Lateegra Gold to acquire interest in Picacho gold mine
2006-07-25 19:45 ET - News Release
Mr. Michael Townsend reports
LATEEGRA GOLD ACQUIRES PRODUCING GOLD MINE IN SIERRA MADRE GOLD BELT MEXICO
Lateegra Gold Corp. has entered into an acquisition agreement with Tara Gold Resources Corp. to acquire up to a 70-per-cent interest in the Picacho gold mine located within the Northern Sierra Madre gold belt, 120 kilometres south of the United States border, in Sonora state, Mexico.
The Picacho mine, a 3,236-hectare mining concession, is 24 kilometres by haulage road from Bacoachi, a town with a population of approximately 2,000 people serviced by the national electrical grid, a 1,200-metre airstrip and a paved highway accessing the nearby mining town of Cananea and the state capital, Hermosillo.
The previous owners have been exploiting an up to six-metre-wide vein structure for the past three years by driving in on a five-metre by five-metre ramp declining 8 per cent and extending over one kilometre in length. Production comes from several working faces averaging four to six metres in width, dipping at 700, with very competent hangingwall and roof-support conditions. Owner-reported, and company-verified, ore grades averaged five grams gold and 15 grams silver per tonne hosted within a mineralized structure comprising an 85-per-cent-silica content, creating a tailings product that is being sold as a flux agent to the local smelters for $35 (U.S.) per tonne, an amount that is estimated to generate sufficient revenues to cover current mining and milling costs. Management believes the orebody width, dip and hangingwall competency offer tremendous operational flexibility, enabling a variety of mining methodologies to ultimately optimize efficiency while minimizing pillar volumes and dilution.
Lateegra has commissioned three separate site visits to the Picacho property, with check samples being taken under the supervision of National Instrument 43-101 qualified persons, Michael Sandidge, PGeo, Jeffrey Reeder, PGeo, and James McCrea, PGeo. The samples tabulated below were random, representing both the structure and the wall rock. Results as obtained from samples are as follows.
RESULTS AS OBTAINED FROM SAMPLES
Sample Au Ag Site Sample Au Ag Site
No. (g/t) (g/t) No. (g/t) (g/t)
16476 1.315 9.3 MP 0004-06 3.86 4.5 UG
16477 0.57 3.8 MP 0005-06 0.354 6.9 DAV
16478 0.258 4.0 MP 1 0.018 1.9 UG
16479 0.451 13.9 MP 2 0.049 0.6 UG
16480 5.72 31.1 UG 3 1.31 2.9 UG
16481 7.82 22.3 UG 4 0.041 1.4 UG
16482 29.9 53.2 GF 5 1.59 11.1 UG
16483 2.42 12.0 OP 6 3.66 23.9 UG
16484 2.37 9.4 OP 7 0.258 1.6 UG
16485 3.93 12.0 OP 8 6.17 15.3 UG
0001-06 6.47 26.2 OP 9 5.85 11.4 UG
0002-06 2.56 7.6 UG 10 0.135 5.4 UG
0003-06 1.565 4.4 UG 11 7.88 43.1 UG
The samples were collected and transported by independent consultants to ALS Chemex Laboratory (Chemex) in Hermosillo, Sonora, Mexico, (a laboratory certified by ISO 9002).
The purchase of the mine includes an extensive processing facility currently capable of 250 tonnes per day of ore throughput. The mill includes a 1,500-tonne-per-day jaw crusher, a 500-tonne-per-day cone crusher, two ball mills, two floatation cells (400 tonnes per day), two caterpillar gen-sets and a large shop facility. The rolling stock consists of three Wagner ST8 scoop trams, a Gardner Denver 2 boom pneumatic jumbo, a stationary hydraulic exploration drill, two compressors, two Cat D8s and a D9 dozer, a Clarke Michigan front-end loader, one track loader, haul trucks, and all ancillary mining equipment. The equipment, being in good serviceable condition, allows the option for a continuing mining operation simultaneous to the commissioning of a scoping study to prepare recommendations, around various optimization scenarios, for plant and equipment upgrading.
The Picacho project, interpreted as a low-sulphidation epithermal gold-silver system, is hosted in a middle-upper Tertiary caldera complex of silicified andesites and andesitic tuffs intruded by nearly contemporaneous rhyodacites, diotites and andesitic breccias. This caldera complex is part of a volcanic regime covering northern Sonora and Chihuahua states of Mexico, overprinting a northwest-southeast-trending lower Tertiary porphyry-copper belt host to Mexico's largest copper deposits -- Cananea and La Caridad. The property is structurally delineated by northwest-southeast, north-south and northeast-southwest fault and fracture-trending structures traced for over five kilometres, and potentially representing a reactivation of older structures, developing an extensive vein system hosting gold, and characterized by multiphase banded quartz and sulphide stockwork veining with hydrothermal brecciation within intensely silicified andesitic volcanics.
A new zone of intense alteration comprising a vuggy silica discovered in recent workings, represents a near-surface heap-leachable gold target believed to be related to the same structure currently being mined on strike, more than two kilometres away. The new zone will be drill tested as part of a resource definition program. Low sulphidation systems of this type, under favourable conditions, have formed large bulk-tonnage gold deposits including the 42-million-ounce Lihir deposit in Papua New Guinea, the 16-million-ounce Zhao-Ye deposit in China, the five-million-ounce Kori-Kollo deposit in Bolivia and the 18-millon-ounce Cadia East deposit in Australia.
The terms of the option agreement to earn an initial 65-per-cent interest in the project are as follows. Lateegra will make staged escalating payments to the vendors totalling $7,325,000 over a five-year period plus an additional $100,000 per year on the anniversary of the agreement for the term of the joint venture. Lateegra will also commit to spending $1-million in exploration and $2-million on mine development and production plant enhancements within 18 months of the signing of the agreement, as well as issue Tara Gold 50,000 shares per month for a period of 12 months. Once Lateegra has earned the 65-per-cent interest, a joint venture will be formed and a standard dilution clause will be in effect. As a basis for the dilution clause, each party will be deemed to have invested the following amount of money in the Picacho groupings:
* Lateegra -- $10,325,000 (U.S.) (representing its 65-per-cent interest); and
* Tara -- $5.6-million (U.S.) (representing its 35-per-cent interest).
In the event a participant has been diluted down to a 10-per-cent interest, this interest will automatically convert into a 3-per-cent net smelter return and the joint venture agreement will become null and void. For a period of no longer than one year, the 3-per-cent NSR can be reduced to 1 per cent by any partner in exchange for a $2-million (U.S.) payment for each 1-per-cent increment. It is also agreed that Lateegra will have an 18-month option to increase its interest in the Picacho groupings to 70 per cent, thereby reducing Tara's interest in the Picacho groupings to 30 per cent, whereby the price for the 5 per cent will be determined based on a sliding scale of daily production averaged over three months. A finder's fee in accordance with TSX policies will be payable.
The above proposed transaction is subject to TSX Venture Exchange approval. The technical information in this news release has been reviewed by Michael Sandidge, PGeo, a qualified person as defined in National Instrument 43-101, and acknowledges that the property-specific data are historical and believed to be accurate, but should not be relied on.
The company has also granted incentive stock options to the officers, consultants and employees under its stock option plan, for the purchase of up to 130,000 common shares of the company for a period of two years at a price of 80 cents per share.
