Desert Gold Ventures Inc.
TSX VENTURE : DAU

Desert Gold Ventures Inc.

January 26, 2012 14:59 ET

Desert Gold Letter to Shareholders

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 26, 2012) -

Dear Desert Gold Shareholder:

On November 30, 2011, Desert Gold Ventures Inc. (TSX VENTURE:DAU) ("Desert Gold" or "we") completed the acquisition (the "Acquisition") of all of the outstanding shares of TransAfrika Belgique S.A. ("TransAfrika"), a private Belgian company which owns interests in three advanced exploration-stage gold deposits in central and western Africa through subsidiaries in Rwanda, Mali and Senegal.

The Acquisition has refocused the company into primarily developing its promising West African and Rwanda permits to proven resource status and develop those properties to mining operations, in a socially and environmentally responsible manner. The Company is very excited to have acquired such highly prospective gold properties, particularly in Mali and Rwanda, the latter having a 43-101 compliant1 inferred mineral resource of 5,551,000 tons at a grade of 1.48 Au g/t for 265,000 oz of gold.

Desert Gold also continues to own a 50% interest in the Goldbanks Project located in Nevada, USA, under the terms of a joint venture agreement entered into with a wholly-owned subsidiary of Kinross Gold Corporation (TSX:K)(NYSE:KGC) which has a 43-101 compliant inferred resource of 28,310,000 tons at a grade of 0.57 Au g/t for 556,000 oz of gold.

In light of these recent developments, the Company would like to provide our shareholders with a brief update on Desert Gold, our current objectives as a company, and the leadership group in place to ensure that we achieve our goals.

Share Capital

Immediately prior to the Acquisition, Desert Gold had 19,118,370 common shares outstanding. As consideration for the Acquisition, Desert Gold issued a total of 20,000,000 common shares to TransAfrika Resources (Mauritius) Limited ("TransAfrika Mauritius") as ultimate parent company of TransAfrika, 10,000,000 of which are being distributed, by way of dividend, to the TransAfrika Mauritius shareholders pro rata to their shareholdings in TransAfrika Mauritius2.

1 SAMREC stands for the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves. As more particularly described in the technical reports filed with the TSX Venture Exchange and other regulatory authorities and available under Desert Gold's SEDAR profile at www.sedar.com, the mineral resource categories of the SAMREC Code reported above reconcile with the same mineral resource categories in the Canadian Institute of Mining, Metallurgy and Petroleum ("CIM") Definition Standards adopted by the CIM Council and incorporated into National Instrument 43-101 - Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators.
2 TransAfrika Mauritius is a widely-held private company that has raised over $40 million in financing since 2007 principally to fund the advancement of the TransAfrika material properties recently acquired by Desert Gold. TransAfrika Mauritius also owns interests in base metals properties in the DRC and Mauritania which did not form part of the Acquisition.

Desert Gold is required to issue a further 12,000,000 common shares (the "Performance Shares"), in the aggregate, to TransAfrika Mauritius and its shareholders in the event that within a two year period from closing of the Acquisition, Desert Gold publishes an NI 43-101-compliant resource calculation disclosing that the TransAfrika material properties contain at least an additional 1,000,000 ounces of gold or gold equivalent in the inferred mineral resource category.

In addition, concurrent with the Acquisition, Desert Gold raised $3.7 million through the issue of 4,949,665 units at a subscription price of $0.75 per unit (the "Financing"). Each unit consisted of one common share and one-half of one common share purchase warrant, with each whole warrant entitling the holder to subscribe for one additional common at an exercise price of $1.00 for a period of 24 months from closing of the Acquisition, provided that, in the event that the closing price of the Desert Gold common shares on the TSX Venture Exchange is greater than $1.50 for a period of 20 consecutive trading days at any time following closing of the Acquisition, Desert Gold may, at its option, accelerate the expiry date of the warrants by giving written notice to the holders thereof and in such case the warrants will expire on the date which is the earlier of: (i) the 30th day after the date on which such notice is given; and (ii) 24 months from closing of the Acquisition.

Overall, a total of 44,038,035 common shares, 2,474,832 warrants, 2,051,625 stock options, and 49,496 broker warrants (issued to MGI Securities Inc. as lead agent in connection with the Financing) are currently outstanding.

Board and Management

Name, Municipality of Residence, Position with
Desert Gold
Selected Biographical Information
Roeland van Kerckhoven
(Bryanston, South Africa)
President, Chief Executive
Officer and Director
Mr. van Kerckhoven has spent more than 29 years of his career with the Anglo American group of companies, serving for the last 15 years as CFO and business development director of Anglo Platinum until he retired in March 2007.At various times during his career at Anglo Platinum, he also headed the; exploration, legal, corporate finance, investor relations and corporate communications portfolios. Since joining TransAfrika Mauritius in 2008 as President and Chief Executive Officer, he has overseen the discovery and evaluation of a portfolio of assets and has been actively involved in negotiations with African governments and joint venture partners. He earned both his MBL and B.Comm degrees from the University of South Africa.
Theo Christodoulou
(Johannesburg, South Africa)
Director
Mr. Christodoulou worked at PricewaterhouseCoopers for nearly 5 years, after which he joined Deutsche Bank. He worked for the bank for 11 years, which included 5 years as Director (and head of Metals and Mining in South Africa). Mr. Christodoulou then founded the corporate finance company, AC Squared Solutions in 2010. He has extensive experience in advising on mining initiatives, project finance planning and management, M&A, IPO's and BEE structuring across Africa. Mr. Christodoulou holds an MBA from Duke University.
Louw van Schalkwyk
(Northern Cape, South
Africa)
Vice-President, Exploration,
Director
Mr. Schalkwyk started his career as an exploration geologist with Gold Fields of South Africa Limited in 1984 and was promoted to senior geologist. In 1992 he moved to consulting and contracting geology, working on gold and base metal exploration for various major and junior exploration and mining companies in sub-Saharan Africa. These include Rio Tinto Plc, Anglo American, Iscor Limited and Pangea Minerals Ltd. His ability to integrate geology with applied exploration techniques led to the discovery of the Gams East Zinc deposit while working as project manager for Anglo American. Mr. Schalkwyk obtained a BSc Geology (Hons) degree from the University of Stellenbosch in 1984.
Jared Scharf
(Ontario, Canada)
Chief Financial Officer,
Secretary
Mr. Scharf has been serving as CFO of Desert Gold since 2009. Mr. Scharf's background is in private investment and management consulting in the areas of corporate finance and financial accounting. Over the last 7 years Mr. Scharf has focused much of his time on the acquisition and development of mining and alternative energy projects in Africa and North and Central America. Mr. Scharf is also a Director of EasyMed Services Inc., a publicly-traded Canadian healthcare technology company. Mr. Scharf holds an Honors Commerce degree in Finance from the Telfer School of Management at the University of Ottawa as well as a Bachelors of Administration also from the University of Ottawa.
Mohd Ayub Khan
(Geneva, Switzerland)
Non-Executive Chairman of
the Board of Directors
Mr. Khan brings over 19 years of experience in operations, public markets and finance to the Resulting Issuer. Over the last 19 years he has been involved in acquiring, restructuring and financing public companies. His experience in public markets includes acquisitions of companies in Europe and South America. Mr. Khan is a professional Asset Manager currently based in Geneva, Switzerland and travels extensively in order to oversee his company's considerable business interests. Mr. Khan holds a B.Sc. in Business Administration and Finance from Ball State University of Muncie, Indiana, U.S.A.
Thomas R. Tough
(British Columbia, Canada)
Director
Mr. Tough has more than 40 years experience as a self-employed consulting Professional Engineer in 40 different countries, in both the western and eastern hemispheres. In the course of his career he has been involved in many capacities of the mining industry. He has held numerous directorships and officer positions in public and private companies, including the role of President, CEO and Director of Desert Sun Mining Corp. for 18 years. In April 2006, Yamana Gold Inc. purchased Desert Sun and its producing gold mine in Brazil. In 2003 Mr. Tough also joined the boards of TSX listed Potash One Inc., where he also served as President and CEO, and TSXV listed Maxtech Ventures Inc., where he still serves as President & CEO. Since 2008 he has served on the board of Aroway Minerals Inc. and in 2010 he became President, CEO and a director of Firebird Resources Inc., both listed on the TSXV. He is a member of the Association of Professional Engineers and Geoscientists of British Columbia and holds a B.Sc. in Geology from the University of British Columbia.
Sonny Janda
(British Columbia, Canada)
Director
He is the President & CEO of Grand Peak Capital Corp., a TSXV listed company that invests in public and private corporations. He also serves on the board of Maxtech Ventures Inc., Lucky Minerals Inc. and EasyMed Services Inc. He holds a bachelor's degree in Economics from Simon Fraser University in Vancouver, BC.

Exploration Programs

Desert Gold is in the process of carrying out a $5 million exploration program in respect of the Rwanda and Mali properties, as recommended by Coffey International Limited, authors of the independent technical reports (the "Technical Reports") filed with the TSX Venture Exchange and other regulatory authorities and available in their entirety under Desert Gold's SEDAR profile at www.sedar.com.

Coffey International Limited is a specialist professional services consultancy with expertise in geosciences, international development, and project management. Coffey is listed on the Australian Securities Exchange (ASX:COF).

Set forth below, for your reference, are excerpts from the Technical Reports summarizing the proposed 2012 work programs at the Rwanda and Mali projects:

Rwanda

Work completed by TransAfrika on its Rwanda permits thus far has been largely focused on the Byumba Project with soil sampling surveys carried out on the Rusizi and Nyamugali Projects. The recommended exploration priority is to increase and improve the mineral resource for the Byumba Project.

The total budget required for Rwanda is USD 3,200,000 as presented in Table 1 below. At the completion of the diamond drilling a decision will be taken on commencing a Scoping Study based on the drill results returned.

Table 1
Bumba, Nyamugali and Rusizi Project
Estimated Exploration Budget. (USD '000s)
Item Total
Drilling $1,929
Logistics and equipment $239
Consulting and salaries $430
Laboratories $227
Kigali and Johannesburg office $375
TOTAL $3,200

The scheduling of the exploration is presented in Table 2 and the associated costing in Table 3.

Coffey Mining considers the exploration rationale to be appropriate for this stage of the projects. Additional funding may be required at a later stage.

Table 2
Summary of Work Schedules by Permit Area
Permit Q3
2011
Q4
2011
Q1
2012
Q2
2012
Rusizi Limited work recommended
Byumba Establishment, rig mobilization, construct drill platforms, Diamond drilling Diamond drilling, soil sampling Diamond drilling, Metallurgical test work Modelling and resource estimate
Nyamugali Target generation Public liaison, Mapping
Table 3
Summary of the proposed Spending of the Exploration Budget for Rwanda
(USD)
Permit Q3
2011
Q4
2011
Q1
2012
Q2
2012
Total
Corporate RSA & Mali/Senegal $112,500 $112,500 $112,500 $37,500 $375,000
Logistics & Equipment $75,200 $75,800 $76,800 $11,600 $239,400
Field Teams & Technical Consulting $112,600 $133,600 $148,600 $35,000 $429,800
Drilling & Geophysical Contractors $226,400 $928,800 $774,000 $0 $1,929,200
Laboratories $30,200 $95,200 $98,800 $2,500 $226,700
Total $556,900 $1,345,900 $1,210,700 $86,600 $3,200,100

Mali

Farabantourou Permit

Farabantourou has an initial budget estimated to the end of Q2 2012 (Table 1). Geological mapping should be carried out over the entire permit area with emphasis on structural geology. Once the structure is better understood, drill results from all known prospects should be reinterpreted. The soil-sampling grid should be extended to cover the entire permit area.

All geological, geophysical and geochemical data should be integrated at the end of phase 1 and drill targets prioritized. Should the assessment be positive a drilling budget should be compiled to allow for drilling to start in Q4 2012. The nature of the drill program will be determined by Phase I exploration results.

The following phased exploration program is proposed:

Phase 1: Prioritization of areas for resource drilling, Phase I will include site establishment, geological mapping, soil sampling, integration of geology IP data and soil sampling data, trenching and pitting over selected areas and drill planning.

The budget to completion of phase 1 is USD $576,100 (table 1)

Phase 2: Exploration drilling. This phase was not budgeted.

Phase 3: Resource drilling. This phase was not budgeted.

Table 1
Summary of Budget for Farabantourou Permit Area
(USD)
Permit Q3
2011
Q4
2011
Q1
2012
Q2
2012
Total
Corporate RSA & Mali/Senegal $67,500 $67,500 $67,500 $67,500 $270,000
Logistics & Equipment $57,000 $30,300 $30,300 $10,800 $128,400
Field Teams & Technical Consulting $36,400 $36,400 $36,400 $28,500 $137,700
Laboratories $15,500 $15,500 $9,000 $0 $40,000
Total $176,400 $149,700 $143,200 $106,800 $576,100

Loulo-Est and Segala-Ouest Permit

Loulo-Est and Segala-Ouest have a combined budget estimated to the end of Q2 2012 (Table 2). TransAfrika have applied to the Malian Government and were successful in getting the two permits combined and they are considered one project. The following phased work program is recommended:

Phase 1: Prioritization of areas for resource drilling. This will include:

  • Soil sampling should be extended to cover the whole of Segala-Ouest. Soil sampling results should be reprocessed using geostatistical estimation methods to identify gold anomalies and trends as this appears to give better results than simpler contour methods.
  • Geological mapping of the permits
  • IP surveys
  • Pitting and trenching
  • Target generation. While various targets have been identified, this has not been done on a fully integrated geological model for the area. A fully integrated geological interpretation needs to be undertaken so that the geology can be better understood and targets for follow-up surface surveys can be better delineated.
  • Drill program planning.

The budget allows for USD $690,100 to complete this phase (Table 2).

Phase 2: Exploration drilling. The nature of the drilling depends on the results of from Phase 1, hence this phase was not budgeted.

Phase 3: Resource drilling. The nature of the drilling depends on the results of from the previous phases. This phase was not budgeted.

Table 2
Summary of Budget for Loulo-Est, Segala-Ouest Area
(USD)
Q3
2011
Q4
2011
Q1
2012
Q2
2012
Total
Corporate RSA & Mali $67,500 $67,500 $67,500 $67,500 $270,000
Logistics & Equipment $57,000 $30,300 $55,300 $10,800 $153,400
Field Teams & Technical Consulting $36,400 $36,400 $126,400 $28,500 $227,700
Laboratories $15,000 $15,000 $9,000 $0 $39,000
Total $175,900 $149,200 $258,200 $106,800 $690,100

In light of challenging financial market conditions, Desert Gold is delighted to have completed the Acquisition TransAfrika and the subsequent Financing. The Company is committed to expanding and further proving the significant potential of the TransAfrika mineral properties for the benefit of our shareholders. To this end, the Company anticipates raising $10 million of additional funding during the first half of this year to pursue the drilling program on Farabantourou, our most prospective property in Mali. All the while, the Company will continue its drilling program in Rwanda where we look to significantly increase the current resource estimate in the short to medium term. At current levels, management feels that the Company's share price is undervalued and we will be undertaking a sustained marketing and investor awareness campaign to increase exposure in the investor community. To our shareholders, we thank you for your continued support as we look to meet our corporate milestones with the aim of building a world-class gold company.

Sincerely yours,

Roeland van Kerckhoven, President and CEO

For further information concerning Desert Gold and the TransAfrika material properties, please refer to Desert Gold's SEDAR profile at www.sedar.com.

Contact Information