Para Resources Inc. Acquires Interest in the El Limon Gold Mine In Zaragoza, Colombia
Jul 20, 2015
Vancouver, British Columbia, July 20, 2015 – Para Resources Inc. (TSXV: PBR) (“Para” or the “Company”) announces that the Company has entered into a shareholders’ agreement (the “Shareholders’ Agreement”) whereby it will subscribe for one third of the common shares (the “Interest”) of Colombia Milling Limited, a Belize incorporated Company (“Colombia Milling”). Pursuant to the Shareholders’ Agreement, the Company is required to contribute an aggregate total of USD$1,000,000 in consideration of the Interest, which payments will be comprised of one payment of USD$400,000 (paid) and six contributions of USD$100,000 no later than the first day of each of the months commencing July 1, 2015 (paid) to December 1, 2015, inclusive.
The other two thirds of the investment and subscription for shares in Colombia Milling will be made by Mr. J. Randall (Randy) Martin (“Martin”) and SAEF Exploration Inc. (“SAEF“). SAEF is a private company controlled by Mr. Alejandro Ochoa of Miami, Florida, U.S.A. Martin will act as the Managing Partner of Colombia Milling. Martin built the El Limon mine and is very familiar with its operations and process. He has had a very successful history of building and operating gold mines all around South America and has recently built and operates a toll mining operation in Nicaragua.
Colombia Milling has entered into an agreement (the “Agreement“) pursuant to which it will acquire from Red Rock Resources plc (AIM: RRR)(the “Vendor“) of all of the shares (the “Shares”) of American Gold Mines Limited (“AGM”), a Cayman Islands wholly-owned subsidiary of the Vendor and owner of 50.002% of the outstanding shares of Four Points Mining SAS (“Four Points”), a Colombian company and the owner of certain mineral licenses in northern Colombia, which contain the El Limon mine (the “Property”).
The Vendor has made shareholder loans to Four Points in the aggregate total amount of USD$2,588,700 (the “Loans”). Pursuant to the Agreement, in addition to the Shares, Colombia Milling will purchase the Loans, as well as any and all other loans made by the Vendor to AGM (the “Subsequent Loans”) (the Loans, Subsequent Loans and Shares collectively, the “Acquired Interests”).
The total purchase price (the “Purchase Price”) for the Acquired Interests shall be up to USD$5,000,000 to be satisfied as to: (i) USD$100,000 previously paid in respect of Colombia Milling’s due diligence review; (ii) USD$450,000 payable by bank draft or wire transfer at closing of the acquisition of the Acquired Interests (the “Closing”); (iii) USD$225,000 payable by bank draft or wire transfer on the date that is 9 months from Closing; (iv) USD$225,000 payable by bank draft or wire transfer on the date that is 15 months from Closing; (v) USD$1,000,000 by the issuance of Colombia Milling to the Vendor of a convertible promissory note secured by a pledge of the Acquired Shares to be held in escrow with Colombia Milling’s legal counsel, bearing simple interest at the rate of 5.0% per annum payable annually in arrears and due and payable on or before the date that is three years from the Closing, (the “Promissory Note”); (vi) a 3% net smelter return royalty (“First NSR”) payable quarterly on gold production from the Property (except in relation to that proportion of gold production from time to time attributable to the beneficial interest in the Property of shareholders other than Colombia Milling or its successors in title)(the “Relevant Proportion”) commencing on the earlier of (a) 9 months from Closing; and (b) the achievement of commercial gold production of at least 100 tons per day for 30 consecutive calendar days, to a maximum of USD$2,000,000; (vii) following the payment in full of the First NSR, a second 0.5% net smelter return royalty (“Second NSR”) payable quarterly on the Relevant Proportion of gold production from the Property, to a maximum of USD$1,000,000. Colombia Milling will have the right to pay the Promissory Note and any accrued interest thereon in whole or part at any time prior to maturity without bonus and the Vendor will have the right to convert the outstanding principal amount of the Promissory Note upon Colombia Milling or any related entity owning the El Limon mine obtaining a public listing, into the class of securities that are publicly listed and at the same price per share at which the entity last sold shares in a financing transaction.
In addition, Colombia Milling has acquired an additional 11% stake in Four Points from Sr. Duque for total consideration of USD$116,000, bringing Colombian Mining’s interest in the Property to approximately 61%.
Pursuant to the Shareholders’ Agreement and the Agreement, Para will, subject to the completion of conditions of Closing and approval of the TSX Venture Exchange (the “Exchange”), indirectly control 20.3% of the Property. The el Limon mine is presently in production at a rate of 75 tonnes per day. It is the intent of Colombia Milling to improve efficiency by investing in the mill and process, initially increasing though put to the 120 tonnes per day design capacity and then later to 200 tonnes per day with an approximate investment of a further $2 million. The mineralized rock that is mined on the Property will be augmented by the purchase of additional, high grade material from local artisanal miners. Colombia Milling has entered into purchase contracts with some of the 57 local artisanal miners who will deliver mineralized material to the mill in return for being paid 45% of the value of the gold in the delivered material.
Mr. Geoff Hampson, President and CEO of Para stated: “We are very pleased to be able to complete this acquisition with our partners. In particular the project’s operating manager, Mr. Randy Martin, has a successful track record of developing, building and managing mines in South America. We are confident that production can be increased and that the operations will continue to generate positive cash flow. This project is another step in Para’s strategy to generate cash flow from small scale mining operations, where a minimal amount of capex is required. Combining the sourcing of mineralized material from local semi-artisanal miners with the mineralized material that we hope to produce at the El Limon mine reduces the mining risk as the mill is ensured a supply of high quality gold grade material at a cost that is fixed to its value.”
About the El Limon Gold Mine:
The Property is located in the northwest part of Colombia near the town of Zaragoza, Antioquia, Colombia and is accessible via both paved highways and gravel roads. The Property is part of the Colombian Central Cordillera, approximately 100 miles northeast of Medellin and 200 miles northwest of Bogota. By road, the mine is 165 miles northeast of Medellin and 345 miles northwest of Bogota.
El Limon Mine is inserted in the wide Zaragoza Gold District which extends from El Bagre until Remedios towns considering the historical alluvium mining and the primary gold underground mines.
The El Limon claims cover a total area of approximately 321 hectares, including 129.6 hectares in RPP No. 12011 and 191.1 hectares in the concession contract No. 620 which is located west of the currently exploited zone.
In the area there are two zones of metamorphic rocks, one of feldespathic-aluminic gneisses and the other associated to the Cajamarca Complex rocks. There are also granitic bodies associated to the Cretaceous magmatism.
Gneisses and schists occur in bundles which are elongated in an N-S strike, they cover the entire area and are intruded into the NW by a stock of grandodioritic composition and small dikes of prophyry andesitic composition. The area features Quaternary deposit; the largest ones are located on the creeks called Juan Vara, Sardina and Culebra.
The main structure present in the area is the Otu Fault that crosses the area from North to South, the control over the Juan Vara creek is relevant.
Gold mineralization is related to this extent thrust fault over the metasedimentary rocks of Neoprotherozoic age, despite the younger intrusive granitoid that could be the source of metals for such mineralization.
The known vein systems of the region extend up to 2-3 km in length with plunging high gold grade shoots central to the vein and surrounded by a lower grade halo. Vein dips are typically around 40-50⁰ and occasionally sub-vertical.
The mineralization of the El Limon mine is embedded in the quartz-feldespathic gmeisses. The gold occurs in a milky quartz vein to the west of the Out fault. Its approximate course is N10E/40W, with average thickness of 0.40 m. These features are very consistent in an extension of almost 400 m on the course and 350 m in the dip direction.
Typical production grades of the region range from 8-12 g/t Au diluted. However, higher grade mines do exist, such as Quintana and El Limon mines at 15-29 g/t Au diluted. Vein widths are typically below 1 m although both the hanging wall and the footwall zones can contain appreciable economic mineralization within the high-grade cores.
Gold mineralization and grade is directed related to the sulphide contents, mainly pyrite, with smaller amounts of galena, shalerite and tetrahedrite, usually occurring as clear strips with a thickness ranging from 2 to 5 mm and they comprise from 7% to 12% in volume. Occasionally, the strip structure is replaced by a distribution of sulphides which are more irregular or uneven.
Pyrite is the first most common and abundant useful mineral, present in the form of aggregates of anhedral and subhedral crystals. Tetrahedrite is the second most abundant useful mineral, usually in the form of anhedral crystals. Gold is the most important metal; it appears in the form of grains in the native state or electrum, normally encapsulated with galena and in the form of inclusions in the pyrite crystals, but not always. The particle size is distributed in ranges from 1-120 micron and occasionally above 200 microns.
The highest grades obtained by Para Resources was in a channel sample of 0.50 m of width over a quartz vein with abundant sulphides and reported 124.50 gpt Au, 127.50 gpt Ag, 1.8% Zn and 1.2% Pb.
Generally, the gold:silver ratio is 1:1.2. The mineralization is normally contained within the quartz veins. It is very rare to find quantities of gold located directly in the host rock. The tenor of gold is related to the quantity of sulphides, preferably related to the presence of sphalerite and galena.
Mr. Paulo J. Andrade, Senior Geologist, VP and Country Manager for Para, Member of the Australian Institute of Geoscientists (MAIG #6136) and qualified person under National Instrument 43-101, has reviewed and approved the scientific and technical information in this press release.
About Para Resources:
Para is a publicly-listed company on the Exchange with a focus on South and Central American gold properties. Para owns 100% of a gold and copper bearing property near the town of Tucumã in Para State in Brazil and has agreed to acquire 100% of the Cumaru/Gradaus property, also in Para State. Tucumã and Cumaru/Gardaus are located within a prospective area for gold and copper deposits and are areas which have seen extensive workings by artisanal miners. The Company is studying the possibility of small scale, low cost mining and is looking to add additional prospective or advanced stage properties in the area to leverage the experienced and qualified geological team already on the ground.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
ON BEHALF OF THE BOARD OF DIRECTORS
“C. Geoffrey Hampson”
C. Geoffrey Hampson, Chief Executive Officer, President and Director
For further information, please contact Andrea Laird
Telephone: 604- 806-0916, Fax: 604- 806-0956
Cautionary Statement Regarding Forward-Looking Information
Except for statements of historical fact, this news release contains certain “forward-looking information” within the meaning of applicable securities law, including statements regarding the proposed private placement. Forward-looking information is frequently characterized by words such as “plan”, “expect”, “project”, “intend”, “believe”, “anticipate”, “estimate” and other similar words, or statements that certain events or conditions “may” or “will” occur. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those anticipated in the forward-looking statements. The Company undertakes no obligation to update forward-looking information if circumstances or management’s estimates or opinions should change except as required by law. The reader is cautioned not to place undue reliance on forward-looking statements. More detailed information about potential factors that could affect financial results is included in the documents filed from time to time with the Canadian securities regulatory authorities by the Company.