August Metal Corp.
TSX VENTURE : AGP

August Metal Corp.

December 15, 2009 10:47 ET

August Metal Corp. Signs Letter of Intent to Option Las Lajas Gold Property, Sonora State, Mexico

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 15, 2009) -

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August Metal Corporation ("August" or the "Company") (TSX VENTURE:AGP) has entered into a letter of intent for an option to acquire the 16,310 hectare Las Lajas gold project, located in southern Sonora, Mexico. The state of Sonora contains numerous precious and base metal deposits and producing mines, and has a strong mining history and culture with favorable permitting and infrastructure.

The Property and Option Terms

The Las Lajas gold project is comprised of seven mineral concessions controlled by Minera Goldzone S.A. de C.V. ("Minera Goldzone") the Mexican subsidiary of Goldzone Exploration Inc. ("Goldzone") a private British Columbia corporation. Three of the concessions are wholly owned by Minera Goldzone and four of the concessions under option to Minera Goldzone.

By a letter of intent signed on December 11, 2009, Goldzone has agreed in principle to grant August the right and option to acquire 100% of the issued and outstanding shares in the capital of Goldzone (the "Option") for option payments over 5 years totaling $750,000 in cash and 5,000,000 units, consisting of a common share and a 2 year warrant to purchase an additional share of August at $0.20. In addition, August would also assume the option payments on the four concessions under option to Minera Goldzone, totaling USD$1,335,000 over 6 years with $75,000 payable in 2010. August would also assume approximately $756,000 of Goldzone's debt incurred in the course of acquisition, maintenance and exploration of the Property. August would satisfy $500,000 of the aforementioned debt through the issuance of 5,000,000 units at deemed price of $0.10 to the debtors, with each unit consisting of one common share and one warrant to purchase one additional common share at the price of $0.20 for two years. The balance of approximately $256,000 would be payable within two years. In the event that August satisfies the Goldzone debt but does not exercise the Option, August will have the right to acquire an undivided 51% legal and beneficial interest in the Property upon payment to Minera Goldzone of $1,000 plus any applicable Mexican taxes for a period of six months after any termination of the Option.

The Property is subject to a 1.25% net smelter returns royalty ("NSR") in favour of the Optionor. Two of the concessions are also subject to a 2% NSR in favour of the previous property owner, of which 1.25% can be purchased for $2 million. The other mineral concessions under option to Minera Goldzone are subject to a 1% or 1.5% NSR and all the NSRs can be purchased outright for a total of USD$1,950,000.

Part and Parcel Private Placement Financings

The Company intends to proceed immediately with a private placement of up to 3,000,000 special warrants at $0.09 ("Sidecar Special Warrants") to raise up to $270,000 to fund ongoing project expenses. Subject to regulatory approval of the transaction, each Sidecar Special Warrant will be exchanged for one August common share and one warrant exercisable for two years to purchase one additional August common share for $0.15. In the event that transaction does not complete, the Sidecar Special Warrants will be exchanged for promissory notes in Goldzone with a maturity date of December 31, 2011 and bearing interest at the rate of 10% per annum, and August shall have no obligation or liability whatsoever to the holders of the Sidecar Special Warrants or to Goldzone.

August will also be arranging a private placement of up to 2,000,000 units for general working capital at a price of $0.10 per unit, comprised of one common share and one warrant exercisable for two years to purchase one additional August common share for $0.20. The Sidecar Special Warrants and the private placement will comprise a "Part and Parcel Financing" under the policies of the TSXV. The Option Agreement and the financings described above are subject to regulatory approvals and securities issued pursuant to the Option Agreement or the financings will be subject to a four month hold period. Finder's fees in accordance with the rules of the TSXV may be paid in connection with the private placements. There can be no assurance that such financings will be completed as announced or at all. No person will become an insider or control person as a result of the Option Agreement or private placements.

The Las Lajas Project

The 16,310 hectare Las Lajas Project consists of 7 contiguous mining concessions and is located in Southern Sonora State, Mexico, approximately 15 kilometers (9 miles) north of the city of Navojoa (27 degrees 16.5´ N and 109 degrees 23' W) in an area of low topographic relief (maximum elevations on the Property are on the order of 300 meters). The bedrock geology consists of a metamorphosed sequence of intercalated rhyolitic volcanic rocks, siliciclastic to calcareous sedimentary rocks, minor quartzite and coal seams of probable Triassic-Jurassic age that appears to correlate with the Barranca Group elsewhere in Sonora. The east-southeast directed El Terco Thrust Fault is probably the major control of mineralization in the Las Lajas District, with gold-rich quartz veining localized along strong structural features. Porphyritic intrusions of Jurassic to Tertiary age cross-cut the metamorphic rocks, and may also be related to gold mineralization.

The Las Lajas property has numerous high grade showings with gold and gold-arsenic mineralization, to date only exploited by local miners. The Project was previously Operated by Minera Glamis and Minera Phelps Dodge in the 1990's. Work completed by the previous Operators included geological mapping, 2,000 soil samples, 28 line kilometers of induced polarization geophysical surveys, 50 shallow percussion drill holes concentrated on one area, and 5 reverse-circulation drill holes scattered over the property. No systematic exploration has been conducted on the property since 1999, and many targets generated by the previous exploration programs remain untested. The Las Lajas Project exhibits strong geological, geochemical and structural similarities to the Mesquite (Western Goldfields) and Picacho bulk tonnage gold deposits in southeastern California.

The company has assembled a strong professional Mexico-based support team who will continue to assist in all phases of permitting, exploration and development of the Las Lajas Project. Currently, a soil sampling, prospecting and mapping program is underway. In addition, satellite imagery and orthorectified topographic maps are being prepared for the entire concession area. The Company has retained Michelle Robinson, MASc., P.Eng., of Mazatlan Mexico to complete an NI 43-101 report on the property.

The foregoing geological disclosure has been reviewed and approved by Michelle Robinson, MASc., P.Eng., a qualified person for the purpose of National Instrument 43-101 Standards for Disclosure for Mineral Projects.

On behalf of the Board of Directors,

Reza Mohammed, Director and President

This release may contain forward-looking statements or statements that relate to programs that involve a number of risks and uncertainties. Actual events or results could differ materially from the Company's expectations and projections.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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