Rose Petroleum plc

Forming Joint Venture Following Successful Gold-Silver Ore Test Run, Mexico

6-October-2010

Forming Joint Venture Following Successful Gold-Silver Ore Test Run, Mexico

In April of this year VANE entered into a binding Memorandum of Agreement ("MOA") to form a Joint Venture ("JV") with the Ruiz brothers to develop four high grade mines in the La Rastra district and to process the gold-silver ore from the JV at the Company's San Dieguito de Arriba ("SDA") mill. The Company today announces positive results from the first ore produced from the Colorada mine and processed at the VANE SDA mill. Following these results, the Board of VANE has made the decision to formalize the JV and increase production at Colorada to continue treating the resulting ore at the SDA mill.

Highlights

  • Mining results from the Colorada mine, operated by the Ruiz Brothers
    • 2,500 tonnes of gold-silver ore extracted between April and July 2010
    • Presently mining at 900 tonnes per month
    • Targeted goal of 2,000 tonnes per month by the end of the second quarter 2011
  • SDA Milling results
    • 1,132.7 tonnes of Colorada ore milled, averaging 6.1 g/T gold and 485 g/T silver (anticipated grade was 5g/T gold and 150g/T silver)
    • Sample milled produced 22.071 tonnes of concentrate carrying 169.7 g/T gold and 14.956 kg/T silver
  •  Commissioning of cyanide leach-Merrill Crowe plant anticipated Q1 2011

The gold/silver milling facility owned by VANE Minerals plc, through its wholly owned Mexican subsidiary Minerales VANE SA de CV has successfully been in operation since November 2007. The addition of the cyanide leach-Merrill Crowe facility, anticipated during Q1 2011, will result in a facility unique to west-central Mexico and will offer a viable alternative to custom smelting, not only for VANE's mines but for numerous other small operations located within several hundred kilometres.

The agreement with the Ruiz brothers, constitutes the first stage of what the Board of VANE believes could be a significant growth area for the Company: milling of gold-silver feedstock from both owned and third-party mines. The first producing asset is the Colorada mine, in the La Rastra District, which, between April and July 2010, produced some 2,500 tonnes of gold-silver ore. As part of the due diligence for the establishment of the JV, a two week test run at the SDA mill processed a total of 1,132.7 tonnes of ore from Colorada, averaging 6.1 g/T gold and 485 g/T silver, better than the anticipated grades of 5g/T gold and 150g/T silver. This mill run produced 22.071 tonnes of concentrate carrying 169.7 g/T gold and 14.956 kg/T silver. Mill tailings which are relatively high in gold and silver as a result of the oxide nature of the ore have been segregated for future reprocessing. With testing now complete, sale of the Colorada concentrates via VANE's ore buyer, Nexxtrade, is complete. The Board of VANE believes these positive results demonstrate that a highly economic feedstock from the La Colorada mine can be consistently produced and fed through the mill and consequently are commencing regular production. The Colorada mine is presently producing at the rate of 900 tonnes per month and is targeted to produce at 2,000 tonnes per month, by the end of Q2 2011.

Under the terms of the JV agreement, the net profits split will be 80:20 (VANE/partner, respectively) until VANE has recovered 150% of any outlaid development/capital costs. Thereafter, net profits are split 60:40 (VANE/partner, respectively).

Steve Van Nort, CEO, commented: "Today's milling results demonstrate the economic viability of treating partner companies' gold-silver ores through our SDA mill in west-central Mexico. By being able to secure high grade feed stock through similar joint ventures, our objective is to significantly expand our profitable milling operations by the end of the first half of 2011. I look forward to updating the market in the near future as to our monthly milling progress and our other expansion initiatives in Mexico".

L. Clark Arnold PhD Geology, Director of Geology VANE Minerals plc, 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.

 

Joint Venture Agreement and Exploration Potential

The joint venture initially focuses on three concessions currently controlled by the Ruiz brothers, of which, La Colorada, is currently in production. In addition, exploration and mine planning of the additional concessions will be examined.

Within the three 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.
  • 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 the 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 the 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, by advancing the lowermost Salto tunnel 200 meters to the north along the 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 as 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 NI43-101 compliant 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 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 the Ruiz brothers and will be explored and evaluated in the course of the joint venture. VANE's and the Ruiz brothers' 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.