CGA Mining Limited - Proposed acquisition of the Masbate Gold Project in the Philippines


    PERTH, Western Australia, Jan. 31 /CNW/ - The Board of CGA Mining Limited
(previously named Central Asia Gold Limited) ("CGA", the "Company") has
entered into a Sale and Purchase Agreement ("SPA") with Thistle Mining Inc.
(THT:AIM) ("Thistle") to acquire 100% of its interest in the Masbate Gold
Project in the Philippines.Project Highlights include:

      - Contained gold resource of 3.305 million ounces of indicated
        resources and 1.766 million ounces of inferred resources (Cut-off
        0.7g/t)
      - Probable mining reserve of 1.98 million ounces (Cut-off 0.7g/t)
      - At a cut-off of 1.0 g/t - resource grade is 2.03 g/t
      - Open-pit mining
      - Ore throughput of 4 million tonnes per year
      - Capex US$92.8 million (May 2006 BFS est)
      - 12 - 15 months construction period
      - All key permits with Environmental Clearance Certificate
      - Re-engineering and optimisation study to be completed in 3 months
      - Production target of CGA post optimisation of in excess of
        200 000 ounces per annumThe Masbate Project is an extensively studied, advanced stage development
project with 55,686m of reverse circulation drilling and 58,757m of diamond
drilling.
    The project has considerable scale with indicated resources of 3.3
million ounces and inferred resources of 1.77 million ounces, including a
probable mining reserve of 1.984 million ounces of gold (cut-off 0.7g/t).
    CGA believes that the project has very good exploration potential, both
from the further conversion of existing resource ounces to reserves, and the
potential to further expand the existing resource base of the project.
    CGA is in a strong financial position with uncommitted cash reserves in
the order of A$75m which allows the Company to both acquire and commence
development of the project once the project has been comprehensively
re-engineered and fully optimised.
    A Bankable Feasibility Study ("BFS") was undertaken by Ausenco
International Pty Ltd, an independent engineering services company located in
Australia ("Ausenco") on behalf of Thistle in May 2006, with assistance from
Australian contractors Leighton Contractors, Knight Pièsold and International
Mining Consultants Pty Ltd ("IMC"). This BFS demonstrated an economically
sound project in the current gold price environment, with a planned throughput
rate of 4 million tonnes per annum ("mtpa") and a current estimated capital
cost in the order of US$92.8m. The key parameters of the BFS, including the
components of the projected capital cost and resource and reserve estimates
are detailed in the attachment to this announcement.
    The management team of CGA has been responsible for the successful
development of a number of significant gold mines, including the Boroo gold
project in Mongolia, Golden Pride in Tanzania, the Obotan mine in Ghana and
the Chalice Gold Project in Western Australia. As a result of that experience
base, CGA has identified a number of key areas which are currently being
implemented to re-engineer and fully optimise the project. SRK Consulting Pty
Ltd and IMC have been retained by CGA to assist in the re-engineering and
optimisation. It is currently estimated that this work will be completed
within the next three months.
    The initial resource and reserve estimate was completed on the Masbate
Project by IMC, who prepared a National Instrument 43-101 ("NI 43-101")
compliant technical report for Thistle in April 2006 (the "Masbate Report").
Although the initial resource estimate in the Masbate Report was calculated on
a 0.7g/t cut-off, the same report also detailed that at a 1.0g/t cut off grade
the average grade would be 2.03g/t for the total of the indicated and inferred
resources. By way of comparison, the reported gold production in Australia for
Q3 2006 averaged a recovered grade of just under 2 g/t.
    The Masbate ore body is amenable to a large scale modern open pit
operation. The process plant will incorporate conventional carbon-in-leach
("CIL") technology. Two ball mills and a SAG mill have already been purchased
for the project. The Masbate project has received a number of key Government
approvals to commence mine construction, including an Environmental Clearance
Certificate.
    Leighton Contractors have been working closely with the Masbate project
team to provide a reliable fixed price lump sum capital cost (process plant
and infrastructure) and contract mining rates.
    The BFS currently estimates that the construction phase will require
approximately twelve to fifteen months from the date of project go ahead.
    Masbate is located within a historical mining area and currently enjoys
strong local community support. The project was originally operated by Atlas
Mining and Development Corporation ("Atlas") for 14 years (1980-1994) during
which time 17.4 million tonnes were processed at a grade of 2.12g/t resulting
in the production of 1,078,326 oz of gold. Overall metallurgical recovery was
86%.
    The Philippines is rich in natural resources, with large scale gold,
copper and nickel deposits attracting investment from a number of major
international mining companies including Anglo American, BHP Billiton,
Xstrata, Sumitomo and Anglo Gold.
    The Philippines Government has been very supportive of the development of
natural resources within the country and offer many attractive incentives
including an initial 6 year income tax holiday for projects of this nature.
The excise tax rate is 2% on gross revenue.
    Filminera Resources Corporation ("Filminera") owns the license to explore
and mine for gold, silver and other minerals within the contract area that
covers an area of approximately 83.36 sq km in terms of the Mineral Production
Sharing Agreement for a term of 25 years commencing in July 1997.
    A SAG mill and two ball mills have already been procured. Their latent
capacity is such that milling throughput could be increased or grind
intensified with economic benefits to the project. The purchase of this
milling gear has mitigated the long lead times applicable for new milling
equipment, i.e. up to 15 months.
    In addition to the Masbate project, CGA would also acquire an
attributable 19.2% interest in the Runruno Project, which has a reported
inferred resource of 1.7 million ounces of gold (23 million tonnes at 2.3 g/t
- as per Metals Exploration Plc's 11 May 2006 public announcement).
    The aggregate acquisition cost of the Masbate Project to CGA is US$51
million, of which US$30 million will be paid in cash (with US$5m paid in
deferred instalments) and the balance will be paid in shares of CGA. Following
completion of the acquisition, Thistle (or a subsidiary of Thistle) will hold
approximately 25% of the outstanding shares of the Company. Full details of
the terms of the acquisition are set out in the attachment to this
announcement.

    Completion of the acquisition of Thistle's interest in the Masbate
Project is subject to various conditions typical in a transaction of this
nature, including the following:- approval of the shareholders of both CGA and Thistle;
      - listing of the shares issued to Thistle;
      - no regulatory imposed restraints to completion; and
      - release of various securities over the shares and loans in
        Philippines Gold Limited and associated companies.A meeting of the Company's shareholders to consider the proposed
acquisition is expected to be held in March. CGA will be preparing and sending
to its shareholders a notice of meeting and information circular containing
additional details concerning the transaction in February including an
independent expert's report prepared by BDO (Consultants) WA Pty Ltd. The
transaction will require approval by a majority of the votes cast by CGA
shareholders at the meeting.
    Assuming the shareholders of CGA and Thistle approve the transaction and
all other conditions to the completion of the acquisition are satisfied or
waived, CGA expects that the proposed transaction will be completed in late
March 2007. Under the terms of the SPA, if the transaction is not completed on
or before 31 March 2007, either party may terminate the SPA unless the time
for completion is extended by agreement.

    Contacts

    Should you have any queries or require further information, please
contact Mr Mark Savage (US contact) or Mr Michael Carrick (Australian
contact).


    Yours Sincerely

    MICHAEL CARRICK
    President and Chief Executive Officer


    OVERVIEW OF THE MASBATE PROJECT
    -------------------------------

    Location

    The Masbate Project is located on the island of Masbate approximately 350
kilometres south of the State capital, Manila. The project can be accessed by
a daily commercial airline service to Masbate city (population of 350,000) and
a 70 kilometre drive on partially sealed road to the project site. Alternate
access to site from Masbate city is via a 1 hour boat ride. The site is
equipped with a barge loading jetty where heavy equipment during construction
and consumables during operations can be delivered and offloaded.

    Previous Operation

    The Masbate Project was originally operated for 14 years (1980 - 1994) by
Atlas. The previous operations included open pit and underground mining of
oxide, transition and fresh material with subsequent processing using CIL and
heap leach processing. A total of 17.4 million tonnes were processed at a
grade of 2.12g/t resulting in gold production of 1,078,326 ounces of gold and
944,474 ounces of silver. Overall plant recovery of 86% was achieved during
the operating period. It is evident from the records of past production that
CIL metallurgical recovery was closely related to the grade of ore mined i.e.
increase in grade resulted in increased recovery. The operation reportedly
closed due to the forced closure of the Atlas group operations as a result of
falling commodity prices, and the inability of Masbate to cover group
overheads from other operations of the company at the time.

    Brownfield Site

    The Masbate Project is a brownfield site with established infrastructure
including an airstrip, dedicated jetty, roads, accommodation, offices,
clubhouse, workshops, assay laboratory, bunker fuel tanks and general
reticulation. The mine is readily accessible by sea, and materials and
supplies can be barged in via Manila or other large ports. The existing
infrastructure will allow construction to start relatively quickly and has
reduced capital expenditure requirements relative to those of a greenfield
site.
    The Philippines is a source of highly skilled and cost effective labour.

    Planned Development

    The resources and reserves (as defined in the Masbate Report) at the
Masbate Project are located within two prominent topographic features (hills)
and are largely above sea level. The ocean is within 0.5km of the project
site. The BFS contemplates large scale mining of 4mtpa at a stripping ratio of
1:3.4 (ore:waste) and all mining to be carried out by a specialist mining
contractor. In this regard, Leighton Contractors has been working closely with
project management to provide detailed mine planning and costings.
    All mined ore will be delivered to a run of mine stockpile from where it
will be fed to a primary crusher and subsequently processed in a conventional
CIL plant. Process plant tailings will be discharged into a large tailings dam
designed by Knight Pièsold. Decant water from the tailings dam will be
returned to the process plant, any water discharged to the environment will be
subjected to cyanide detoxification.
    The project will be staffed using expatriate experts in management
positions in the formative years so as to effectively commission and optimise
the project. These experts will have the responsibility to train Philippine
nationals to assume supervisory and management roles.
    Management of CGA, using its extensive experience in mine development in
remote, offshore locations, has identified areas of the forecast development
which may be optimised.
    Management of CGA also intend to supplement existing cash reserves with
new capital to fund development of the Masbate Project.

    Geology

    Gold mineralisation is located within quartz veining in the form of
fracture filling and silification of the host rock. Sulphides are not abundant
but are found within the veins and selvidges. Gold can be associated with the
sulphides. The gold is finely distributed (grain size 5 micron to 20 micron).
    The depth of weathering is dependant on the lithology and varies from
zone to zone e.g. 20m - 40m in the main vein zone, 50m - 60m in the Colorado
zone. The massive quartz veins are not subject to weathering other than in
areas of brecciation.

    Reserves and Resources

    A full geological review and resource and reserve estimate was completed
on the Masbate Project by IMC, who prepared the Masbate Report for Thistle in
April 2006.Resources(1)
    ---------
    Indicated     59.3mt @ 1.55 g/t for          2.940m ounces.
    Inferred      33.7mt @ 1.63 g/t for          1.766m ounces.
    Low Grade (Indicated) 18.65mt @ 0.61 g/t for 0.365m ounces.

    Reserves(2)
    --------
    Probable      37.4mt @ 1.65 g/t for          1.984m ounces

    Notes
    (1) The reported resources assume a 0.7 g/t cut-off grade and gold price
    of US$450/ounce (except with respect to low grade dump material from past
    mining operations, which were reported assuming a zero cut-off grade).
    The resource estimate is based on all available data from Thistle's 2005
    drill programme on the project. Mineral resources that are not mineral
    reserves do not have demonstrated economic viability.
    (2) Calculated accepting an economic 0.7g/t cut-off grade, gold price of
    US$450/ounce and an oil price of US$50/barrel. The reserves are current
    as of March 31, 2006 and are included in the indicated resources above.The Masbate Report is based on work completed on behalf of Thistle by
Ausenco, IMC and Mining Associates. The authors of the Masbate Report, Stewart
Lewis, B. Eng (Mining), B.Eng (Civil), MGA, M.AusIMM and Andrew Vigar,
B.App.Sc (Geol.), F.AusIMM, both from IMC, are independent Qualified Persons
within the meaning of NI 43-101. The Masbate Report was lodged in Canada by
Thistle on the SEDAR website at www.sedar.com.
    In the preparation of the Masbate Report, and calculating resources,
ordinary kriging was accepted as appropriate for the steeply dipping vein
material as it was assumed that all the material of this type would be
available to be exploited. A selective mining unit technique was applied to
the stockwork material so as to simulate which of that type of material could
be effectively exploited. The key parameters in respect of reserves were:
geotechnical recommendations as to pitwall design as determined by Knight
Pièsold and reported in the BFS, metallurgical recovery as determined by
testwork as reported in the BFS, operating costs totalling US$15.13/t (LOM
average) as reported in the BFS, a gold price of US$450/ounce and an oil price
of US$50/barrel. The Project does not appear to have any onerous permitting or
environmental issues which will impact on the assessment of reserves and
resources and the project is located in an area close to protected waters and
is thus considered as a low risk area as far as potential typhoon or cyclone
damage is concerned.
    A CGA technical assessment of the project, including a site visit and
review of all available and presented technical information including the BFS
and independent technical report by Behre Dolbear has been conducted over the
last 9 months. Following this review, CGA has compiled the information
contained in this report and verified it with that previously stated in the
various documentation released publicly. The technical team comprised of Geoff
G. Jones - Mining Eng (F.AusIMM.C.P.) 35 years experience, Alf Gillman -
Geologist (M.Aus.IMM) 25 years experience, Bob Bourne - Metallurgist
(F.Aus.IMM) 45 years experience.

    Exploration Potential

    The known resources at Masbate extend over a strike length of 3.5
kilometres trending in a north westerly direction. The exploration effort will
not only be to add to the existing resources base, but to locate additional
high grade zones so as to extend the forecast high grading period of
operations.
    The area immediately south of the Main Vein pit contains underground
workings from past operations. The mineralisation surrounding these previous
workings has not been tested and is considered a highly prospective source of
additional resources.
    The topographic features hosting the Masbate resources are repeated along
strike to the south east where artisinal miners are exploiting the near
surface material. These areas are contained within a 5.25 million hectare
(approximately 8 kilometres x 7 kilometres) Exploration Permit Application
submitted in 2004 (EXPA - 0039 - V) by FRC. The topographic highs will be the
target of an immediate resource generation program by the Company geologists.
    The current resource estimate includes 1.8m ounces of the inferred
material, a large percentage of which is amenable to be upgraded to reportable
status by additional drilling.

    Ownership of the Project

    Thistle's interest in the Masbate Project is held through a number of
local Filipino companies, with Filminera owning title to the project and
Philippine Gold Processing and Refining Corporation ("PGPRC"), responsible for
constructing, owning and operating the key components of the plant. Filminera
will sell the ore to PGPRC on a cost plus basis. In accordance with Philippine
Law, 60% of Filminera is owned by a Philippine company, Open Pit Holding
Limited ("OPH") which in turn is held as to 60% by a local Filipino partner
and 40% by the Thistle group (with Thistle having an option over the 60%
interest in OPH in accordance with Philippine Law). PGPRC is wholly owned by
the Thistle group and there are significant intercompany loans which would be
acquired by CGA in connection with the transaction. The loans would need to be
repaid by Filminera before any dividends can be declared. It is planned that
there will be a reconstruction of OPH prior to closing of the acquisition such
that its assets will be transferred to a new company ("Newco") with the same
ownership structure.

    CORPORATE STRUCTURE
    http://files.newswire.ca/578/Corporate_Structure.doc

    The Original BFS Key Parameters

    The BFS evaluated resources and reserves available for development at
Masbate. An optimum annual production rate was determined and the recoverable
reserves computed using operating costs (mining, processing and
administration), taxes and any other imposts appropriate for a project in the
Philippines. The key assumptions used in the compilation of the resources, the
calculation of the reserves and the BFS financial assessment are as reported
previously in this statement.
    The key results of the original BFS, (before any CGA re-engineering and
optimisation) are set out below.Total ounces produced                                    1.623m oz
    Capital Costs                                            US$ 92.8m
    Recovery                                                 82%
    Annual Production                                        171,000 oz
    Cash operating costs/oz (assuming US$50/barrel oil)      US$339
    L.O.M                                                    9.5 yearsTotal capital costs are estimated at US$92.8 million. The scope of the
estimate covers engineering, procurement services, construction and
commissioning of the proposed 4.0 mtpa project. The base date for the costs is
December 2005. The cost estimates of the study reflect a +/-10-15% feasibility
study level of engineering accuracy.
    Initial CGA due diligence has suggested that the parameters as set out
above can be improved. A number of optimisation initiatives are currently
being undertaken by CGA, including increasing the cut-off grade to 1.0g/t and
a recalculation of the mineable reserves at a gold price of greater than the
assumed US$450, and increasing metallurgical recoveries with the objective of
delivering a project capable of an annual production rate of in excess of
200,000 ounces, at cash costs of around the US$300/ounce level.

    Key Acquisition Terms

    The aggregate acquisition cost for the Masbate Project is US$51 million.
The acquisition is governed by the SPA executed among the Company, Central
Asia Gold Limited (a wholly-owned Bahamian subsidiary of CGA) and Thistle. The
key terms of the SPA are as set out below:- Assets Acquired

        100% of the issued capital of Philippine Gold Limited ("PGO"), 40% of
        Newco, an option interest over the 60% interest in Newco and 100% of
        the intercompany debt owing by PGO to Thistle.

      - Cash consideration                           US$30m

        With payment of US$5m deferred until placement of the final
        development capital, but no later than 6 months following closing.

      - Share consideration                          US$21m

        Approximately 41.5m new shares in CGA will be issued to Thistle (or
        its subsidiary) at an issue price of A$0.65, representing a 16%
        premium to the current market price of CGA shares on the ASX, and
        which will represent 25% of the issued capital of CGA on closing.

        In the event that the share price at and around closing (anticipated
        to be in late March 2007) it less than A$0.65, the number of shares
        to be issued will be increased to represent that number of shares
        that equate to US$21m at then trading prices and exchange rates.

        Under the terms of an investment agreement to be executed between CGA
        and Thistle at the closing of the transaction, the shares issued by
        CGA will be subject to a contractual 12 month hold period and Thistle
        will be entitled to nominate a representative to the board of CGA for
        so long as Thistle continues to hold at least 10% of the outstanding
        CGA shares.CGA has paid a non-refundable deposit of US$0.5m, which will be applied
against the US$25 million to be paid at completion of the acquisition, and has
agreed that it will fund US$1.5m of working capital expenditure and US$2.9m of
direct capital expenditure (which will reduce the capital development budget
for the project) incurred in the intervening period prior to closing, based on
an agreed joint budget and successful completion of the transaction.

    National Instrument 43-101 Compliance

    NI 43-101 is a rule developed by the Canadian Securities Administrators,
which establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects.
    The scientific and technical information and all resource and reserve
estimations regarding the Masbate project contained in this announcement are
based upon the BFS and the Masbate Report prepared by IMC on behalf of
Thistle.
    Readers are cautioned that the conclusions, projections and estimates set
out in this announcement are subject to important qualifications, assumptions
and exclusions, all of which are detailed in the BFS and the Masbate Report.
To fully understand the summary information set out herein, the Masbate Report
should be read in its entirety. A copy of the Masbate Report is available on
the SEDAR website at www.sedar.com under Thistle's SEDAR profile.
    CGA has retained IMC to prepare a NI 43-101 compliant technical report
for CGA, which is expected to be completed and filed in Canada on the SEDAR
website in January 2007.
    Mr Geoff Jones, CGA's general manager, technical, is acting as the
Qualified Person in compliance with NI 43-101 with respect to this
announcement. He has reviewed the contents for accuracy.

    Cautionary Note Regarding Forward Looking Statements

    This announcement includes certain "forward-looking statements" within
the meaning of Canadian securities legislation. All statements, other than
statements of historical fact, included herein including, without limitation,
statements regarding the proposed acquisition by CGA of Thistle's interest in
the Masbate Gold Project; anticipated dates for construction and production,
and other milestones related to the Masbate Gold Project; estimates of capital
and operating costs, recovery rates, production estimates and estimated
economic return; and CGA's future operating or financial performance, are
forward-looking statements. Information concerning mineral reserve and
resource estimates also may be deemed to be forward-looking statements in that
it reflects a prediction of the mineralization that would be encountered if a
mineral deposit were developed and mined. Forward-looking statements involve
various risks and uncertainties. There can be no assurance that such
statements will prove to be accurate, and actual results and future events
could differ materially from those anticipated in such statements. Important
factors that could cause actual results to differ materially from CGA's
expectations include uncertainties related to completion of the proposed
acquisition, which is subject to a number of conditions beyond the control of
CGA, including shareholder and regulatory approval; fluctuations in gold and
other commodity prices and currency exchange rates; uncertainties relating to
interpretation of drill results and the geology, continuity and grade of
mineral deposits; uncertainty of estimates of capital and operating costs,
recovery rates, production estimates and estimated economic return; the need
for cooperation of government agencies in the development of the Masbate Gold
Project; the need to obtain additional financing to develop the Masbate Gold
Project; the possibility of delay in development programs or in construction
projects and uncertainty of meeting anticipated program milestones for the
Masbate Gold Project; and other risks and uncertainties disclosed under the
heading "Caution Regarding Forward-Looking Statements" in CGA's Annual
Information Form for the year ended 30 June 2006, filed with the Canadian
securities regulatory authorities on the SEDAR website at www.sedar.com.

    %SEDAR: 00021775E



For further information: US Contact, Chairman - Mark Savage, Tel: (505)
344-2822, Fax: (505) 344-2922, Email: marksavage@comcast.net; Australian
Contact, President & CEO - Michael Carrick, Tel: +61 8 9263 4000, Fax: +61 8
9263 4020, Email: mcarrick@cagl.com.au