SOURCE: Colorado Goldfields Inc.

March 13, 2008 08:00 ET

Colorado Goldfields Inc. Announces Letter of Intent to Acquire 75% Interest in Producing Mexican Silver Company

LAKEWOOD, CO--(Marketwire - March 13, 2008) - Colorado Goldfields Inc. (OTCBB: CGFI) (the "Company") today announced the signing of a Letter of Intent to acquire 75% of the shares of Besmer, S.A. de C.V. ("Besmer"), of Durango, Mexico, from existing shareholders.

Besmer is currently operating the El Barreno, Remedios, and La Zacatecana mines in the states of Zacatecas and Durango, Mexico, and also operates the Bocas Hacienda flotation mill near Suchil, Mexico.

The El Barreno Mine is located in close proximity to Pan American Silver Corp.'s El Conjuro silver property in the Chalchihuites mining district in Zacatecas State. The Chalchihuites mining district has a very long history of high grade silver production dating from the Spanish conquest to the present time. The El Barreno property has multiple silver-lead veins and mantos. Colorado Goldfields intends to examine options to increase production at El Barreno as part of its due diligence.

The Remedios Mine is also located in the Chalchihuites mining district in Zacatecas State. The Remedios Mine has two known lead-silver bearing mantos, with reported ore grades up to 30% lead and varying silver content. Multiple silver-bearing veins are located on the property. Colorado Goldfields intends to examine locations for a potential new production portal as part of its due diligence.

The La Zacatecana Mine property is located at La Parilla, Durango State. The La Zacatecana property is adjacent to First Majestic Silver Corp.'s La Parilla property, which is reported to mine and mill approximately 800 tons per day. The mineralization at La Zacatecana is silver and base metal in vein.

Besmer's mill at Bocas Hacienda processes silver-bearing ores through differential flotation. The mill currently ships its concentrates to the Penoles smelters located at Torreon, Mexico. This mill is currently processing ore from Besmer's three mines and accepts ore from small local miners. Colorado Goldfields intends to examine the feasibility of expanding the mill's capacity to 500 metric ton per day capacity. The mill has associated laboratory, administrative and shop buildings.

The Letter of Intent contemplates a purchase price of $3 million, with $750,000 payable at closing and the balance of $2,250,000 payable over a four year period with 6% interest on the unpaid balance, in exchange for 75% of the shares of Besmer. In addition, if the acquisition is made, Colorado Goldfields will agree to provide up to $5 million to expand production at the mines and mill; on a loan basis to Besmer. A 2% Net Smelter Royalty to Besmer´s current shareholders on the existing Besmer owned concessions can be extinguished within a four year period for a payment of $350,000. Colorado Goldfields has also agreed to pay a business brokerage fee to two individuals who introduced the Besmer prospect to the company.

The Letter of Intent calls for a 60-day due diligence and exclusivity period and Goldfields personnel are currently conducting a geological and technical evaluation of the Besmer properties to ensure due diligence requirements are fulfilled. Under the terms of the agreement, either party may withdraw from the Letter of Intent during the 60-day due diligence period. In addition, the Letter of Intent will automatically terminate if definitive agreements are not entered into by May 25, 2008. However, in connection with the execution of the Letter of Intent, Colorado Goldfields paid the sellers a $50,000 earnest money deposit, and such deposit is non-refundable unless material discrepancies are discovered with respect to Besmer's financial, legal, property ownership or environmental matters or operating conditions. Colorado Goldfields intends to raise capital within the next few months to complete this potential acquisition, although no assurance can be made that Colorado Goldfields will be successful in raising the required funds.

Todd Hennis, President of Colorado Goldfields Inc., states, "The potential Besmer acquisition gives us the opportunity for immediate production with a profitable company, at a time of record precious and other metal prices. It gives us the further opportunity to greatly expand existing production as we simultaneously prepare for potential gold production at the Silverton, Colorado, properties which we have under option. We view the potential operations in Mexico as strongly complementary to our efforts in Colorado and consistent with our core strengths. We believe the economics of silver production in Mexico are compelling, and the Chalchihuites mining district has all the characteristics we are looking for."

Mr. Hennis went on to say, "We are extremely positive about these opportunities and for the continuation of our work on the Silverton properties. It's a very exciting time for Colorado Goldfields Inc. and we look forward to continued progress and building value for our shareholders."

On Behalf of the Board,
Colorado Goldfields Inc.
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Todd C. Hennis, President

Notice regarding forward-looking statements

This news release may contain forward-looking statements or information within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements or information include statements regarding the expectations and beliefs of management. Forward-looking statements or information include, but are not limited to, statements or information with respect to known or unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or information. Forward-looking statements or information are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements or information, including, without limitation, risks and uncertainties relating to obtaining financing to meet the Company's exploration program and operating costs during its exploratory stage, the interpretation of exploration results and the estimation of mineral resources and reserves, the geology, grade and continuity of mineral deposits, the possibility that future exploration, development or mining results will not be consistent with the Company's expectations, accidents, equipment breakdowns, title matters, or other unanticipated difficulties with or interruptions in production and operations, the potential for delays in exploration or development activities or the completion of feasibility studies, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, regulatory restrictions, including the inability to obtain mining permits and environmental regulatory restrictions and liability, the speculative nature of mineral exploration, dilution, competition, loss of key employees, and other risks and uncertainties, including those described under "Risk Factors" in the Company's Annual Report on Form 10-KSB filed on December 27, 2007, which is on file with the Securities and Exchange Commission, as well as the Company's other SEC filings. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements or information. The Company does not undertake any obligation to release publicly revisions to any "forward-looking statement," to reflect event or circumstances after the date of this news release, or to reflect the occurrence of unanticipated events, except as is required under applicable securities laws. This press release may also contain information about adjacent properties on which the company has no right to explore or mine. We advise investors that the SEC's mining guidelines strictly prohibit information of this type in documents filed with the SEC. Investors are cautioned that mineral deposits on adjacent properties are not indicative of mineral deposits on our properties.

Contact Information

  • Contact Information:
    Todd C. Hennis
    President
    Colorado Goldfields Inc.
    Tel. 303-984-5324
    10920 W. Alameda Avenue, Suite 207,
    Lakewood, CO 80226