VANCOUVER, Aug. 20 /CNW/ - Red Dragon Resources Corp. (the "Company")
announces that it has signed a heads of agreement ("HOA") with Compania Minera
Viento Norte ("MVN"), a Chilean mining company, to acquire a variable interest
in and to a group of mineral concessions in northern Chile known as the Valle
Hermosa Project (the "Project").
The Valle Hermosa Project is located approximately 245km northwest of
Santiago, the capital city of Chile and 43km northeast of the town of Illapel
in Chile's fourth region. The Project is located in a valley at 1,100m above
sea level (ASL) with surrounding hill sides up to 1,500m ASL. It is accessible
by paved road and electrical power can be obtained from the Chilean Central
Interconnected System (SIC) approximately 14km to the south.
The Project is underlain by Cretaceous age intrusive and
volcano-sedimentary rocks that exhibit porphyry style hydrothermal alteration
and mineralization. The extensive alteration is visible over a 16km(2) area
and is mostly argillic. Historic and active mine workings are located in the
southwest and northeast margins of the valley with the adjacent hillside where
outcrop exposure is more prevalent. Samples from surface working and dumps
consist of quartz and sulphide veined argillically altered medium grained
felsic intrusive rock. Disseminated and vein sulphide are mostly weathered to
limonite and malachite, however samples from short shafts often contain
sulphides (pyrite, chalcopyrite, and bornite) that are commonly replaced by
chalcocite, suggesting the potential for a zone of supergene enrichment.
Pursuant to the HOA, the Company has agreed to purchase up to 50% of
MVN's 100% interest in the Project by way of an option agreement (the
"Option") enforceable under the laws of the Republic of Chile, which will
provide for installment payments over the next five years of up to a total of
US$9 million. The first installment, payable on signing of the Option is
US$300,000. The Company plans an initial geophysical survey with follow-up
drill testing in the first year.
In addition to the US$9 million, the Company, at its discretion, is
entitled to acquire an additional 20% interest in and to the Project by making
a further cash payment of US$7,500,000 within eight years of the execution
date of the HOA, provided a Bankable Feasibility Study has been concluded at
such time. In the event that the Company acquires the additional 20% interest,
it will also have a right of first refusal to acquire MVN's remaining 30%
interest in the Project.
In consideration for the Option, the Company has also agreed to
exploration and property acquisition expenditures over the first five years of
US$8,250,000 that will be allocated as to 70% for exploration expenditures and
30% for the costs to acquire mining rights and surface rights for the Project.
The Company and MVN have agreed to incorporate a company in Chile to hold
their respective beneficial interests in the Project.
The TSX Venture Exchange neither approved nor disapproved the contents of
this news release.
For further information:
For further information: Red Dragon Resources Corp., Alvin Jackson,
Chairman and Chief Executive Officer, Tel: (604) 602-8188; Harbour Financial
Inc., Brian N. Barbour, Tel: (403) 813-5832