SOURCE: Colombia Goldfields

October 25, 2005 14:08 ET

Colombia Goldfields Signs Letter of Intent to Acquire Interests in Marmato Mountain

VANCOUVER, BC -- (MARKET WIRE) -- October 25, 2005 -- Colombia Goldfields Ltd. (OTC BB: CGDF) is pleased to announce the signing of a Letter of Intent ("LOI") with Investcol Limited, ("Investcol"), a private Belize company, to acquire up to 100% of Investcol's wholly owned Belize subsidiary.

The Letter of Intent ("LOI") is to purchase an interest in RNC (Colombia) Limited ("RNC"), a wholly owned subsidiary of Investcol Limited ("Investcol") and a corporation incorporated under the laws of Belize. RNC's wholly owned subsidiary, Compania Minera de Caldas, a corporation incorporated under the laws of Colombia, holds valid mining licenses in properties located in Colombia and referred to as the Zona Alta portion of the Marmato project.

The non-binding LOI outlines a proposed transaction where Colombia Goldfields will have the ability to, in a series of four transactions, acquire all of the issued and outstanding stock of RNC in increments of twenty-five percent (25%). Under the terms of the proposed transaction, we would not be obligated to acquire all of the issued and outstanding stock of RNC and are able to acquire a lesser percentage of the issued and outstanding stock of RNC without incurring any penalty.

As evidence of our good faith to enter into a definitive agreement, we advanced to Investcol $200,000 as a fully refundable deposit. This proposed transaction is contingent upon the parties due diligence and the execution of a definitive agreement. The parties have agreed to use their reasonable efforts to execute a definitive agreement on or before November 15, 2005.

RNC owns 100% of Compania Minera de Caldas, a Colombian corporation that owns mining licenses on the Zona Alta property located on Marmato Mountain, Department of Caldas, Colombia. Under the proposed terms of the agreement, Colombia Goldfields can acquire, in 25% stages, up to a 75% interest in RNC by issuing up to 7 million shares of restricted common stock to Investcol and investing up to US$20.2 million in the project over the next 12 months. The funds proposed to be advanced, will be used by RNC to complete the purchase of mining licenses on Marmato Mountain, to invest in infrastructure and social programs in the Marmato district, and to complete a feasibility study to determine the economic and social viability of the project.

If Colombia Goldfields completes the purchase of the 75% ownership interest in RNC described above and an acceptable feasibility study has been completed, Colombia Goldfields will then have the option to purchase the remaining 25% of RNC from Investcol at fair market value.

Investcol is the manager of the properties located in the Zona Alta portion of the Marmato project and has over the past 15 years acquired and developed several gold bearing deposits throughout Latin America. They have successfully developed many of these projects by conducting detailed exploration and feasibility work, and subsequently raising sufficient capital to build and operate a number of operating gold mines.

"During my recent visit to Marmato I was encouraged to see the vast involvement of the local residents in the gold mining industry. The gold mining industry in Marmato has supported many local residents for several generations. Our management believes that the current and past techniques of mining and extracting gold in Marmato has been inefficient, potentially resulting in a significant amount of remaining gold deposits," said Dan Hunter, CEO of Colombia Goldfields Ltd.

A previous mining company completed a scoping study on Marmato Mountain in the late 1990s before vacating the country due to the terrible civil conditions that existed at that time. Mineral Resource Development Inc. completed the study in 1998 based on 44 drill holes and extensive underground sampling of crosscuts and surface sampling. The report highlighted an "inferred geological resource and mineral potential" projection of approximately 155 million tons of gold-bearing ore grading 1.07 gAu/t and 5.65 gAg/t. The report does not meet the current 43-101 reporting standards and a full feasibility study will need to be completed. Compania Minera de Caldas has already begun preparatory work, and over the past 18 months has conducted a social evaluation of the district including a mining census to determine the social viability of constructing an open-pit gold mine. There is no assurance that the feasibility study to be completed will be consistent with favorable prior reports on Marmato Mountain. The Colombian government has recently issued a Mining Code (Law 685 of 2001), which guarantees the legal framework protecting such foreign investments.

For the full terms of the deal, interested investors are encouraged to review the company's recent 8-k filing at www.sec.gov. and visit our website at www.colombiagoldfields.com.

About Colombia Goldfields:

Colombia Goldfields intends to acquire and develop a portfolio of advanced precious metals projects in the underdeveloped mineral-rich country of Colombia providing shareholders with maximum leverage in a time of increasing economic uncertainty. Previous to this announcement, the company acquired an option on three advanced projects located approximately 6 kilometers from the base of Marmato Mountain. The company can earn a 100% interest in the projects, known as the Caramanta concessions, by spending USD$3milion over a three year period.

This release contains forward-looking statements that are based on the beliefs of Colombia Goldfield's management and reflect Colombia Goldfield's current expectations as contemplated under section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. When used in this release, the words "estimate," "project," "believe," "anticipate," "intend," "expect," "plan," "predict," "may," "should," "will," "can," the negative of these words, or such other variations thereon, or comparable terminology, are all intended to identify forward-looking statements. Such statements reflect the current views of Colombia Goldfields with respect to future events based on currently available information and are subject to numerous assumptions, risks and uncertainties, including, but not limited to, risks and uncertainties pertaining to development of mining properties, changes in economic conditions and other risks, uncertainties and factors, which may cause the actual results, performance, or achievement expressed or implied by such forward-looking statements to differ materially from the forward-looking statements.

Contact Information

  • On behalf of the board

    Daniel Hunter -- Chairman & CEO
    Colombia Goldfields Ltd.
    Suite 610-375 Water Street
    Vancouver, British Columbia
    Canada V6B 5C6
    Phone: 604-691-6518
    Fax: 604-801-5575
    info@colombiagoldfields.com