Pan American Goldfields Ltd Announces Acquisition of Control of The Cieneguita Silver & Gold Project
By Pan American Goldfields Ltd, PRNETuesday, June 28, 2011
BROOMFIELD, Colorado, June 29, 2011 -
Further to its press release of May 3rd, 2011, Pan American
Goldfields, Ltd., a Delaware corporation (OTCBB: MXOM) (the
“Company”), has entered into a binding letter agreement (the
“Letter Agreement”) with Minera Rio Tinto, S.A. de C.V., (”MRT”)
and Marje Minerals S.A., entities organized under the laws of the
United Mexican States (”MM”), to increase its interest from 40% to
80% in the Cieneguita project located in Chihuahua State, Mexico.
MRT will retain a 20% participating interest, subject to dilution
under a definitive joint venture agreement to be finalized between
the parties. Under the Letter Agreement, the Company shall direct
the preparation of the feasibility study evaluating the future
development of the Cieneguita project.
The Letter Agreement provides that the parties will use their
best efforts to negotiate, finalize and execute definitive
agreements, which will amend and restate the existing agreements
between the parties related to the Cieneguita project. The
definitive agreements are expected to be completed in 60 days. The
Letter Agreement is binding on the parties. Pending completion of
the definitive agreements, the Company has the right to immediately
commence preliminary work and analyses on the Cieneguita project
and propose preliminary work plans and budgets for the joint
venture.
A. Restructuring of Cieneguita Project
Ownership
Previous Agreement:
According to the previous agreement, MRT had the right to earn a
54% interest in the Cieneguita project under which MRT made an
investment in the Company and financed a small startup mining
operation to extract ores up to a depth of 15 meters, as well as
providing the initial US $4 million towards the completion of a
bankable feasibility for the Cieneguita project as a whole. The
Cieneguita 43-101 compliant resource consists of a measured and
indicated 20 million tonnes averaging 0.74 grams per tonne Au and
51.8 grams per tonne Ag. The Company originally had the right to
the 20% of the net cash flows from the first 15 meters mined and
40% thereafter.
Since MRT began mining operations in 2010, material processing
has progressed to the point where gold and silver recoveries into a
bulk sulfide concentrate are excellent, about ninety percent.
However, the current drought conditions have significantly reduced
through-put at the operation due to a lack of process water
availability. It is important to note that the infrastructure
required to provide adequate water in compensation for the current
and unanticipated severe drought conditions, has not been installed
by MRT.
The Letter Agreement:
The principal changes under the Letter Agreement, are that the
Company’s interest in the Cieneguita shall be increased from 40% to
80%, the Company shall direct the preparation of the feasibility
study, and the current small-scale mining operation shall cease on
December 31st 2012.
B. Feasibility Study
The Company plans to promptly commence a feasibility study for
the Cieneguita project. The Company and MRT shall be responsible
for the cost of the feasibility study on a pro rata basis based on
their respective amended ownership percentages of the Cieneguita
project. The definitive agreement will provide the terms and
conditions relating to submittal, approval by a management
committee, performance, and completion of work plans and budgets
for the feasibility study.
In the event that either the Company or MRT fail to fund their
pro rata portion of the feasibility study or any development
expenditure when due, the non-contributing partner will have
its ownership interest in the Cieneguita project decreased by one
percent (1%) for every $100,000 invested on its behalf by
the other partner.
C. Reduction of Debt and Purchase of
MM Cieneguita Interest
The Letter Agreement also provides for Company and MM to enter
into agreements to accomplish the following transactions:
- The Company will issue MM 3,333,333 shares of restricted Common
Stock in exchange for its 6 % ownership interest in the Cieneguita
project (not including the right to receive revenues attributable
to 6% of operations on the first 15 meters, if any, through
December 31, 2012). - MM will assume all outstanding debt owed by the Company to Mr.
Ayub, MRT and Robert Knight (approximately $490,000). - In consideration for the debt assumption, MM will receive half
of all monthly Net Cash Flows the Company is entitled to receive
from the first 15 meters until the sooner of December 31, 2012 or
the date on which the aggregate amount of Net Cash Flows from half
of the Company’s portion so received by MM equals $490,000. After
December 31, 2012, MM’s percentage interest in the Net Cash Flows
is reduced to 0% and the Company’s percentage interest is increased
to 80%. - The above mentioned assumption of debt owed by the Company to
Mr. Ayub, MRT and Robert Knight will be in full satisfaction
including any and all accrued interest with respect to the
outstanding debt.
D. Co-Sale, Drag Along and Right of
First Refusal Agreement.
The Company and MRT will enter into a Co-Sale, Drag Along and
Right of First Refusal Agreement relating to any bona fide, third
party industry standard offer or proposal to buy or sell of the
Cieneguita project, which provides:
- If the Company places its ownership interest in the Cieneguita
project up for sale, MRT must, if directed by the Company, agree to
offer to sell its ownership interest to any bona fide third party
buyer on the same terms as are being offered by the Company. - If the Company elects to sell its ownership interest in the
Cieneguita project, MRT will be required to sell its ownership
interest if offered similar terms based on its pro rata
ownership. - If MRT elects to sell its ownership interest in the Cieneguita
project, it must offer the Company a first right to purchase the
ownership interest.
Board change
On June 28, 2011, the Company’s Board of Directors elected Neil
Maedel as Chairman of the Board.
Commenting on Pan American’s evolution since both its control
group and executive was changed in 2009 and its recapitalization
and restructuring subsequently began Mr. Maedel said:
“The acquisition of a majority
interest and control of the development of Cieneguita project is a
turning point for Pan American Goldfields, as it puts our technical
and management team firmly in the driver’s seat to initiate and
accelerate the development of what we consider to be a very
exciting project. In 2009, our original decision to make a
significant investment in Pan American’s predecessor, Mexoro
Minerals, occurred after an extensive evaluation of the Cieneguita
resource. Events since then, while frustrating, have not
diminished our view of the potential of the Cieneguita project, and
we are pleased to double our interest in, and take control of, the
Cieneguita project and move it forward with our own technical and
management team.
Now that the Letter Agreement has
been executed, our first goal will be to initiate and complete a
scoping study for Cieneguita, the first step towards the completion
of a feasibility study. The scoping study should take approximately
six months to complete and from there we will initiate a
pre-feasibility or full feasibility study for what we expect to be
a fairly straightforward mining development. I speak for the
entire Pan American team when I say how excited we are to get
started and, as a consequence, immediately start the process of
building value for the company and its shareholders.
In the meantime progress is being made at our Cerro Delta
porphyry exploration project in Argentina, where we
continue to expand our land position. Assays of samples taken
during a recent field trip further confirmed the core of the
previously mapped gold zone. As a final step towards
commencing drilling at Cerro Delta, we plan to expand our program
of geological work at the onset of the coming exploration season in
the third quarter of this year. Actual drilling is expected to
commence either in the late 2011 or early 2012.
In closing, I must emphasize how
thrilled I am to have the honor of leading such an accomplished
group of explorationists and company builders. Approximately two
years has lapsed since we began restructuring the company and
recruiting the current technical and executive team. I would
like to thank our current directors and management, and at the same
time welcome the latest member of our team, Dr. Alex Becker, who is
geological adviser to the board. I look forward to drawing on
this distinguished group’s prior successes and expertise to help us
achieve the full potential of our current and future projects, and
build value for our shareholders.”
About Forward-Looking Statements
Except for statements of historical fact, the matters discussed
in this press release are forward looking and reflect numerous
assumptions and involve a variety of risks and uncertainties, many
of which are beyond our control and may cause actual results to
differ materially from stated expectations. For example, there can
be no assurance that we will complete the definitive agreements
with MRT and MM on a timely basis, or at all. Actual results may
also differ substantially from those described in or contemplated
by this press release due to risks and uncertainties that exist in
our operations and business environment, including, without
limitation, our ability to enter into definitive agreements with
MRT and MM, our ability to successfully complete the feasibility
study for the Cieneguita property, and our ability to raise funds
to support our future operations, and other risks described from
time to time in our filings with the Securities and Exchange
Commission. We undertake no obligation to release publicly the
results of any revisions to these forward-looking statements to
reflect events or circumstances arising after the date hereof.
SOURCE: Pan American Goldfields Ltd., a fully reporting company
in United States and Canada
For further information:
+1-604-681-1163
.
Tags: Broomfield, Colorado, June 29, Pan American Goldfields Ltd, United States of America
