First Gold Exploration Inc.

First Gold Exploration Inc.

November 09, 2009 10:29 ET

First Gold Signs Letter of Intent for a 50% Interest in a Past Producing High Grade Silver/Lead/Zinc/Copper Project Located in the Heart of Mexico's Sierra Madre del Sur

LAVAL, QUEBEC--(Marketwire - Nov. 9, 2009) - First Gold Exploration Inc. (TSX VENTURE:EFG) (FRANKFURT:F12) is pleased to announce that it has signed a letter of intent (LOI) to earn a 50% interest in the San Javier silver property located in the Municipality of Malinalpetec, State of Guerrero, Mexico.

The 253 hectares property hosts a silver-gold-lead-zinc epithermal mineralization typical the Mexican precious metal belt. It is located within the Sierra Madre del Sur, therefore in the southern portion of the precious metal belt. This portion of the belt is characterized by a high Silver/Gold ratio.

Approximately 30 quartz-sulphide veins have been discovered in the district so far. They are hosted in a weathered granodiorite. According to the vendors, the veins run for 400-500 metres and their average thickness is in the order of 1.5 metres. Historical and recent sampling indicates that the veins carry grades above 500 g/t Ag, 1-2% Pb and 1-2% Zn. These epithermal veins hosts a variety of sulphide minerals such as argentite, pyrite, galena, sphalerite, arsenopyrite and chalcopyrite. The following table was provided by the vendors. It gives examples of results from high grade vein material found on the property. Sampling procedures are not known.

Ag Pb Zn
g/t oz/t % %
440 12.8 1.49 0.44
731 21.3 1.44 0.44
297 8.7 1.41 0.10
162 4.7 1.86 0.31
816 23.8 3.60 0.57
563 16.4 5.66 4.55
238 6.9 4.21 6.88
418 12.2 1.32 0.72
506 14.8 2.15 1.53
419 12.2 3.70 0.07
2290 66.8 4.81 2.83
1270 37.0 3.71 2.28
1760 51.3 2.93 1.88
12247 357.3 6.83 1.76
1930 56.3 7.15 3.67
481 14.0 8.86 3.30

Small underground workings are observed on the property and limited mining was apparently recently carried out (A shaft 85 m deep, small pits and other shafts have been constructed and seven of the thirty veins have apparently produced high grade material in the past). A small processing plant was built on site. Capacity and state of the equipment is not known at present time. It will be investigated during the due diligence process.

Camsim Minas S.A DE C.V., a privately-held Mexican Corporation, currently is the holder of an option to earn-in 100% of the title, subject to a 10% Net Profit Interest (the 10% NPI can be reduced to 3.5% at any time in the future, by making a one-time payment in the amount of USD $8M), in the "La Mina San Francisco Javier" property, which is comprised of approximately 253 hectares, situated in Tiapa District, Malinaltepec in the state of Guerrero, Mexico. Under the terms of the proposed Option Agreement, First Gold Exploration will acquire 50% of the right, title and interest of the "La Mina San Francisco Javier" Property by spending US $3,000,000 Three Million U.S. Dollars, plus applicable Federal Mexican I.V.A tax(es), on the property on or before October 1, 2012 as follows:

- $1M by October 1, 2010

- $1M by October 1, 2011

- $1M by October 1, 2012

These obligations include any Mexican Government exploration funding or grant(s) assistance. It is also understood and agreed that First Gold will be the Operator of the project, and therefore, will be responsible for directing how project-related monies are spent.

In addition to the above expenditures schedule, First Gold Exploration Inc. also agrees to make a one-time cash payment within seven days of the signing of the binding Option Agreement in the amount of CAD $150,000.00 and issue for the benefit of Camsim Minas S.A. DE C.V., two million common shares of the company per the following schedule:

- 500,000 shares upon the signing of the binding Option Agreement;

- 750,000 shares on the first year anniversary of the signing of the binding Option Agreement;

- 750,000 shares on the second year anniversary of the signing of the binding Option Agreement.

Camsim Minas S.A. DE C.V. will receive a monthly consulting fee in the amount of CAD $15,000.00 in order to assist First Gold Exploration Inc. in local community, State and Federal Government relations, securing Government funding assistance for the project, and assisting in identifying local staff and contractors. If the aforementioned Government funding is received in excess of USD $1.0M (for the first US$3M spent on the property) then said monthly consulting fee will be increased to CDN $30,000 (effective from the date of the Option Agreement being executed).

The formal Option Agreement necessary to be executed to close the transaction, including, without limitation, agreements of purchase and sale of the Property interest, any regulatory filings and approvals, or similar, shall be negotiated on mutually agreeable terms between the parties and shall contain the usual and customary representations and warranties, covenants and other agreements in a form satisfactory to the parties and their respective solicitors.


- Approval from the boards of each of Camsim and First Gold Exploration Inc within 7 days of the execution of this Letter Of Intent;

- Completion of due diligence reviews of La Mina San Francisco Javier and the completion of a 43-101 report by First Gold Exploration Inc., for the project, with results satisfactory to each of the parties, within 40 days of the execution of the Letter Of Intent;

- The completion of the binding Option Agreement mutually satisfactory to the applicable parties, implementing the arrangements agreed to above by December 15, 2009;

- Delivery of normal and customary closing certificates and other documentation on the closing date; and

- The passage of all necessary corporate resolutions and obtaining of any shareholder, regulatory or securities approvals as may be required to authorize the transaction contemplated by the binding Option Agreement on the closing date;

- The funding of CAD $150,000.00 by First Gold Exploration Inc. to Camsim. It is understood that such funds are being advanced to pay for the costs associated with the completion of a National Instrument 43-101 Technical Report and for costs associated with preparing the property for the initial stage of exploration (The first payment will be of 75,000$ and will be before or on Nov. 20th, 2009. These funds will be managed by the Operator;

- The payment of CAD $150,000.00 by First Gold Exploration Inc. to Camsim within seven days from the date of execution of the binding Option Agreement.

First Gold is sending a technical team on November 12th to carry a due diligence, collect information for the writing of a NI43-101 report and prepare the first phase of drilling. Pierre O'Dowd, p. Geo. And Qualified Person reviewed and approved the technical content of this press release.

Below is the link to the Cansim Website and a video taken on the property:


Web Site:

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