VANCOUVER, Dec. 10 /CNW/ - Red Dragon Resources Corp. ("Red Dragon") is pleased to announce that it has obtained the approval from the TSX Venture Exchange (the "Exchange") for the transaction with MapGold Resources (B.V.I.) Limited to acquire up to an 80% interest in a company that will indirectly hold 14 mineral rights covering an area of 56,790 hectares (the "Mineral Rights") divided into four separate gold properties (the "Properties") located in Amazonas State, Brazil. The definitive agreement for this transaction was signed by MapGold and Red Dragon on September 19, 2009 (the "Definitive Agreement"), as announced by Red Dragon on September 24, 2009.
The Properties occur within the Tapajos Mineral Province ("TMP"), which encompasses the Tapajos River and its drainages. The TMP underwent wide spread alluvial gold mining by local miners (garimpeiros) in the last 40 years resulting in the largest gold rush in the world in the later part of the twentieth century. Many of the alluvial deposits are nearly exhausted, however since the early 1990's the primary source of these deposits have been explored by junior and senior mining companies. Exploration to date has identified a number of 1 million ounce or greater gold deposits that are amenable to low cost, bulk mineable open pit extraction.
The Properties are located in eastern Amazonas State along the border with Para State in northern Brazil. The Properties from north to south are Doze de Outubro, Rosa de Maio, Bandeirantes and Maues. They cover historic alluvial workings (garimpos) and have been partially explored by Mapex Mineraçao Ltda. ("Mapex") and CRC do Brasil Mineraçao Limitada ("CRC") and their previous joint venture partner. Exploration work to date includes airborne magnetic and radiometric surveys, stream, soil, and rock-geochemistry, induced polarization surveys, auger drilling and geological mapping for total expenditures of approximately US$3 million.
The Rosa de Maio property is the most advanced of the four properties with a number of drill ready targets. One of these targets consists of a large gold in soil anomaly that is approximately 5 kilometres in diameter and is underlain by altered granite containing disseminated sulphides and quartz-sulphide stockworks. Grab samples of this mineralization commonly grades several grams per tonne gold, and the style and tenor of mineralization is similar to many of the deposits currently being explored in the TMP. The soil anomaly is coincident with a flexure in a large northeast trending regional scale fault, as are a number of other soil anomalies on the property. Buriti creek, which flows eastward into the Tapajos River, cuts the northern part of the anomaly. The creek and its tributaries were the focus of extensive alluvial mining in the 1980's and 1990's with un-official gold production estimated to be 0.5 million ounces.
The Exploration Program will consist of drill testing the anomalies on the Rosa de Maio property, while soil geochemistry, geophysics and mapping are extended to cover the other three properties. Drilling will be extended to the other properties as exploration results are received, interpreted and prioritized.
Under the terms of the Definitive Agreement, Mapex and CRC are transferring their 100% interest in the Mineral Rights to a Brazilian company named Maues Mineraçao Limitada ("Maues Brasil"), which is a wholly-owned subsidiary of Maues Minerals (B.V.I.) Limited ("Maues BVI").
Red Dragon through its wholly-owned subsidiary Cabral Resources (B.V.I.) Limited ("Cabral") will earn a 49% interest in Maues BVI upon reimbursement of US$1,200,000 for consideration of previous expenditures and spending US$3,000,000 on exploration over the next 3 years.
Cabral has the right to increase its shareholding interest in Maues BVI to 80%, by exercising a call option ("Cabral's Call Option"), within six months of earning its 49% shareholding interest and paying MapGold an additional US$7,800,000 and, failing such payment, Cabral's shareholding interest will be automatically reduced to 15%. Upon exercise of Cabral's Call Option, MapGold will have the right to take all or any portion of such US$7,800,000 in shares of Red Dragon at a price of Cnd$0.48 (the closing market price for Red Dragon's share on September 18th 2009, the date immediately preceding the execution of the Definitive Agreement). The election by MapGold to take shares of Red Dragon could result in a change of control of the Red Dragon. If an election by MapGold to take shares of Red Dragon would result in a change of control of Red Dragon, such election would be subject to Red Dragon obtaining prior shareholder approval.
Maues BVI has granted MapGold a 2.0% net smelter return royalty (the "MapGold NSR Royalty") on the Properties, all in accordance with the Definitive Agreement. In addition, MapGold has the right to put to Cabral and Cabral is obliged to acquire from MapGold, and Cabral has the right to call and MapGold is obliged to sell one-half of the MapGold NSR Royalty (i.e. 1.0%) according to a formula set out in the Definitive Agreement related to the size of a known mineral resource.
After Cabral has exercised Cabral's Call Option and acquired an 80% interest in Maues BVI, the parties shall fund the activities of Maues Brasil according to their respective shareholding interest in Maues BVI. If MapGold cannot finance its part, Cabral will use its best effort to assist MapGold to obtain finance for its shareholding interest or will finance 100% of the required amount. In such case, MapGold will only receive revenue from the Properties after Cabral has been repaid 100% of the amount financed for MapGold plus applicable interest.
The option to acquire the Properties was assigned by Mapex BVI, according to the terms and conditions of an assignment agreement between Red Dragon and Mapex BVI, where Red Dragon paid a total amount of US$350,000 and 1,250,000 common shares of Red Dragon as part of the acquisition cost.
The transaction has received final approval from the Exchange.
Garnet Dawson, M.Sc., P.Geo. (British Columbia), Vice President, Exploration for the Company and a Qualified Person, as defined by National Instrument 43-101, has reviewed and approved the technical disclosure contained in this News Release.
About Red Dragon Resources Corp.
Red Dragon Resources Corp. is a Canadian based company with a focus on acquisition, exploration and development of mineral properties. The Company has a balance sheet of Cdn$9 million in cash and cash equivalents of Cdn$9.1 million in investments as of September 30, 2009.
Some statements in this news release contain forward-looking information, including without limitation statements as to planned expenditures and exploration programs. These statements address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. Such factors include without limitation the completion of planned expenditures, the ability to complete exploration programs on schedule and the success of exploration programs.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or the accuracy of this news release.
SOURCE Brazilian Gold Corporation
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