First Mexican Gold Corp.
TSX VENTURE : FMG

First Mexican Gold Corp.

January 14, 2011 10:14 ET

First Mexican Gold Corp. Update for Shareholders

VANCOUVER, BRITISH COLUMBIA--(Marketwire - January 14, 2011) - First Mexican Gold Corp. (TSX VENTURE:FMG) -

This company update is for the purpose of keeping shareholders of First Mexican Resources informed of the Company's activities. The Company has been very busy during 2010 advancing the Hilda's project area (now referred to as the Guadalupe property package), getting listed on the Venture Exchange and now planning for 2011. There is a slight name change and the Company is now known as First Mexican Gold Corp. utilizing the trading symbol of FMG on the TSX Venture Exchange. The website domain name has also been changed to www.fmgoldcorp.com

Your Board of Directors remains as Gregory Roberts, Michel Roy (Chairman & CEO of ECU Silver Mining) and James Voisin, who is the President & CEO with Nicole Wood as CFO. The company has added one new board member, Robert Findlay. Mr. Findlay's background includes extensive experience in mining equipment sales and service, business development, management, corporate finance and management consulting services to both public and private companies. Recently he has served on the boards of several private and public companies from incorporation to listing on the TSX Venture Exchange including Auric Development Corp. Mr. Findlay is an honours graduate from Haileybury School of Mines, 1987.

A list of 2010 activities and accomplishments is included below, in no particular order or timeline:

1. The Company completed the initial option agreement which was based on $1 million dollar in expenditures. Plus management completed discussions and entered into a new Option Agreement with International Millennium Mining Corp. (IMMC) which allows First Mexican to increase earn-in interest to 80% of the Hilda prospects (Hilda 30, 37, 38) and mutual area of interest. The agreement requires the expenditure of an additional US$3 million on exploration, $100,000 in timed cash payments and the issuance of 1.4 million shares of First Mexican over a 5 year period. This also includes a right of first refusal on a nearby property, La Esperanza.

2. Meetings were held with the local communities (Adjito's) and legal agreements were signed and completed with both relevant communities, Guadalupe Tayopa and Santa Ana.

3. A confidentiality agreement was signed with our direct neighbour Corex Gold Corp. who are very actively exploring a significant gold discovery contiguous to our property package.

4. The Company completed numerous small financings to continue exploration operations and complete the Qualifying Transaction process. The public float of First Mexican Gold Corp. now stands at approximately 31.5 million shares post reverse takeover and a recent financing with Canaccord Capital, the sponsoring firm. The company would like to thank Canaccord for the key role it played during the listing and financing process.

5. Access road development has now been extensive with over 14 km completed to the numerous exploration areas on the property.

6. The Company has been conducting an extensive systematic soil and rock chip sampling program since early spring of 2010 with over 2000 samples assayed to date and the resultant mapping of same. In addition the company conducted and completed a regional airborne magnetic survey in conjunction with Corex Gold. This activity has been conducted under the supervision of James McCrea, PGeo and Ryan Grywal, Bsc.Geo. This work has led to numerous additional target areas over and above the original discoveries reported in the last shareholders update.

7. The Company completed a revised 43-101 report in Q2 2010 and provided audited financials for the listing process.

8. The Company has been in active discussions and expects to finalize numerous additional property package acquisitions in the near term.

9. The Company has finalized plans for establishing a more extensive operations camp/compound for its management and exploration team which will include accommodation, secure core storage & logging facilities, and equipment storage and maintenance. Construction will begin as soon as is feasible. The team on site now numbers 6 people with plans to increase personnel as the exploration program ramps up.

10. The Company has planned and has mobilized a phase 2 drill program comprised of 8 to 10 holes, recently announced.

11. The Company has planned and is preparing to begin an extensive Induced Polarization (IP) survey and line cutting program over what has been identified to date as 8 target areas.

History

The Company first raised capital in the spring of 2007 and completed an option agreement with IMMC in May 2007 for the Hilda properties. The company had originally planned to go public in late 2007 and by March 2008 this proved unsuccessful due to market conditions. The company continued baseline exploration activities and access road development while maintaining the current status of the option agreement. It became evident to the Company that to successfully go public it would have to increase its interest in the property so this led to successful discussions with IMMC in summer 2009 to revise the option agreement to contemplate earning an 80% interest.

In the late summer of 2009 a three hole diamond drill program was planned and then executed on the Hilda 30 prospect in Guadalupe Tayopa which is some 220 kilometers SE of Hermosillo Mexico in Sonora State. A paved road runs about 15 kilometres from the property.

This property is bordered by Corex Gold Corp. on two sides and in the same general area as the Mulatos mine of Alamos Gold Inc., Dolores mine of Minefinders Corp. Ltd., and Ocampo mine of Gammon Gold Inc. The initial plan was to drill three parallel diamond drill holes into an oxide occurrence that was exposed by a road cut about one third of the way up the mountain. Poor ground conditions interrupted the drilling of the first two holes and the third one was completed to a design depth of 100 metres. (see highlights below)

Due to cash constraints the samples from this drilling were sent in the fall of 2009 to the University of Hermosillo for assay which was conducted by a Phd. professor with the most up to date assay equipment available. Subsequently the samples were sent for check assay to ALS Chemex which is a qualified laboratory under instrument 43-101 guidelines and this re-confirmed the initial results although they remain non-compliant at this time.

Subsequent to this initial diamond drilling program an opportunity to quickly drill an additional seven holes presented itself so a program was designed with drilling carried out by Layne Drilling of Hermosillo. These holes were reverse circulation holes (RC) and on average reached a designed maximum depth of 100 metres. These seven holes were not targeted to replicate the original three holes but were designed to help provide strike and dip information to increase the orientation knowledge of the discovery and aide in our efforts to figure out where the mineralization was going and where it was contained. From this drill testing it appears that it is trending further to the north than originally expected as is exhibited in results from hole RC hole #3 which is situated furthest to the north. The RC drilling was overseen by John Archibald BSc., P.Geo, QP. All samples were assayed by ALS Chemex.

All holes drilled to date are near surface with open pit potential and have all hit mineralized zones with the best highlights outlined below:

DDH #1: 5.8 metres with 3.67 g/t Au & 753 g/t Ag

DDH #2: 15.25 metres with 2.58 g/t Au & 47 g/t Ag

DDH #3: 37.8 metres with 6.51 g/t Au & 678 g/t Ag
             including 29.1 metres with 8.36 g/t Au & 900 g/t Ag
             including 16.9 metres with 10.61 g/t Au & 1,416 g/t of Ag

RC hole #2: 2 metres with 1.48 g/t Au & 1330 g/t Ag

RC hole #3: 18 metres with 6.52 g/t Au & 61 g/t Ag
                 including 2 metres with 14.40 g/t Au & 152 g/t Ag

DDH holes #1 thru #3 are non-compliant by Canadian 43-101 standards as the initial drilling was not supervised by a Qualified Person, drill locations were not surveyed and the exact drill-hole collar locations were lost as a result of access road rehabilitation and therefore are approximate. The reverse circulation holes listed above are compliant to 43-101 standards and were overseen by John Archibauld P.Geo.

So far it is management's assessment that it is possible we are drilling into the cap of a larger system at depth and are only hitting the mineralized stringers that are coming from the main event. One of the only hematite plugged mountains in the area is situated some 400 metres from this current drilling and is a possible source of the mineralization. The trend of the drilled zones is headed in the direction of the plug and further investigation is required. All areas remain open at depth and on strike.

Subsequent exploration work has been focused on extensive soil and rock chip sampling and mapping program over Hilda 30, 37 & 38 properties which is ongoing presently. In addition the Company carried out a regional airborne magnetic survey. An 8 to 10 hole drill program has now begun while plans are being prepared for a targeted Induced Polarization (IP) survey to identify the highest grade zones of mineralization. Following the interpretation of the data collected and combined with the new drill data and very encouraging drill results that exist to date, a further exploration drill program will be planned and executed to further delineate the existing significant discovery and test new targets on various areas of the property.

Management view

Management is of the opinion that the initial results we have provided demonstrate that the area has excellent exploration potential. Coupled with our neighbour's results, Corex Gold Corp., a strong regional play is starting to develop in an already prolific gold and silver mining region that boasts projects such as Gammon Gold's Ocampo, Minefinder's Dolores and Alamos Mulatos projects.

Corex Gold Corp. has been consistently reporting good results and has approximately 44 million shares outstanding with a market capitalization of approximately $35 million. It is our belief that we may have an important higher grade feeder system for the mineralization of this area. First Mexican Gold has approximately 31.5 million shares outstanding and based on the 35 cents per share recent financing this will yield an approximate market capitalization of $11 million.

It is the view of management that First Mexican Gold has the potential to further develop and outline a significant discovery on this property package as indicated by the above information outlined in this update letter. To date, our higher grade intercepts compare favourably with Corex Gold Corp. results and provide investors a very good early entry opportunity to participate in what could be a potential significant gold and silver discovery in what is a secular bull market for precious metals that should continue for many years yet.

On behalf of existing First Mexican shareholders, management successfully negotiated a special warrant provision during the recent reverse takeover process that allows those original risk investors to participate in the upside success of the Company going forward. As result driven milestones are attained by the corporation the Special Warrants are released and become exercisable at 10 cents per share. Management wants to sincerely express our gratitude to our original shareholders of First Mexican Resources for their support and contributions over these last 3 years.

The senior management would like to welcome shareholders of Auric Development Corp.

Jim Voisin, President & CEO

First Mexican Gold Corp.

We seek safe harbour.

This news release includes certain forward-looking statements or information. All statements other than statements of historical fact included in this release, including, without limitation, statements regarding plans for the completion of a private placement financing and other future plans and objectives of the Company are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's plans or expectations include market prices, availability of capital and financing, general economic, market or business conditions, regulatory changes, timeliness of government or regulatory approvals and other risks detailed herein and from time to time in the filings made by the Company with securities regulators. The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise except as otherwise required by applicable securities legislation.

Contact Information

  • First Mexican Gold Corp.
    Jim Voisin
    President & CEO
    Toll Free: 1-800-366-8566 (Canada & USA)
    www.fmgoldcorp.com