Drill results identified extensive low-grade copper and molybdenum in the Downs Dome area, and the initial hole in the Alunite Dome area ended in 12 m of 0.50 per cent oxide copper, beneath a leached high-sulphidation alteration zone. Subsequent work has identified an outcropping copper-gold porphyry target within an exposed leached cap at the Stockwork zone. The logical next step for this program is the completion of an induced polarization survey, to identify drill targets.
The Gallant portfolio also includes eight early-stage gold and base metal projects that have received initial prospecting and require additional follow-up work to properly access their potential. These eight projects are listed below.
Exploration
Property target Licences Hectares
Cu-Au
porphyry
Arshaant target 1 20,088
Volcanic
Bosoo epithermal
Khar gold 2 20,497
Javkhlant Epithermal
Uul gold 1 1,414
Cu-Au
Porphyry
near Oyu
Khan Bogd Tolgoi 1 14,777
Khatan Epithermal
Nuur gold prospect 2 1,078
Recon
Nariin property
Khar with silica-gold
Uul system 1 962
Recon
property with
epithermal
alteration,
possible hot
spring gold
Nomgon system 1 2,560
Reduced
intrusion-hosted
Tumur gold
Tolgoi target 2 9,275
Totals 11 70,571
Agreement summary
Payments by Solomon
Pursuant to the MOA, Solomon will pay Gallant:
the sum of $50,000 (U.S.) as a good faith payment (paid on the date of signing);
if closing (signing of a formal definitive agreement) does not take place by March 31, 2005, a further sum as a good faith payment equal to the land payments due on the properties between April 1, 2005, and the date of closing, not to exceed $25,000 (U.S.), to be paid on the later of the date of closing or April 30, 2005; and
if the parties agree to extend the closing date by up to 30 days to no later than May 30, 2005, a further sum as a good faith payment equal to the land payments due on the properties between May 1, 2005, and the date of closing, not to exceed $40,000 (U.S.), to be paid on the later of the date of closing or May 30, 2005, which payments will be non-refundable unless Solomon terminates the MOA because the representations and warranties made by Gallant are not true and accurate in all material respects.
Solomon's option and financial obligations
On the closing date Gallant will grant to Solomon an exclusive and irrevocable option to acquire 60 per cent of the shares of the holding company to be incorporated to hold the properties. The option will be exercisable upon the payment of $1.00 (U.S.) to Gallant during a period of three years after the closing date, on the condition that Solomon makes the following payments and expenditures:
on the closing date, Solomon will deliver to Gallant:
one million common shares of Solomon, listed for trading on the TSX Venture Exchange, which shares will be subject to any hold period imposed by applicable securities regulatory authorities; and
$100,000 (U.S.);
on or before the first anniversary of the closing date, Solomon will complete $1-million (U.S.) of work expenditures on the properties or pay any remaining balance to Gallant;
on or before the first anniversary of the closing date, Solomon will deliver to Gallant:
common shares of Solomon, calculated in value as worth the Canadian dollar equivalent of $200,000 (U.S.) based on the nominal rate of exchange for U.S. to Canadian dollars posted on the website of the Bank of Canada and the average closing price of the shares over the 10 days of trading immediately preceding the fifth trading day prior to the anniversary date, listed for trading on the TSX Venture Exchange and legended as to any hold period required by securities regulatory authorities; and
$200,000 (U.S.);
on or before the second anniversary of the closing date, Solomon will expend a total of $3-million (U.S.) of work expenditures (including expenditures spent during the first year after the closing date) on the properties or pay any remaining balance to Gallant;
on or before the second anniversary of the closing date, Solomon will deliver to Gallant:
common shares of Solomon, calculated in value as worth the Canadian dollar equivalent of $450,000 (U.S.) based on the nominal rate of exchange for U.S. to Canadian dollars posted on the website of the Bank of Canada and the average closing price of the shares over the 10 days of trading immediately preceding the fifth trading day prior to the anniversary date, listed for trading on the TSX Venture Exchange and legended as to the applicable hold period required by securities regulatory authorities; and
$300,000 (U.S.);
on or before the third anniversary of the closing date, Solomon will expend a total of $6-million (U.S.) of work expenditures (including expenditures spent during the first and second years after the closing date) on the properties or pay any remaining balance to Gallant; and
on or before the third anniversary of the closing date, Solomon will deliver to Gallant $400,000 (U.S.).
Further option
On the closing date Gallant will grant to Solomon a second option, subject to Solomon making all payments and exercising its option to acquire 60 per cent of the shares of the holding company, to acquire an additional 20-per-cent interest in any property on which Solomon commits to spend, and then does spend, a further $1-million on work expenditures on or before the fourth anniversary of the closing date.
Gallant's option to participate or dilute or convert to net smelter return royalty
For any property on which Solomon has earned an additional 20-per-cent interest, taking its total direct and indirect interest in that property to 80 per cent, Gallant may at its sole discretion then elect either to:
participate in all future expenditure on that property pro rata to its remaining 20-per-cent interest or accept dilution on industry standard terms (such that the property will be valued at 125 per cent of Solomon's cash payments) and share issuances to earn such 80-per-cent interest, and each of Solomon and Gallant will be deemed to have, at any time, that percentage interest in the property equal to its actual and deemed expenditures divided by the total actual and deemed expenditures of both of them, and should a party's interest be reduced to 5 per cent or less, that party will exchange such interest for a net smelter return royalty equal to 50 per cent of the royalty described in paragraph 16; or
convert its 20-per-cent interest to a net smelter return royalty.
The transaction is subject to the satisfactory completion of due diligence investigations by Solomon, execution of definitive formal agreements and approval by all applicable regulatory authorities.
The parties anticipate the closing of this transaction will take place before March 31, 2005.
Qualified person under National Instrument 43-101
Solomon's president, Lawrence J. Nagy, PGeol, a qualified person for the purposes of National Instrument 43-101, has reviewed the information contained in and supervised the preparation of this news release, however, such information has been acquired from Gallant and has not verified by him or any independent qualified person.
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