Columbia Metals Corporation Limited

Columbia Metals Corporation Limited
Tara Gold Resources Corp.
OTC Bulletin Board : TRGD

Tara Gold Resources Corp.

April 06, 2006 11:36 ET

Columbia Metals Corporation Limited-Tara Gold Resources Corp.: Binding Letter of Intent Signed to Acquire the Lluvia De Oro Gold Property

TORONTO, ONTARIO--(CCNMatthews - April 6, 2006) - Columbia Metals Corporation Limited (TSX VENTURE:COL)("Columbia") and Tara Gold Resources Corp. (OTCBB:TRGD)("Tara Gold") are pleased to announce the following:

(i) Columbia has entered into a binding letter of intent ("LOI") with Tara Gold to acquire all mining, surface and water rights and all assets of the Lluvia de Oro gold property, more particularly set out below (the "Lluvia Property") from Tara Gold, the optionee and Atotonilco Contrucciones, S.A. de C.V. of Mexico (the "Vendor");

(ii) Columbia and Tara Gold agree to use their best efforts to enter into a definitive agreement by April 30, 2006;

(iii) Tara Gold agrees to deliver to Columbia a full and final release in respect of the Vendor's claims and any other outstanding liens on the Lluvia Property;

(iv) Columbia has paid Tara Gold US$150,000 upon signing of the LOI and agrees to make further payments of US$4,337,500 by December 1, 2008;

(v) Columbia will acquire all interests in and to the Lluvia Property upon making the final payment to Tara Gold;

(vi) Tara Gold will receive a 20% net cash flow interest ("NCF") in the Lluvia Property, however Columbia will have a right to purchase all of Tara Gold's NCF interest in the Lluvia Property for a period of 24 months from the date of approval of this transaction by the TSX Venture Exchange, for a payment of US$250,000 for each 1% for a total of US$5,000,000 for all of Tara Gold's NCF interest in the Lluvia Property.

The Lluvia Property is located in Sonora, Mexico, and is comprised of the following four mineral claims:

N Lot Title File Surface Type of Location Sub-
deg- Num- Num- Concession Agency
rees ber ber
I Lluvia 192050 321.1/ 5.5317 Exploi- Magdalena, Hermosillo,
de Oro 4-746 Hectares tation Sonora Sonora
II Lluvia 195124 321.1/ 100 Exploi- Magdalena, Hermosillo,
de Oro 4-581 Hectares tation Sonora Sonora
N deg-
rees 2
III Sahuara, 201469 4/1.3/ 479 Exploi- Magdalena, Hermosillo,
I "A" 1161 Hectares tation Sonora Sonora
IV Sahuara, 210805 4/1.3/ 4.4684 Exploi- Magdalena, Hermosillo,
I Dos 1301 Hectares tation Sonora Sonora

Upon completion of the acquisition of the Lluvia Property, Columbia will control the contiguous mineral rights to some 60 square kilometres in the immediate vicinity of the deposit.

Mine History

Located in the state of Sonora, in northern Mexico, Lluvia de Oro was designed as a large tonnage, low-grade gold operation. The property currently includes one open pit, two heap leach pads and a gold recovery plant. Under Great Lakes Minerals Inc. the facility entered into production in May 1996, and was later operated by Santa Cruz Gold Inc. ("Santa Cruz") and finally by Compania Minera Lluvia de Oro S.A. de C.V.

The mine had an anticipated average production rate of 25,000 ounces per year from an initial reserve of 4.6 million tonnes grading 0.82g Au/t or 121,000 ounces. Santa Cruz had projected that the life-of-mine cash costs for the Lluvia de Oro Gold Mine would be in the range of US$235 per ounce.

Mining & Exploration

During 1997, 1.65 million tonnes of ore, with an average grade of 0.75g Au/t were mined and placed on the pad at an average cash cost of US$3.76 per tonne. As a result of El Nino, the project area received twice the average annual rainfall. Production for 1997 was 20,688 ounces versus the projected 25,000 ounces. Cash costs averaged US$299 per ounce, which was US$79 higher than the projected US$220 per ounce. The cash cost overrun was not only due to the shortfall in production but also due to increased mining (an extra 320,000 tonnes of ore were placed on the heap in an attempt to offset the negative impact of the excess rains).

Santa Cruz completed a drilling program in the 2nd quarter 1997 successfully expanding the existing proven reserves(a) by more than 60%. This 6,100 metre drill program was successful in adding 2.1 million tonnes grading 0.81g Au/t or 54,400 oz. Additional lower grading material, which may be mined and leached later in the mine life, added another 9,500 oz for a total of 64,000 oz. These reserves were defined along 300 metres of strike from the limit of the current open-pit.

The new reserves(a) increased the proven reserves(a) to 4.7million tonnes grading 0.81g Au/t, representing an increase of 64%. In addition to adding mine life to the operation, the reserves discovered in 1997 allowed for an increase in production scheduled for 1998 to approximately 28,000 ounces.

Drilling delineated an additional higher-grade resource(a) of approximately 4.5 million tonnes grading 0.95g Au/t along the same structure. Highlights from the drill program include three holes, all of which ended in "ore" and appear to have intersected a deeper, higher grading zone. These holes include:

hole L188, located approximately 60 metres on strike from the pit
limits, which intersected 15.2 metres grading 2.3g Au/t;

hole L194, on the next section, intersected 19.8 metres grading
1.8g Au/t; and

hole L202, approximately 200 metres from the current pit along
strike, intersected 7.6 metres grading 3.8g Au/t.

A deeper drilling program comprised of six holes was completed in the 3rd quarter 1997. Four of the six holes intersected good values including hole L239 which intersected 30 metres grading 1.5g Au/t, hole L240 which intersected 14 metres grading 1.62g Au/t, hole L241 which intersected 39 metres grading 2.29g Au/t and hole L242 which intersected 18 metres grading 1.33g Au/t.

The Company is currently in the process of conducting due diligence on the Lluvia de Oro gold mine and our engineering team is reviewing options for re-initiating mining, production, rinsing the leach pad and heap leach processing. Columbia will now commence a National Instrument 43-101 qualifying report on the Lluvia Property.

(a)The terms reserve and resource are as reported by Santa Cruz and do not necessarily conform to NI 43-101 standards.

Cautionary Note: The tonnages, grades, assays, drill intercepts, production figures and other technical data are taken from historical records prior to the implementation of NI 43-101. While the data is believed to have been acquired, processed and disclosed by persons believed to be technically competent it is unverifiable at present. The data source for the Lluvia de Oro is largely the 1997 Annual Report of Santa Cruz Gold Inc.

A qualified person as defined under NI 43-101 has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves. Columbia is not treating the historical estimates as current mineral resources or mineral reserves as defined in NI 43-101 and the historical estimate should not be relied upon.

This press release was prepared by J. E. Steers, P. Eng. VP Exploration, Columbia Metals Corporation Limited.

Forward-Looking Statements: Except for statements of historical fact, all statements in this new release - including without limiting, statements regarding future plans, objectives and payments are forward-looking statements that involve various risks and uncertainties.

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

Contact Information

  • Columbia Metals Corporation Limited
    Carl Di Placido
    (416) 364-6799
    Tara Gold Resources Corp.
    Francis R. Biscan Jr.
    (630) 462-2079