Rose Petroleum plc

Production commences at high-grade gold-silver mine in Mexico

22-December-2014

Rose is pleased to announce that production has commenced on schedule and budget at the high-grade gold-silver Mina Charay project in Mexico

Rose Petroleum plc, the AIM-listed (Ticker: ROSE) natural resources company, is pleased to announce that production has commenced on schedule and budget at the high-grade gold-silver Mina Charay project in Mexico. The project is held through the Company's wholly owned subsidiary, Minerales VANE S.A. de C.V. ("MV"), which has a joint venture agreement (the "JV" or "Agreement") with Minera Pafex S.A. de C.V. ("Pafex"). The terms of the JV specify a 60:40 (MV:Pafex) profit split on production.

Highlights:

  • Mining commenced on 18 December 2014 and operations will continue throughout the Christmas period
  • Planned mining rate is scheduled to reach approximately 100 tonnes per day by the end of the first quarter 2015 with a forecast production cash cost of US$699 per ounce of gold equivalent or US$9.33 per ounce of silver equivalent
  • Total resources at Mina Charay of 29,000 oz gold and 173,000 oz silver contained in 90,000 tonnes of ore based on in-house re-evaluation at current metals prices
  • In-house estimate of mineable grade (including dilution) of 10 g/T (grams per tonne) gold and 60 g/T silver
  • Projected minimum mine life of three years

The Mina Charay project is located near the town of Los Mochis in western Sinaloa, Mexico, on the Charay, Charay 2 and San Luis concessions. During 2004 and 2005, MV drilled 27 holes at the project under an earlier option agreement with Pafex. MV and Pafex entered into the current JV agreement in September 2014 under which MV is responsible for developing and mining the Mina Charay deposit and profits are split 60:40 (MV:Pafex). After entering into the JV agreement, MV immediately started development work and the application process for securing a blasting permit. Initial development work was carried out to open up the vein and mining operations commenced on 18 December 2014. Ore will be transported to MV's San Dieguito de Arriba Mill ("SDA") at Acaponeta in the State of Nayarit, will continue throughout the Christmas period. Mining and transportation of ore are being carried out by contractors under supervision of MV. Processing of the ore at our SDA Mill will commence in January 2015.

The Mina Charay Mine is projected to reach a production rate of 100 tonnes per day at a fully absorbed cash cost of US$699 per ounce of gold equivalent or US$9.33 per ounce of silver equivalent over the life of the mine based on gold and silver prices of US$1,200/oz and US$16/oz, respectively. It is forecast that full daily production will be reached by the end of the first quarter of 2015.

Group CEO Matthew Idiens commented: "I am very pleased we have commenced operations at the Mina Charay Mine, within the forecasted time and budget, which is testament to the hard work and commitment of our team in Mexico. The Mina Charay project is a high-grade deposit and the cash flows from operations will be used to help fund the significant operational activity that is currently going on in the Company."

Idiens added: "With respect to operations, on the mining side we are awaiting assay results on the core from the drilling at the TC porphyry copper project in New Mexico, USA. With Mina Charay expected to make a significant contribution in terms of cash flow soon, we expect to be able to drill the Tango porphyry moly and copper targets in Mexico in the coming months. On the oil & gas side, the drilling permit has been received for the 1-34 well in the Uinta Basin and drilling will commence imminently. We have also commenced completion operations at our 16-42 well in the Paradox Basin. Although the recent oil price decline has overshadowed a lot of what Rose has achieved as a group during 2014, with our low breakeven costs of below US$20 BOE in both the Uinta and Paradox Basins, we have much to look forward to, and be optimistic about, in the coming year. "