Aurcana to acquire silver-zinc mine - Top quality engineering group with extensive property portfolio to be Aurcana's partner
February 6, 2006
Aurcana Corporation ("Aurcana"or the "Company") is pleased to announce it has signed a letter of intent ("LOI") with Reyna Mining & Engineering S.A. de C.V. ("Reyna") to acquire the La Negra silver-zinc-copper-lead mine in Queretaro State, Mexico, approximately 250 km northeast of Mexico City. This is a significant acquisition for Aurcana as the 800 tonne per day La Negra mine and mill have been well maintained and the "skarn-hosted" polymetallic deposit has historically reported grades of approximately 160 grams/tonne silver, 2.83% zinc, 0.94% copper and 0.91% lead, contained in approximately 1.2 million tonnes. Originally reported as reserves by Penoles S.A. de C.V. ("Penoles") in 2000 based on metal prices at that time, the reader should be cautioned that the historic reserve does not conform to National Instrument 43-101 requirements for reporting purposes; as such the Company is not treating these historic estimates as current reserves or resources. These estimates should not be relied upon until they have been verified by further due diligence and by the Company's "Qualified Person". All necessary infrastructure is in place and the mine has been fully developed on five levels, is accessed via adits and ramps and the plant consists of three stages of crushing, an 8' x 10' ball mill and conventional floatation to produce zinc, copper and lead concentrates.
The exploration potential at La Negra is considered to be very good, both around existing ore zones and also at depth. Penoles developed a very detailed exploration model outlining potential blocks, location and number of holes to be drilled and a budget. In the La Negra district a general metal zonation has been recognized whereby lead -- zinc rich "manto" type bodies overlie silver rich lead -- zinc "chimney" type bodies. At greater depth the copper content increases significantly as seen on the Cristo Rey 2 level where stopes have historically reported grades of up to 353 grams/tonne silver, 5.69% copper and 1.26% zinc. Penoles reported diamond drilling results from 90 metres below the Cristo Rey 2 stope that graded 323 grams/tonne silver, 5.79% copper and 2.37% zinc over a width of 7.8 metres. Readers are however cautioned that this potential grade is an estimate and further due diligence and work is required by Aurcana to verify the grade and widths.
Under the terms of the LOI, Aurcana and Reyna will form a joint venture whereby Aurcana will own an 80% interest in La Negra and Reyna will own 20%. Reyna has a Letter of Intent to acquire 100% of the La Negra mine from the vendor of the mine. Aurcana will be responsible for the cost of the acquisition and up to US$3.0 million in expected costs and working capital to bring the mine back into production. The total cost of the acquisition is US$3.0 million of which US$2.0 million is to be paid to the vendor on March 15, 2006 and US$1.0 million to be paid on March 15, 2007. Under the terms of the LOI, Aurcana is required to pay Reyna US$25,000 on execution of the LOI, US$500,000 and US$725,000 on the date which is twelve and twenty four months respectively from the execution of a definitive joint venture agreement. Aurcana will issue to Reyna three million shares of which one million shares will be issued on the execution of a definitive agreement and one million shares on each of the dates which is twelve and twenty fours months, respectively, following the execution of a formal joint venture agreement. The principals of Reyna will also be consultants to Aurcana and as such will be entitled to up to one million share purchase options with terms standard to options granted to consultants. The above terms will be subject to regulatory approval, title due diligence and the formation of a definitive agreement with the vendor of the mine.
A finder's fee, which is subject to regulatory approval, will be payable on this acquisition.
Reyna is a private Mexican mining group focussed on the acquisition and development of mining projects in Mexico. Reyna's principals consist of mining engineers and geologists and have worked for some of Mexico's largest mining companies. In addition to their mine development and operational skills the principals of Reyna have put together a property portfolio in Mexico that would be available to Aurcana to compliment this acquisition.
ON BEHALF OF THE BOARD OF DIRECTORS OF
"Ken Booth", President
For further information, please contact:
Ken Booth, President
Phone: (604) 331-9333
Web site: www.aurcana.com
The statements made in this News Release may contain certain forward-looking statements. Actual events or results may differ from the Company's expectations. Certain risk factors may also affect the actual results achieved by the Company.The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy and accuracy of this Release.