Rose Petroleum plc

Mexico high-grade mine joint venture agreement

6-September-2014

Mexico high-grade mine joint venture agreement

Rose Petroleum (AIM: ROSE), the AIM-listed natural resources company, is pleased to announce that its wholly-owned subsidiary Minerales VANE S.A. de C.V. ("MV") has entered into a joint venture agreement (the "JV" or "Agreement") with Minera Pafex S.A. de C.V. ("Pafex") in connection with Pafex’s concessions located near the town of Los Mochis in western Sinaloa, Mexico. The Charay, Charay 2 and San Luis concessions host the high-grade Mina Charay gold and silver mine where MV drilled 27 holes during 2004 and 2005 under an earlier option agreement with Pafex (as described in the Company’s announcements of 31 August 2004, 18 February 2005 and 18 July 2005). 
 
Highlights:
  • 21 drill intervals on high-grade gold/silver veins including 66.2 g/T Au over 0.6m true width (Hole 21 Vein#2) and 42.3 g/T Au over 2.0m true width (Hole 18 Vein#1)
  • Total resource of 29,000 oz gold and 173,000 oz silver contained in 90,000 tonnes based on in-house re-evaluation at current metals prices
  • In-house estimate mineable (including dilution) grade of 10g/T Au and 60g/T Ag
  • 60:40 (MV:Pafex) profit split on production
  • Projected minimum 3-year mine production life
MV and Pafex have now entered into a JV whereby MV will be responsible for developing and mining the Mina Charay deposit and split profits 60:40 (MV:Pafex) after all operating costs are deducted. Under the terms of the JV, whilst operating costs will ultimately be deducted prior to the payment of any profits generated by the mine, MV has assumed full liability for these until such time as the cash flow from the mine covers these. MV has already commenced activities including mine design with consultant mining engineers Physical Resource Engineering, Inc. (“PRE”) and surface work in preparation for development and mining as well as renewal of the blasting permit. Actual development and mining will commence once the blasting permit is received which is anticipated to be in the next 30-60 days. As the property has historically had a blasting permit, no issues are anticipated in the renewal of this permit. All other permissions are in place to proceed with mining. Ore produced from the project will be transported 600 kilometres to MV’s San Dieguito de Arriba Mill in Acaponeta, Nayarit.
 
Group CEO Matthew Idiens commented:  "With the Oil & Gas side of the Company doing so well it is pleasing to be able to provide such a positive update on our mining operations. The Mina Charay project is a high grade, shallow target, which provides an excellent opportunity to increase mill grades and assure stable production over at least the next three years.  We have a good understanding of the project due to our previous work programme. We expect the project to provide additional cash flow and provide additional capital for exploration in the near term." 
 
Background to Mina Charay
 
Mina Charay is known to contain multiple veins including the Veta de la Mina del Padre. It is located in the long-established San Blas Mining District in a part of the Rio Fuerte Valley known as “The Buried Peaks” which represent the westernmost bedrock exposures of the Sierra Nevada Occidental Mountain Range.
 
In August 2004, MV entered into an option agreement with PAFEX to acquire the Mina Charay gold and silver prospect. The intent of the programme under the 2004 option agreement was to evaluate the property for a large disseminated gold deposit. The results of that programme did not confirm disseminated mineralization, but rather high-grade veins. The price of gold and silver at that time were approximately US$450/oz and $7/oz, respectively, and MV elected to withdraw from the agreement.   However, high-grade veins have now become very attractive with the significant improvement in gold and silver prices.
 
During 2004 and 2005, VANE completed a total of 27 diamond drill holes on the Mina Charay vein system varying in depth from 24 to 103 metres and averaging 58 metres. Inclined holes intersected the nearly vertical vein system in 19 of the 27 holes to provide 32 mineralized intercepts. Drilling tested the system over a strike length of some 240 metres. The deepest intercepts of the vein system are approximately 50 metres below surface.
The drill hole assay results are tabulated below:
 
MINA CHARAY
DRILL HOLE INTERCEPTS
 
VEIN #1
 
True width
 
 
Hole ID
metres
Au, g/T
Ag, g/T
1/1A
1.0
26.0
290.1
2
0.8
10.1
30.9
3
0.5
3.7
49.7
4
2.3
6.1
69.9
7
2.6
8.8
65.0
8
2.1
20.4
70.4
16
1.9
11.3
235.3
17
1.0
15.0
347.8
18
0.8
16.0
76.9
18
2.0
42.3
39.8
20
0.7
3.4
168.0
21
3.4
3.9
96.1
22
3.1
14.5
34.6
23
1.4
16.7
72.8
24
0.8
5.1
51.4
25
1.0
43.4
77.5
 
VEIN #2
 
True width
 
 
Hole ID
metres
Au, g/T
Ag, g/T
2
1.2
5.5
34.3
14
0.2
11.9
24
20
6.8
16.5
131.7
21
0.6
66.2
147.4
25
1.4
19.3
171.5
 
In 2005, VANE contracted International Mining Consultants Inc. (“IMC”) to complete an internal reserve estimate from its drill hole programme results.  IMC calculated a reserve of 38,000 tonnes at a grade of 16 g/T Au and 100 g/T Ag, based on vein continuity across 16 of the 27 holes drilled, which contains 19,500 ounces of gold and 122,000 ounces of silver. MV recently re-evaluated the drill data internally given the substantially improved metals prices and a total resource estimate was determined as 55,000 tonnes at a grade of 16 g/T Au and 100 g/T Ag with an average vein thickness of 1.5m. In accounting for mining dilution, the resource estimate is 90,000 tonnes at the grade of 10 g/T Au and 60 g/T Ag, which would yield 29,000 ounces of gold and 173,000 ounces of silver during a mine life of three years. The previous drilling appeared to close off the mineralization along strike, but the potential for additional mineralization down-dip has not been established.
 
The geology of the Mina Charay region and of the prospect itself is characterised by a thick section of volcanics of Tertiary age. Mina Charay occurs at the southwest foot of Cerro Del Mina, a conical hill composed of northwest dipping andesites. The southern flank of this hill is cut by a steep fault zone believed to be the same structure that controls mineralization at Mina Charay, particularly that of the strongly mineralized vein called Veta de la Mina del Padre. That fault extends into a zone of brecciated andesites and rhyolites, which are intensely silicified, fractured and cut by a stockwork of quartz veinlets with concentrations of gold and silver as well as geochemically anomalous values of lead, zinc, molybdenum and mercury.  Other veins, known to occur in the immediate area, some parallel with the Veta de la Mina del Padre (Charay) vein, have not yet been explored and provide further exploration potential on the property.

Kristopher K. Hefton, BSc Geology, Chief Operating Officer Rose Petroleum plc, who meets the criteria of a qualified person under the AIM Rules - Guidance for Mining, Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement. VANE Minerals, as operator of the project, is responsible for the contents of this press release.