BROOMFIELD, CO, June 29, 2011 /CNW/ - 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
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
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,
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
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
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