Teras Resources Inc.

Teras Resources Inc.

October 29, 2007 18:15 ET

Teras Announces Signing of Letter of Intent to Option Properties of Consolidated Goldfields

CALGARY, ALBERTA--(Marketwire - Oct. 29, 2007) - Teras Resources Inc. ("Teras" or the "Company") (TSX VENTURE:TRA): Further to a press release dated June 21, 2007, Peter Leger, President and Chief Executive Officer of Teras is pleased to announce that Teras signed a Letter of Intent ("LOI") dated October 25, 2007 with Consolidated Goldfields Corporation ("Consolidated"), a Montana corporation with offices located in Reno, Nevada to option (the "Option") all 18 of Consolidated's properties (the "Consolidated Properties"), including the Cahuilla Gold Project and the Pyramid Mine, both of which are described below. The LOI is subject to certain conditions including TSX Venture Exchange Inc. ("TSX Venture") acceptance and shareholder approval. The LOI supersedes and replaces the letter of intent Teras signed with Consolidated dated June 11, 2007 and announced in the June 21, 2007 press release. The Option is arm's length. There can be no assurance that the Option will be completed as proposed, or at all.


Pursuant to the LOI, the duration of the Option will be 5 years from the date of signing of a definitive Option Agreement, yet to be negotiated, and Teras can earn a 100% interest in all 18 of the Consolidated Properties by: 1.) spending US$2,500,000 on exploration expenditures on the Cahuilla Gold Project on or prior to the 24 month anniversary of the closing date of the execution of the Option Agreement ("Closing Date"); and 2.) prior to the 5 year anniversary of the Closing Date: A.) issuing to Consolidated US$10 million of 5 year debt instruments of Teras (the "Debenture Payment") with an interest rate of 3% paid in arrears on maturity; and B.) issuing 50,000,000 common shares in the capital of Teras at a deemed price of Cdn $0.23 per share (the "Share Payment"). In addition, if the Option has not been exercised prior to the 24, 36 and 48 month anniversaries of the Closing Date, Teras will pay Consolidated US$500,000 on each of those anniversaries (the "Cash Payments"). Finally, as a condition precedent to the payment of any required Cash Payment, the Debenture Payment and the Share Payment, Teras or Consolidated must receive a National Instrument 43-101 ("NI 43-101") compliant technical report on the Cahuilla Gold Project which discloses a measured or indicated resource of at least 1,000,000 ounces of gold (as determined by multiplying the tons of measured or indicated resource by the grade of such resource), or such lesser amount as is acceptable to the board of directors of Teras and any applicable regulatory authority, including the TSX Venture, with an industry acceptable cut-off grade.


Property and Ownership

The Cahuilla Gold Project is located in northwest Imperial County, approximately two miles west of the community of Salton Sea Beach and thirty miles south of Indio, California, in the eastern foothills of the Santa Rosa Mountains. The project area encompasses approximately 2,100 acres of leases that are controlled by Consolidated.

On December 1, 2006, Consolidated executed a formal Exploration and Mining Agreement for the Cahuilla Gold Project with the Torres Martinez Desert Cahuilla Indian Tribe which controls the majority of the project area and holds the exclusive and irrevocable right to explore, develop and mine reservation lands.

Geology and Mineralization

The Cahuilla Gold Project is localized along the western edge of the Salton Trough, which is characterized by active crustal extension within the San Andres-Modoc-San Jacinto fault system. The Modoc Fault is the most important geologic feature at Cahuilla Gold Project, and Jurassic quartz monzonite comprises the footwall block in the project area. The hanging wall is composed of the Quaternary Palm Springs Formation, a succession of fine- to coarse-grained clastic sediments, rhyolite, siliceous sinter and fanglomerates.

Both the quartz monzonite and Palms Springs Formation host ore-grade mineralization. The northwest to east-west trending Modoc Fault along with north-south and east-west trending subvertical faults host higher grade mineralization and that may have represented pathways for the hydrothermal precious metal-rich solutions. An extensive, disseminated lower-grade halo surrounds the higher-grade gold values. Mineralization is known to extend for approximately two miles along the strike of the Modoc Fault and more than 1/2 mile south of this important geologic feature.

Two dominant styles of gold mineralization are recognized at the Cahuilla Gold Project and include: 1) flat, tabular, extensive bodies disseminated in Palm Springs sediments and volcanics; and 2) structurally controlled, stockwork-associated, higher-grade sheeted quartz veins along fault zones. Intense, widespread silicification commonly accompanies precious metal mineralization. Argillization occurs along the Modoc fault zone, which resulted from both paleo-hot springs activity and younger supergene alteration of unsilicified material.

Previous Exploration

Historically, gold was produced from several mines located in the vicinity of the Cahuilla Gold Project beginning in 1897. Mining activities are believed to have originated in the Cahuilla Gold Project area as early as 1912. Modern exploration began in the late 1980's with Newmont Mining (Newmont) and Homestake Mining (Homestake) drilling 44 drill holes from 1988 to 1989. In 1992 and 1993 Torres Martinez Desert Cahuilla Indians (TMDCI) drilled 56 holes and discovered a significant gold deposit. A total of 112,168 ft of drilling in 214 reverse circulation and diamond drill holes have been completed on the Cahuilla Gold Property in 4 drill campaigns by Newmont, Homestake, TMDCI and Kennecott.

Summary of Drilling Campaigns on the Cahuilla Gold Property

RC RC Drill Core Core Drill
Drill Footage Drill Footage
Campaign Timeframe Holes (ft) Holes (ft)
Newmont 1988 19 10,355 1 451
Homestake 1989 24 12,315 0 0
TMDCI 1991-1992 56 26,055 0 0
Kennecott 1995-1996 110 61,650 4 1,342
Totals 209 110,375 5 1,793

The Cahuilla area has been explored by various operators, including the major mining companies, Newmont, Homestake, and Kennecott. Exploration work conducted in the late 1980's and early 1990's on the Cahuilla property includes geological mapping, rock-chip geochemical sampling, geophysical surveying, and exploration drilling. Newmont and Homestake first explored the Cahuilla project area in 1988 and 1989, and together drilled a total of 44 drill holes, totaling over 23,000 ft, and conducted geologic mapping, rock-chip sampling, and geophysical surveying programs on their respective land packages.

In 1991, TMDCI mapped the property and conducted a rock-chip sampling program. From 1992 to 1993, TMDCI drilled 56 drill holes totaling over 27,000 ft, and discovered, and subsequently defined, a non-NI 43-101 compliant gold resource. Earlier holes intersected moderate widths and grades of mineralization, but drill hole TM-28, reporting 240 ft grading 0.112 oz/ton gold, is considered the discovery hole at Cahuilla.

In 1995 and 1996, Kennecott mapped the Cahuilla Gold Project area in detail, collected rock-chip samples, and drilled 114 drill holes, totaling over 61,000 ft. Canyon Resources conducted preliminary mapping, sampling, and metallurgical investigations while considering whether to purchase the Cahuilla property in 1997. Western Goldfields conducted limited mapping and rock-chip sampling over the project area in 2003.

Exploration Program and Budget

Todd Wakefield, M. SC., MausIMM, of AMEC E&C Services, Mining & Metals ("AMEC"), a qualified person, has completed a NI 43-101 technical report on the Cahuilla Gold Project (the "Wakefield Report") and has recommended an exploration budget of approximately US$2,580,000 for the continued exploration of the Cahuilla Gold Project. For further information on the Cahuilla Gold Project, please see the Wakefield Report which is expected to be filed on www.SEDAR.com in the near future.

Recommended Exploration Program for the Cahuilla Gold Property

Program Cost
RC Drilling 50,000 feet @ $25.00/foot $ 1,250,000
Diamond Drilling 10,000 feet @ $50.00/foot $ 500,000
Sample Assays 12,000 @ $25.00/sample $ 300,000
Drill Supervision $ 60,000
Metallurgical Testwork $ 50,000
Bulk Sample Program $ 100,000
Permitting/Bonding $ 200,000
Road Building, drill sump construction, and reclamation $ 50,000
Data Compilation, audit, verification $ 20,000
Contingency $ 50,000
Total $ 2,580,000

Quality Assurance Program

In preparation of the Wakefield Report on the Cahuilla Gold Project, the following quality assurance and testing procedures were used by AMEC.

AMEC performed data integrity checks on the Cahuilla database and finds the digital database, acquired from the Bureau of Indian Affairs, to be complete and in good condition. The database records were not checked against the original documents because Consolidated is not yet in possession of these documents.

Five rock-chip samples were collected by AMEC from banded quartz vein and silicified outcrops and assayed for gold and silver by fire assay to confirm the presence of gold mineralization on the Cahuilla Gold Property. The assay results from these samples returned gold concentrations up to 0.28 oz/ton gold and 2.57 oz/ton silver and verify that precious metal mineralization in mineable widths occurs on the Cahuilla Gold Project.

Analytical and Testing Procedures

Kennecott and TMDCI used Skyline Laboratories in Tucson, Arizona ("Skyline") as their primary assay laboratory. Industry standard fire assay methods were employed at Skyline to assay for gold and silver. Standards and blanks were inserted by Kennecott into the sample stream at a rate of 3 quality assurance/quality control (QA/QC) samples for every 20 project samples to ensure assay accuracy. The Company does not currently have access to information regarding the assay laboratory used by Newmont or Homestake in their drill campaigns or the sample preparation and assay methods employed.


Management of Teras is in the opinion that the Pyramid Mine is not a material property to the Company at present.

Property and Ownership

The Pyramid Mine is a silver-gold-lead-zinc vein and stockwork system hosted in altered Tertiary dacite and rhyolite tuffs situated along the northeast bounding portion of the northwest-trending Walker Lane structural zone. The Pyramid Mine is located in the Terrill or Holy Cross Mining District approximately 28 miles south of Fallon, Nevada and consists of five unpatented lode claims totalling approximately 100 acres.

Geology and Mineralization

The Pyramid Mine is located in the Terrill Mountains and Holly Cross Mining District which is situated within the northwest trending, regional Walker Lane, structural zone. The Terrill Mountains are largely composed of a several thousand foot sequence of Oligocene-Miocene age rhyolitic tuffs that are intruded by porphyritic andesites, dacites and gabbroic-basaltic plugs, dikes and sills and capped by dacitic flows.

Ore deposits in the Holly Cross Mining District are polymetallic in nature, primarily hosting silver, gold, lead and zinc mineralization. The mineralization appears to occur within three northwest striking en echelon structural zones controlled along a regional N70E structural zone, all within the north bounding Walker Lane fault zone.

Mineralization that has been recognized to date occurs in high-grade pods, shear zones, stockwork-stringers and veins that vary in width from less than one inch to approximately seven feet thick. Recent examination of the Pyramid Mine has identified that beside high-grade underground veins, the broad area of disseminated mineralization lends this property to a possible open-pit, bulk minable operation, as well as a deeper porphyry target.

Previous Exploration

Gold, silver, lead and zinc were produced from the Pyramid Mine since its discovery in the early 1900s, although accurate production records are not available until 1977. From 1977 to 1987, the Silver Arrow Mining Company conducted underground mining operations on a small scale within historically worked portions of the project area. High-grade, precious and base metal ore was mined and processed locally to produce concentrates, which were shipped to the Asarco smelter in East Helena, Montana. A total of approximately 17 tons of concentrates were processed at the smelter containing an average grade of 3.302 opt gold, 477.8 opt silver and 17.5% lead. A small tonnage of direct shipping ore mined in 1987 was also sent to Asarco in Montana, which averaged 0.775 opt gold, 182.1 opt silver and 5% lead.

In the early 1990's, the Pyramid Mine was acquired by Silver State Mining & Exploration, Inc. During underground exploration programs conducted in 1993 and 1994, high-grade precious and base metal values were detected in underground workings.

Exploration by Consolidated

During 2007, Consolidated conducted both underground and surface exploration programs. Samples collected throughout the claim block from the surface consisted of both grab and channel samples. A total of seventeen samples were collected from existing underground workings on the 100 and 225 foot levels and consist of both grab and channel samples. Assays were completed at Inspectorate Laboratories in Reno, Nevada and sample results were seen as encouraging.

On October 18 2007, Consolidated press released that they collected two bulk samples during the underground exploration program which were utilized to conduct preliminary scoping metallurgical test work. Sequential lead/zinc rougher flotation testing was conducted on each sample and lead rougher concentration showed excellent results from the initial tests. McClelland Labs, Inc. of Reno, Nevada conducted the metallurgical test work.

The sampling program done by Consolidated was not done for NI 43-101 compliant purposes. Since the management of Teras is of the opinion that the Pyramid Mine is not material to the Company it has not done significant due-diligence at this time regarding the Pyramid Mine.

Postponement of Exploration Program and Budget

Other than as noted above, pursuant to the LOI, until a NI 43-101 compliant technical report on the Pyramid Mine has been submitted to, and accepted by, the TSX Venture, both Consolidated and Teras have agreed that no further exploration or development work (other than for the preparation of a NI 43-101 technical report) will be conducted by either party on the Pyramid Mine.


In addition, subject to regulatory approval, upon the execution of the Option, Thomas (Toby) Mancuso, current President of Consolidated, and Thomas Callicrate, current Vice President of Exploration at Consolidated will join the Board of Directors of Teras. Mr. Mancuso holds a Masters degree in Geology and has worked for various companies over the past 25 years, including Kennecott Rawhide Mining Company, Kennecott Exploration Company, Flambeau Mining Company, Freeport McMoRan Gold Company, and Western Goldfields. Mr. Callicrate is a certified Professional Geologist and has generated or been associated with discoveries such as the Midas-Gold Crown Deposit (Midas, NV), the Gemfield (Goldfield, NV), Midway (Tonopah, NV), Red Rock (Fish Lake Valley, NV), Castle (Tonopah, NV), Big Springs (Elko, NV) and the Wood Gulch (Elko, NV) deposits as well as Eureka Creek (central AK) and Lincoln Hill (Rochester, NV). Mr. Callicrate has also been involved with several companies over the years, including but not limited to Kennecott Exploration Company, FMC Gold Company, Freeport Exploration, Western Goldfields, Romarco Minerals Inc, Nevada Star Resource Corp and New Gold Inc.


Consolidated is incorporated in Montana and trades on the Pink Sheets of the OTC (Over the Counter) Market under the symbol CDGF. Consolidated has 19,263,638 shares outstanding with Thomas Mancuso, Thomas Callicrate, and Becky Corigliano, all of whom are directors and the CEO, VP Exploration and CFO, respectively, of Consolidated, being the largest shareholders of Consolidated, with each holding approximately 2,300,000 shares of Consolidated.


Teras will have to do a financing in the near future to full fill its obligations under the LOI. The details of the financing will be announced in a press release in near future.


Union Securities Ltd. has agreed to act as sponsor in connection with the Option. An agreement to sponsor should not be construed as any assurance with respect to the merits of the Option.


Trading in the shares of Teras will be reinstated at the opening of markets on Wednesday, October 31, 2007 under the symbol TRA.


Completion of the Option is subject to a number of conditions including, but not limited to, TSX Venture acceptance and shareholder approval. There can be no assurance that the Option will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in a management information circular or filing statement, if applicable, to be prepared in connection with the Option, any information released or received with respect to the Option may not be accurate or complete and should not be relied upon. Trading in securities of Teras should be considered highly speculative.

All information contained in this news release with respect to Teras and Consolidated was supplied by Teras and Consolidated, respectively, for inclusion herein, and with respect to such information, Teras and its board of directors and officers have relied upon Consolidated.

Thomas E. Callicrate, BSc (Geol), a qualified person, has reviewed and verified the technical information contained in this news release through a review of the NI 43-101 prepared by Todd Wakefield of AMEC on the Cahuilla Gold Project (September 24, 2007).

Teras will continue to update shareholders on the progress of future corporate news, financings, and project developments.

Stock Symbol TRA on the TSX Venture.

All statements, other than statements of historical fact, included herein are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed in the Company's documents filed from time to time with the TSX Venture, the Alberta Securities Commission, the British Columbia Securities Commission and the Ontario Securities Commission and maintained on www.sedar.com.

The TSX Venture has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Teras Resources Inc.
    Peter Leger
    (403) 852-0644