Carpathian Gold Inc.

Carpathian Gold Inc.

December 07, 2007 09:20 ET

Carpathian Gold Adds Second Major Exploration/Development Platform With the Acquisition of the Riacho Dos Machados Gold Project, Brazil

TORONTO, ONTARIO--(Marketwire - Dec. 7, 2007) - Carpathian Gold Inc. (TSX:CPN) ("Carpathian" or the "Corporation") is pleased to announce that it has entered into a letter of intent (the "LOI") outlining the terms for a definitive purchase agreement to acquire from Zoneplan Limited and Repalla Inc. (the "Vendors") a 100% interest in the Riacho Dos Machados gold project (the "Proposed Acquisition") which the Vendors hold through Melbourne Ventures Fund LLC. The project covers a 22,000 hectare land package comprising 12 exploration areas and one mining concession which incorporates all mineral and surface rights and existing infrastructure. This acquisition is in accordance with the Corporation's strategy to expand its portfolio with high quality projects.

The benefits to Carpathian of the Proposed Acquisition are as follows:

- Addition of a second, strong exploration/development platform: Located in the State of Minas Gerais, Brazil, this project is situated on a favourable greenstone belt which hosts gold mineralization associated with shear-zones known to extend regionally for tens of kilometres within similar settings.

- Permitted brownfield project with historic gold production: A high grade gold oxide deposit was previously mined from an open-pit by Companhia Vale do Rio Doce ("CVRD"), producing approximately 180,000 ounces of gold between 1989 and 1997. The historic grade of this oxide zone is 1.89 g Au/t. The surface oxide zone has not been fully exploited and is known to extend immediately to the south of the past mining activities. Similar gold geochemical anomalies are known to extend along a 10 kilometre shear zone to the north and have not been evaluated.

- Historical gold resource: Although not yet.NI 43-101 compliant, there is a historical resource of 3.77 million tons of gold mineralization at an estimated grade of 4.61 g Au/t (560,000 ounce historical resource) was calculated by CVRD in 2001, based on CVRD's analysis and experience in mining the project. This is a historical resource estimate only and is indicative of the presence of possible significant gold mineralization and is not being treated by the Corporation as a current mineral resource and as such should not be relied upon. It lies immediately below the previously mined oxide zone with metallurgical test work indicating a recovery rate of +90%. The metallurgical work whle considered reliant was not carried out by the Corporation and as such should not be relied upon. This zone was not exploited by CVRD, nor was its full extent defined. It is open at depth as well as along strike. Additional exploration potential from two previously identified nearby targets also remain to be tested.

- Existing infrastructure: Development of the Riacho dos Machados project will benefit from the extensive existing infrastructure, including: buildings, roads, power, water access and ownership of the surface rights.

- Geographic diversification of the project portfolio: The project is located in a well known mining friendly area in the state of Minas Gerais, Brazil.

- Increased gold exposure: The combination of this project with Carpathian's existing Rovina License project in Romania provides the Corporation with excellent upside potential from two very large land portfolios, which enhance the profile of the Corporation.

- Near-term gold production potential: Management believes that it may be possible to commence gold production from Riacho dos Machados in 2009. The proposed acquisition is consistent with the Corporations strategic direction to focus on near term cash flow generation to fund longer term development and exploration. Production is expected from additional surface oxide material from the existing open-pit and along strike as well as a new underground operation either utilizing an existing exploration shaft to a depth of 120 metres, or ramp access assuming the presence of economic mineralization can be established.

Commenting on the Proposed Acquisition, Mr. Dino Titaro, President and CEO, stated, "This acquisition represents an exciting opportunity for Carpathian to accelerate its goal of becoming a near term gold producer without the burden of a large capital expenditure requirement as is typical with development assets. We believe the upside potential of this land package is excellent and that this acquisition is accretive to existing shareholders and enhances the portfolio by complementing our existing exploration and development projects in Romania. Carpathian remains committed to the Rovina Project and will utilize the expanded in-house expertise that it develops from this acquisition to assist in its development".

Definitive Terms for the Acquisition

As consideration for the purchase of the Riacho Dos Machados gold project, the Corporation will issue 75 million of its common shares to the Vendors. The Corporation may also issue an additional 25 million common shares (the "Additional Common Shares") subject to the Corporation establishing a NI 43-101 compliant mineral resource estimate (all categories) within the project area which, in the aggregate amount to greater than 1,000,000 ounces. The Additional Common Shares are issuable in two tranches as follows: 12,500,000 shares being issuable to the Vendors upon the Corporation establishing one or more NI 43-101 compliant mineral resource estimates (all categories) which in the aggregate, amount to 750,000 ounces of gold and the second tranche of 12,500,000 shares being issued upon the Corporation establishing a further NI 43-101 compliant mineral resource estimate (all categories) of 250,000 ounces of gold representing an aggregate of 1,000,000 ounces. The Additional Common Shares may also be issuable in the event that the Corporation completes any business combination, including a takeover bid, amalgamation or merger, or sells, directly or indirectly, all or a substantial portion of the Riachos Dos Machado gold project. Normal course due diligence will be undertaken prior to the signing of a definitive agreement.

The definitive agreement will also provide that the Vendors will be entitled to nominate one director to the Corporation's board of directors and will have the right to participate in any future equity financings of the Corporation in order to maintain their percentage interest in the Corporation's issued share capital. The Vendors, as a group, currently own 18% of the Corporation's issued and outstanding common shares and as a result the Proposed Acquisition will be a related party transaction as defined under NI 61-501 and will therefore be subject to approval by the majority of the minority shareholders of the Corporation at a meeting to be called for this purpose in the early part of 2008. Furthermore, completion of the Proposed Acquisition will be subject to regulatory approval, due diligence and the execution of a definitive agreement between the Corporation and the Vendors. Information material on the proposed transaction will be sent to all shareholders in due course. The Board of the Directors of the Corporation has unanimously endorsed this transaction. Furthermore, a Special Committee has also been established to, among other things, ensure the fairness of this transaction to shareholders. To this effect, the Special Committee will obtain a fairness opinion from its own advisors which will report directly to the Committee.

The Corporation has engaged Canaccord Capital Corporation as its financial advisor for the Proposed Acquisition.

Resulting Carpathian Capitalization

Subsequent to the consummation of the Proposed Acquisition, the Corporation's capital structure will be as follows:

Common shares issued and outstanding 206.9 million
Options and warrants outstanding 15.7 million
Fully diluted common shares 222.6 million

The Corporation has approximately Cdn$17 million currently on hand.

Carpathian Business Description

The primary business of the Corporation, prior to the closing of this Proposed Acquisition, has been the exploration and development of precious metals projects, principally its Rovina gold-copper project, which consists of two gold-copper porphyry systems located in central Romania. The Corporation holds a 100% interest in the Rovina License, a 93.5 km2 land package in the historic gold producing "Golden Quadrilateral" mining district, located in the south Apuseni Mountains of central Romania. The Rovina License contains the two porphyry systems, namely, the Colnic Au-Cu porphyry and the Rovina Cu-Au porphyry prospect, which is located approximately 2.5 km to the north of Colnic. Collectively, these two deposits comprise an indicated resource of 68.0 million tonnes grading 0.64 g Au/t and 0.12% Cu, in addition to an inferred resource of 160.3 million tonnes grading 0.33 g Au/t and 0.24% copper (see press release dated May 29, 2007).

The Corporation also holds a 100% interest in the Oravita License which covers an area of approximately 132 km2 located in south western Romania on which Carlin style gold mineralization has been outlined along with Cu porphyry showings and porphyry-Au skarn showings.

Mr. Titaro is the qualified person (as defined in National Instrument 43-101) overseeing the design and implementation of the present exploration programs. He is responsible for preparing the information contained in this news release.

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.

Contact Information

  • Carpathian Gold Inc.
    Dino Titaro
    President & CEO
    (416) 368-7744 (CAN)
    (416) 260-2243 (CAN) (FAX)
    Carpathian Gold Inc.
    Mike O'Brien
    Manager Investor Relations
    (416) 368-7744 (CAN)
    (416) 260-2243 (CAN) (FAX)
    Eric Leboeuf
    Investor Relations, Montreal
    (514) 341-0408 or 1-866-460-0408
    (514) 341-1527 (FAX)