- Kerr-Addison mine produced more than 11 million ounces of gold from 1938 to 1996
- Kerr-Addison property adjoins Armistice's McGarry Mine gold project on which it is about to commence work to prepare for production in late 2011
- Significant mineralized inventory identified on Kerr-Addison property in 1996 report (not compliant with current NI 43-101 requirements)
TORONTO, Dec. 23 /CNW/ - Armistice Resources Corp. (Armistice) (TSX: AZ), which expects to begin production in 2011 from its McGarry Mine gold project in the Kirkland Lake area of northeastern Ontario, today announced that it has signed a definitive five-year option agreement for the purchase of up to 100 percent of the mineral rights of the former Kerr-Addison mine property.
The Kerr-Addison property adjoins on the east the McGarry Mine gold project on which Armistice is about to commence work to prepare for production. Some of the underground workings from the Kerr-Addison Mine extend onto the McGarry property. The Kerr-Addison property covers approximately four miles of strike straddling the heart of the Larder Lake - Cadillac Break (the Break). The Break is a major crustal feature with which all the gold deposits from Val d'Or to Kirkland Lake are directly or indirectly associated. Total gold production from mines along the Break exceeds 95 million ounces. Mines along the Break continue to be prolific gold producers. The full length of the Break continues to be the focus of intense gold exploration and new mine development.
Armistice Resources had previously signed a Letter of Intent with a group of private investors to provide the company one year to complete due diligence and an additional 6 months to sign a definitive option agreement for the purchase of up to 100 percent of the ownership of the former Kerr-Addison Mine workings and related mineral properties totalling in excess of 2,000 acres.
"During the past year, we have been carrying out our due diligence process, including a review of the vast historical geological data available on the Kerr-Addison property," said Todd J. Morgan, Armistice's President and Chief Executive Officer. "While we have a great deal of additional work to do in examining the wealth of data available, we feel even more excited and positive about the potential of this option to acquire than we did when we announced last January that we had signed the intent letter.
"We have been particularly interested in the potential for resource definition outside the immediate area of the previous workings at the Kerr property. Our review so far has focused on near-surface targets along strike and across strike from the previous production stopes. In particular, we have identified priority targets for drill testing in the Mill Zone, south of the former production areas, the Chesterville East Zone, to the east, the Green Giant Zone to the north, and the area between the Kerr and McGarry properties.
"The financings that we recently announced will provide us the funding needed in 2011 to undertake further exploration, including drilling programs, on the Kerr-Addison property," Mr. Morgan said. "With this option to acquire and the progress that we are making on bringing the McGarry Mine gold project into production, Armistice Resources is taking significant steps forward in building our company. Our strategy continues to be to build a portfolio of mineral resource properties that provide synergies that will enable us to create long-term and sustainable value for our shareholders."
Terms of the Transaction
As previously announced, on signing the Letter of Intent, Armistice Resources paid $100,000 to the group of private investors. With the signing of the definitive five-year option agreement, Armistice Resources will make the first of five annual payments of $500,000 on or before January 14, 2011 to the private investors for a total of $2.5 million, and will issue 2,000,000 common shares to the group in due course. Armistice Resources also will be required to pay a 2% royalty on gold production, except for an area identified in an internal report prepared by AJ Perron Gold Corp. dated October 21, 1996, as containing "proven and probable reserves" (not compliant with national instrument 43-101) which, are subject instead to a 3% royalty.
The Kerr-Addison Property
The former Kerr-Addison Mine was one of the biggest gold producers in North America, producing more than 11 million ounces of gold from 41 million tons of ore during its 58-year history from 1938 to 1996. The mine closed in 1996 during a period of pronounced low gold prices even though gold-bearing mineral resources of more than five million tons grading an average of about 0.14 oz per ton were reported in internal documentation.
As noted in Armistice's January 8, 2010 news release, after the shutdown of production in 1996, AJ Perron Gold Corp. completed an internal inventory of mineral resources for the Kerr-Addison Mine dated October 21, 1996 and authored by Chief Geologist M. Hasan, M.Sc., FGAC and General Mine Superintendent R.R. Gagnon, P.Eng. (the Kerr Report). The review in the Kerr Report was not compliant with the current National Instrument 43-101 or CIM Mineral Resource standards and therefore cannot be relied upon. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources.
In addition, the review for the Kerr Report was made at a time when the surface and underground infrastructure was still in place and serviceable. This is no longer the case since all surface structures, including the hoisting plant and mill, have been demolished and the mine workings are flooded. Therefore, Armistice Resources does not consider the mineral resources data to be current. The historical mineral resources in the Kerr Report were summarized as:
|Proven + Probable Reserves
||@ 0.110 oz Au / ton
||84,500 oz Au
||@ 0.124 oz Au / ton
||161,800 oz Au
|Additional Mineral Inventory
||@ 0.150 oz Au / ton
||457,600 oz Au
The categories "proven and probable reserves" and "possible reserves" are NOT the same categories used in sections 1.2 and 1.3 of National Instrument 43-101. This information is not current or reliable until further work is completed and reviewed by a qualified person.
The authors of the Kerr Report state that the "parameters and formulas used for ore reserve calculations have been historically established and are: calculated on longitudinal sections using a tonnage factor of 12 cubic feet per ton; applying a minimum dilution of 15 percent at nil grade; applying a cut-off grade of 0.06 ounces gold per ton; and cutting high values to 0.72 ounces gold per ton in the carbonate ore and 3.00 ounces gold per ton in the flow ore."
"The eastern two-thirds of the property has received very little exploration work since the property was not consolidated under a single owner until the early 1990s," reports Erik Andersen, P. Eng., Armistice's Vice-President and Chief Operating Officer. "Aside from a few very old drill holes in this region, only 10 drill holes with wedges have been drilled over this 2.5 mile strike extent of the Break. These drill sections were at 1,000-foot spacings and many did not reach their intended target.
"Armistice considers the eastern two-thirds of the property to be virtually unexplored. For example, underground exploration drifts on the 1,600 and 2,650 foot Levels east of the former producing areas discovered the Chesterville East Zone in which the historical record reports drill intersections of 1.4 oz/t over 9.5 ft, 0.16 oz/t over 20.0 ft, and 0.42 oz/t over 14.0 ft amongst about two dozen holes with gold zone intersections, confirming the potential for the discovery of new ore zones to the east of previous production areas," said Mr. Andersen.
To view a map of the Kerr Option Property, please go to http://files.newswire.ca/670/Armistice.pdf
Erik Andersen, P.Eng., Vice-President and Chief Operating Officer of Armistice Resources and a Qualified Person as defined by National Instrument 43-101, has reviewed and approved this news release.
About Armistice Resources Corp.
Armistice Resources, a Canadian-based exploration and development company, expects to begin gold production in 2011 from its McGarry Mine in the Kirkland Lake area of northeastern Ontario. The McGarry Mine gold project is located in Virginiatown on the prolific Larder Lake-Cadillac Break that extends 200 km east-west straddling the Ontario and Quebec border and that has produced 95 million ounces of gold. The McGarry Mine is adjacent to the former Kerr-Addison Gold Mine that has produced more than 11 million ounces of gold. The McGarry Mine gold project consists of 33 contiguous patented mining claims, including three licenses of occupation, totaling 484 hectares. The McGarry Mine gold project is fully permitted and all equipment and systems at the site have been brought up to standards, including its installed mining plant. Armistice Resources is listed on the Toronto Stock Exchange (Symbol: AZ) and currently has 86,836,899 common shares issued and outstanding. To find out more about Armistice Resources, please visit the company's website at www.armistice.ca.
This news release contains forward-looking statements, including completion of the equity offering, the bridge loan and the project loan facility, current expectations on the timing of the commencement of production, and the execution of an option agreement with respect to the Kerr-Addison property. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Such statements are based on current expectations, are subject to a number of uncertainties and risks, and actual results may differ materially from those contained in such statements. These uncertainties and risks include, but are not limited to, the strength of the Canadian economy; the price of gold; operational, funding, and liquidity risks; the degree to which mineral resource estimates are reflective of actual mineral resources; the degree to which a pre-feasibility study gives sufficient grounds for classifying the indicated mineral resources as probable reserves; and the degree to which factors which would make a mineral deposit commercially viable are present; the risks and hazards associated with underground operations. Risks and uncertainties about Armistice Resources' business are more fully discussed in the company's disclosure materials, including its annual information form and MD&A, filed with the securities regulatory authorities in Canada and available at www.sedar.com and readers are urged to read these materials. Armistice Resources assumes no obligation to update any forward-looking statement or to update the reasons why actual results could differ from such statements unless required by law.
SOURCE Kerr Mines Inc.
For further information: For further information:
Investor and Media Relations
Richard W. Wertheim
Wertheim + Company Inc.
416-594-1600 ext. 223