Carpathian Gold Inc.

Carpathian Gold Inc.

May 05, 2010 06:00 ET

Carpathian Concludes US$30 Million Gold Sale Agreement With Macquarie Bank

TORONTO, ONTARIO--(Marketwire - May 5, 2010) - Carpathian Gold Inc. (TSX:CPN) (the "Corporation" or "Carpathian") is pleased to announce that it has concluded a gold purchase and sale agreement (the "Agreement") for US$30 million with Macquarie Bank Limited ("Macquarie Bank") for its RDM gold project (the "Project") in Brazil. Closing is expected to take place upon delivery of final legal opinions and Brazilian central bank and regulatory approvals, all of which is in process and expected to be obtained shortly.

Under the terms of the Agreement, Macquarie Bank will make upfront cash payments (the "Upfront Payments") totaling US$30 million in return for which it will have the right to purchase 12.5% of the gold produced from the Project at a price of US$400 per ounce of payable gold delivered ("Delivered Gold Ounce"). Based on the current life of mine model (as determined from the Preliminary Economic Assessment ("PEA") previously released on August 12, 2009), the effective total proceeds per ounce to Carpathian per Delivered Gold Ounce will be approximately US$730. The price per Delivered Gold Ounce to Carpathian will be subject to an inflation escalator as well as upside price participation for Carpathian of 25% of every Delivered Gold Ounce delivered at a price above US$1,850 per ounce. Macquarie Bank will also have the right to extend its participation to purchase 12.5% of the additional gold produced from any underground operation within the mining concession and five contiguous exploration licenses, as well as any open pit and/or underground operation on the balance of the property ("Expanded Production"), by contributing 12.5% of the capital required to develop the Expanded Production and paying US$450 per Delivered Gold Ounce. This price per ounce will also be subject to adjustment by the price escalation and inflation factor described above.

"The early stage and participatory nature of this financing by Macquarie Bank clearly demonstrates their confidence in the Project and confirms our belief to the effect that Carpathian has a robust gold project at Riacho dos Machados that can be developed quickly" said Dino Titaro, President and CEO. "Macquarie Bank has entered into this Agreement following completing its due diligence as a result of which it is providing an early stage financial commitment to the Project which represents a key component of our overall financing strategy. The upfront cash payment in conjunction with the additional purchase price received for the gold when delivered to Macquarie Bank, has a margin that well exceeds the total cash costs, inclusive of capital, for the development of the resource as defined in the recent Preliminary Economic Assessment".

The Corporation will apply these funds towards the advancement and construction of the Project, beginning with the commencement of civil works on the project and the ordering of long lead time equipment in accordance with the specifications of the feasibility study, which is currently being completed. The first payment of US$7.5 million will be available to Carpathian immediately upon delivery of, inter alia, legal opinions and registration of the Agreement in Brazil. The second payment of US$7.5 million will be available upon, inter alia, the issuance of the construction license, (the Licenca Instalacấo or "LI"). It is anticipated that the granting of the LI will be in place on or about July of this year. The final payment of US$15.0 million will be available when, inter alia, the new updated NI 43-101 resource estimate is completed and the balance of the Project construction financing has been secured.

The Agreement also provides financing flexibility as it allows for a senior ranking secured financing to be put in place if needed. The Agreement, which has a thirty year term, does not provide for any guarantees as to the number of ounces that will ultimately be produced from the Project apart from an initial completion guarantee. As consideration for entering into the Agreement, Carpathian will issue Macquarie Bank 5.0 million common shares. The full agreement will be filed on once the transaction is closed.

Carpathian is in advanced discussions with a number of financial institutions regarding debt financing for the Project and is also evaluating other forms of non-equity funding.

About Carpathian

The Corporation is an exploration and development company whose primary business interest is developing near-term gold production on its 100% owned Riacho dos Machados Gold Project in Brazil, which is currently in the feasibility study stage, along with progressing its exploration and development plans on its 100% owned Rovina Valley Au-Cu Project located in Romania. The RDM Gold Project, based on the PEA is expected to be a +100,000 ounce per year gold producer at a relatively low cash cost. The Project is currently in the Feasibility Study stage with this study expected to be completed by the end of the second quarter of 2010. As previously announced on April 14, 2010, the initial license to being civil works on the Project has been granted.

Forward-Looking Statements: This press release includes certain statements that may be deemed "forward-looking statements". Forward-looking statements are frequently characterized by words such as "plan", "expect", "Project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. All statements in this release, other than statements of historical facts, that address future exploration drilling, exploration activities and events or developments that the Corporation expects, are forward-looking statements. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. There can be no assurance that forward-looking statements will prove to be accurate, as results and future events could differ materially from those anticipated statements. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

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