Solomon Gold Sign LOI on Cascabel Project

RNS Number : 0013B

Solomon Gold PLC

10 April 2012

 

10 April 2012

Solomon Gold Plc

("Solomon Gold" or the "Company")

Solomon Gold and Cornerstone Capital Resources Inc. sign Letter of Intent for the Cascabel gold-copper-silver property, Ecuador

Solomon Gold Plc (AIM code: SOLG) and Cornerstone Capital Resources Inc. ("Cornerstone") (TSXV-CGP) (F-GWN) (B-GWN) (OTC-CTNXF) are pleased to announce that they have signed a binding Letter of Intent ("LOI") whereby Solomon Gold may acquire up to 85% of Cornerstone's 100% owned 5,000 hectare Cascabel gold-copper-silver property in northern Ecuador.

The Cascabel project is located approximately 120 km north of Ecuador's capital, Quito, 20 km south of the Colombian border, and 75 km inland from the coastal city of San Lorenzo. The gold-copper porphyry project is located within the Andean western cordillera, host to numerous Tier 1 world class* copper-gold deposits through Chile, Peru, Ecuador and Colombia. Tier 1 deposits in the region include the Junin porphyry copper-molybdenum deposit (982Mt at 0.89% copper), and the La Colosa porphyry gold deposit (468Mt at 0.86 g/t gold). The Cascabel project area contains coincident copper and gold anomalism in soil and rock chip sampling, and contains highly prospective geology and alteration that exhibits porphyry mineralization affinities on a scale that could accommodate a large discovery. Integration of all datasets identifies a very compelling, large gold-copper target.

Gold and copper mineralization (ranging up to 3% copper and 5.9g/t gold) associated with potassic alteration of dioritic intrusions has been mapped over an area of at least 3km x 2km, and is the immediate gold-copper porphyry target of Solomon Gold.

*>10 million ounces of gold and 2.5 million tonnes (5.5 billion pounds) of copper

Under the terms of the LOI (details included below), Solomon Gold has the ability to earn an initial 65% interest in the Cascabel property by making a series of private placements in Cornerstone totaling CAD$850,000, and spending US$7.8 million on exploration over 4 years (including US$800,000 in the first year if drilling commences).

Solomon Gold also has the further right to earn an additional 20%, taking its interest to 85%, by funding further work towards completion of a bankable feasibility study, capped at an expenditure by Solomon Gold of US$20 million.

Malcolm Norris, CEO of Solomon Gold commented, "Today's news follows the Board's outlined strategy of identifying and securing potential Tier 1 gold-copper assets in the major gold-copper belts of the world, where the management team carry considerable expertise, having recently been instrumental in the discovery of the 1.7 billion tonne Tujuh Bukit copper-gold porphyry deposit in Indonesia.

This is an exciting time for Solomon Gold. The Cascabel property demonstrates all the features that we would like to see in an early stage gold-copper porphyry project, and to partner with a highly respected company such as Cornerstone enhances the probability of success. We will commence field work in May and move the project towards the drilling stage as soon as possible."

Cornerstone's President and CEO, Brooke Macdonald said "We are very pleased to have Solomon Gold as our partner on the Cascabel project, their technical team brings solid expertise gained in similar geological environments, and both companies have complementary skills that will benefit the project."

References to Figures are for the version available on the Company's website.

Figure 1: Location of the Cascabel property, in northern Ecuador. The La Colosa deposit contains 13.4 million ounces of gold in resources, and the Junin copper-molybdenum deposit contains 19.3 billion pounds (8.74 million tonnes) of copper.

About Cascabel

The Cascabel property is located approximately 120 km north of Quito and 20 km south of the Colombian border. Access is very good via a paved road from the provincial capital city of Ibarra to San Lorenzo city, on the Pacific coast, and secondary gravel roads to the central part of the 50 km² property. An environmental license for the initial exploration phase was granted by the Ministry of Environment on 12 July, 2011. Exploration work including geology, geochemistry, geophysics and hand-dug trenching and pitting, is allowed for a 4 year period under this environmental license. Cornerstone has complied with all regulations on this project and no further authorization is necessary to initiate field work. A further permit is required for drilling activity and this will be sought as a matter of priority.

Maps showing the geology and exploration results to date may be viewed inthe 'Latest News' section on the website, www.solomongold.com.

An area of approximately 25km² comprises altered dioritic porphyry and andesite, coinciding with anomalous gold and copper in rock chip and stream sediment samples. Within this area gold and copper mineralization (ranging up to 3% copper and 5.9g/t gold) associated with potassic alteration of dioritic intrusions has been mapped over an area of at least 3km x 2km, and is the immediate gold-copper porphyry target of Solomon Gold.

Highlights of assay results for the 179 rock samples (grabs and representative rock chips) announced by Cornerstone on September 13, 2011 show that precious and base metals are anomalous over most of the property area:

Gold	> 0.1 g/t	> 0.5 g/t	Max. value	Average of all values
	93 samples (52%)	26 samples (14%)	5.93 g/t	0.32 g/t
Silver	> 5.0 g/t	> 30.0 g/t	Max. value	Average of all values
	43 samples (24%)	10 samples (5%)	150.0 g/t	7.25 g/t
Copper	> 0.01%	> 0.1%	Max. value	Average of all values
	144 samples (80%)	36 samples (20%)	3.23%	0.13%

Free gold has been identified by panning in most of the streams of the area (49 pan concentrates out of 64 show the presence of gold) with greater numbers of gold grains (10-30) in the headwaters of the Rio Parambas, Rio Cachaco and Rio Cristal. Stream sediment sampling has also identified anomalous catchments that require follow-up.

The Cascabel area is underlain by Upper Cretaceous sedimentary rocks which are overlain by Oligocene to Miocene andesitic flows and breccias. These units are intruded by Miocene age batholiths and stocks of granodiorite and diorite. Major regional tectonic structures in the area strike northeast. One such structure, the Apuela regional fault, transects the southeast part of the Cascabel property. Several mineral prospects which are hosted in the same geological belt, have been identified in the Cascabel district including the Chical (Au-Ag) and Rio Amarillo (Au-Ag-Cu) epithermal prospects located 12 km to the northwest and 12 km to the south of the property respectively. Cascabel is located upstream from an extensive alluvial gold district, Playa de Oro, located 50 km to the west. The Junin porphyry copper-molybdenum deposit (undeveloped NI 43-101 compliant inferred resource of 982 Mt @ 0.89% Cu, 0.04% Mo and 1.9 g/t Ag; 19.3 billion pounds (8.74 million tonnes) of copper) lies 65 km to the southwest in the same geological belt.

Figure 2: Image showing geology, alteration and Copper assays in rock chip samples

Figure 3: Image showing geology, alteration and Gold assays in rock chip samples

Terms of the Letter of Intent

Under the terms of the LOI, Solomon Gold is entitled to earn an initial 65% interest in the Cascabel property by:

(1) making an initial CAD$200,000 private placement in Cornerstone common shares based on the TSXV 30 day volume weighted average price ("VWAP") within 30 days of the execution of a definitive option agreement embodying the terms of the LOI;

(2) spending US$7.8 million over 4 years (including US$800,000 in the first year if drilling commences);

(3) within 60 days of the commencement of drilling on Cascabel, making a private placement in Cornerstone common shares of CAD$150,000 and issuing Solomon Gold ordinary (i.e., common) shares to Cornerstone with a value equal to CAD$150,000 (both based on 30 day VWAP); and

(4) making a final private placement in shares of Cornerstone of CAD$500,000 priced at 30 day VWAP plus 20% on or before the 4^th anniversary of the execution of the definitive option agreement.

All private placements shall be subject to Stock Exchange approval.

Prior to Solomon Gold earning its initial 65% interest, Cornerstone will be the operator of the property on a cost plus 10% basis, and Solomon Gold will direct the technical program.

Following Solomon Gold's earning of its initial 65% interest, Cornerstone and Solomon Gold will enter into a joint venture and will fund their respective proportionate shares of ongoing expenditures and be subject to dilution according to a standard formula. After entering the joint venture Solomon Gold will have the option for one year to elect to earn an additional 20% interest in Cascabel by funding exploration towards the completion of a National Instrument 43-101 ("NI 43-101") bankable feasibility study ("BFS") within 18 months of making such election. The cost to Solomon Gold of the BFS is capped at US$20 million, after which the parties will contribute on a pro-rata basis. If Solomon Gold exercises its right to earn the additional 20% interest, then any amounts spent by Cornerstone prior to that exercise and post Solomon Gold earning its initial 65% interest will be reimbursed to Cornerstone by Solomon Gold at 200% of expenditures incurred. Within 90 days of completion of the BFS, subject to Stock Exchange approval, Solomon Gold shall issue to Cornerstone, at no cost to Cornerstone, ordinary (common) shares of Solomon Gold equal to 2% of the ordinary (common) shares of Solomon Gold then issued and outstanding. If Cornerstone fails to fund its proportionate share of ongoing expenditures and its interest is diluted below 10%, such interest will be converted to a 1% assignable Net Smelter Return ("NSR") on the property. Solomon Gold may purchase the NSR from Cornerstone on the following terms: half of the NSR for US$1.5 million within 90 days following completion of the BFS; and the remaining half of the NSR for US$2.0 million within 90 days following a production decision.

Qualified Person

Information in this report relating to the exploration results is based on data reviewed by Mr Malcolm Norris (B.Sc. Hons, MSc), the Chief Executive Officer of the Company.  Mr Norris is a Fellow of the Australasian Institute of Mining and Metallurgy who has in excess of 25 years' experience in mineral exploration and is a Qualified Person under the AIM Rules.  Mr Norris consents to the inclusion of the information in the form and context in which it appears.

By order of the Board

Karl Schlobohm

Company Secretary

Contacts:

Mr Karl Schlobohm                                                                                                        Tel: [phone]

Solomon Gold Plc (Company Secretary)

[e-mail] 

Mr Ewan Leggat                                                                                                                Tel: [phone]

Fairfax I.S. PLC (Broker)

[e-mail] 

Mr Stephen Weir                                                                                                            Tel: [phone]

RFC Corporate Finance (Nominated Advisor)

[e-mail] 

Mr Dominic Barretto                                                                                                      Tel: [phone]

Yellow Jersey PR (PR & IR)

[e-mail] 

NOTES TO EDITORS

Solomon Gold's exploration projects are located in Queensland, Australia and the Solomon Islands. In Australia, they comprise the Rannes, Mt Perry, Cracow West and Normanby Projects. In the Solomon Islands they comprise the Fauro Project (located on Fauro Island), and the Guadalcanal Joint Venture with Newmont Mining Corporation.

At the Rannes project Solomon Gold has announced Inferred resources of 25.5 million tonnes at 1.0 g/t gold equivalent (gold + silver) for 812,000 ounces of gold equivalent (486, 935 ounces of gold and 13,014,294 ounces of silver; see announcement dated 30 November 2011 for details of the resource statement and gold equivalent ratios). The 2012 exploration program, including drilling to define new ore positions and grow the resource, has commenced.

Exploration continues at Mt. Perry, Normanby and Cracow West with drilling expected to commence in Q2 2012.

In the Solomon Islands, final data from the 2011 exploration program on the Fauro project has been reviewed and plans for 2012 are being prepared. The 2012 Guadalcanal Joint Venture exploration program with NVL Solomon Islands Limited (a subsidiary of NYSE-listed Newmont Mining Corporation) has commenced with drilling on highly prospective gold-copper porphyry targets expected to resume in April 2012.

Solomon Gold's strategy is to be an integrated gold and copper explorer, developer and miner.

Solomon Gold's Board includes accomplished professionals with strong track records in the areas of exploration, mine development in Australasia and Melanesia, investment, finance and law.  Board and Management have significantly vested interests in the Company holding approximately 16.3% of its issued share capital.

Solomon Gold is based in Brisbane, Queensland, Australia.  The Company listed on London's Alternative Investment Market in 2006, under the AIM Code 'SOLG' and currently has 313,381,934 shares on issue and 11,264,000 options exercisable at 50p on issue.  Further details concerning the Company's key projects and personnel can be found at www.solomongold.com.

About Cornerstone

Cornerstone Capital Resources Inc. is a mineral exploration company based in Mount Pearl, Newfoundland and Labrador, Canada, with a diversified portfolio of projects in Canada, Ecuador and Chile, and a strong technical team that has proven its ability to identify, acquire and advance properties of merit. The company's business model is based on generating exploration projects whose subsequent development is funded primarily through joint venture partnerships. Commitments from JV partners constitute significant validation of the strength of Cornerstone's projects. 

Further information is available on Cornerstone's website: www.cornerstoneresources.com 

 

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