Rose Petroleum plc

Joint Venture Agreement, Exploration of Silver/Gold Production, Mexico

7-June-2010

Joint Venture Agreement, Exploration of Silver/Gold Production, Mexico

  • 1,000 tonne bulk sample test of gold/silver ore to be processed through Minerales VANE’s mill, Mexico
  • 15 tonnes/day at 5-6 g/T Au and 100-200 g/T Ag produced by joint venture partner
    • 50 tonnes/day target production
  • Production to be shipped 150km to VANE’s mill pending test results, Mexico
  • Operating profits to be split 60-40% (VANE/Partner, respectively)
  • Further mining opportunities to be examined

Minerales VANE SA de CV (“MV”) the 100% owned subsidiary of VANE Minerals plc has signed a legally binding memorandum of understanding (“MOU”) with Jose and Hector Ruiz (“Partner” or “Met-Sin SA de CV”) forming a joint venture to process gold/silver ores and develop additional precious metal mines in southern Sinaloa, Mexico.

The joint venture will focus initially on four concessions currently controlled by Met-Sin SA de CV, one of which, La Colorada, is currently in production. The MOU provides for a 60-day due diligence period during which a 1,000 tonne bulk sample of La Colorada ore will be processed through MV’s mill at San Dieguito de Arriba (“SDA”) to ensure metallurgical compatibility with the SDA plant. Current production from La Colorada mine, amounting to some 15 tonnes/day at 5-6 g/T Au and 100-200 g/T Ag, will be trucked to MV’s SDA mill which is located approximately 150km to the south. This is planned to be increased with a target production of 50 tonnes/day.

In addition, MV will also oversee the exploration and mine planning of the additional concessions, provide project financing and make available its SDA plant near Acaponeta, Nayarit, Mexico. Operating profits will be split 60:40 (VANE/Partner, respectively) after VANE has recovered 150% of its upfront capital costs, from an initial 80:20 split (VANE/Partner, respectively). The joint venture includes an area of interest of approximate 1,500 km2, within which the owners’ family has controlled properties for several generations.

Commenting today Steve Van Nort, CEO of VANE said: “While we have successfully mined gold-silver in Mexico for 5 years, today’s agreement allows us to significantly increase projected revenues from our milling facility. The joint venture with Partner, enables VANE to quickly increase revenues from the mill and begin a low-cost precious metals exploration/development program in the surrounding region. Following successful test production results, consistent gold-silver ore feed would be immediately available. In addition to La Colorada’s production, the JV’s three additional concessions will be brought forward. I look forward to announcing the test production results including projected recovery rates.”

JV exploration and development potential

Within the four concessions a number of precious metal vein and vein systems are known and have been partially developed:

  • La Colorada concession (14 hectares) - includes the following workings: Salto, La Camichin, Campo Ancho, La Colorada, and La Escondida workings located at different elevations along the same vein(s) system. These workings have opened the principal vein structure intermittently over a horizontal distance of 400 meters and a vertical distance of 130 meters.
  • Maria Fernanda concession (72 hectares) - includes two separate veins, Saltito, which has numerous shallow workings along a strike length of more than 500 meters and the largely unexplored Papayal vein.
  • La Valenzuela concession (75.7 hectares) - covers the lower levels of the La Valenzuela mine.
  • Jorge Luis concession (11.9 hectares) - covers the upper level workings along the La Valenzuela vein 75 meters above La Valenzuela tunnel. 

Although several ore shoots have been intersected in La Colorada drift, current production is from a 2 meter wide vein from the drift which extends upwards to the La Escondida drift, 15 meters above. The potential below the La Colorada drift is excellent based on historic drill results obtained in 2006. Sampling of La Colorada drift beyond the current mining area indicates another ore shoot which has yet to be fully explored or mined but would be accessible from La Colorada drift, by advancing the lowermost Salto tunnel 200 meters to the north along La Colorada vein. Mapping and sampling will be carried out to determine the location of all of the underground workings and the best method to access the known ore shoots to expand production. Diamond drilling will be carried out as necessary.

The Saltito vein system, which is next targeted for production, on the Maria Fernanda concession, exhibits numerous shallow mine workings over a 500+ meter strike length. Historic drilling (2006) has given indications of mineralization extending to depth. Mineralogy and grades are projected to be similar to the ore being produced at La Colorada. Mapping and sampling will be carried out to determine the best method of accessing/developing the ore shoots currently indicated from shallow underground workings. Diamond drilling will be carried out if and when necessary.

Historic mapping from the La Valenzuela vein indicates two ore shoots extending from the upper Jorge Luis drift to 40 meters below the La Valenzuela drift, a vertical difference of 115 meters in which a non compliant NI43-101 resource of 43,000 tonnes at 6.8 g/T Au (9,400 oz. Au) and unspecified silver has been inferred. Mapping and sampling will be carried out to determine the best method of accessing/developing the ore shoots currently indicated from the existing underground workings. Diamond drilling will be carried out as necessary.

Within the 1,500 km2 Area of Interest, numerous other precious metal vein targets are known to Partner and will be explored and evaluated in the course of the joint venture. VANE and Partner’s plan is to develop several additional projects that will be capable of each supplying 50+ tonnes of ore/day. This would justify construction of an additional mill in a location more central to the resources/reserves. Concentrates from that mill would then be processed by leaching and Merrill Crowe precipitation at SDA, which will allow for more extensive marketability of end product to further increase profits.

Kristopher K. Hefton, Chief Operating Officer VANE Minerals (US) LLC, BSc Geology, who meets the criteria of a qualified person under the AIM Rules - Guidance for Mining, Oil and Gas Companies, has reviewed and approved the technical information contained within this announcement.