Mandorin Goldfields Inc.

Mandorin Goldfields Inc.

October 31, 2005 09:00 ET

Mandorin Goldfields: Gold and Coal Project Joint Venture Formation

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Oct. 31, 2005) -

- Agreement to Acquire Gold Mine Interest,

- CDN$1.6 Million Non-Brokered Private Placement Financing, and

- Appointment of Vice-President of Mineral Reserve Development

Mandorin Goldfields Inc. ("Mandorin" or "the Company") (TSX VENTURE:MGD) is pleased to announce the following:


Mandorin has entered into a formalised strategic alliance with a strongly supportive, non-public Investment Group which allows for Mandorin to identify and manage (advanced) mineral resource projects for acquisition and advancement. The Investment Group will bear primary responsibility to arrange for financing of the projects. It is contemplated that this Group's investors (which Mandorin understands will be primarily European-based) will have an initial equal interest to that of Mandorin in any company jointly established for the development of gold and coal projects.

It is intended that for any project company, the interests of Mandorin and the Investment Group's investors would together represent the majority interest in the project company. Mandorin and its investment partner have agreed that this majority interest will be controlled by Mandorin through its voting control over the combined interest. Mandorin reserves the right to appoint a majority of the directors and the Chair of the Board (with the Chair having a casting vote) of the project company. In addition, for any project, Mandorin will require that it be the manager of the project further to a management contract to be entered into for at least a 3-year term (with a 3-year renewal option) pursuant to which Mandorin would provide all technical, accounting, legal, corporate and investor relations services for the project company.

In order to initially provide Mandorin with funds to investigate suitable projects and make project acquisition arrangements, the Investment Group has agreed to arrange up to Cdn.$1.6 million of private placement financing for Mandorin at such time or times as Mandorin shall conduct a private placement of securities. Of this amount, a total of Cdn.$600,000 was contributed through the private placement of units that Mandorin most recently completed. A further Cdn$1 million will be arranged for Mandorin, at the time and pricing of the next private placement, or for any project company formed, as described above, and will be utilised by that company for the purpose of achieving an IPO or RTO transaction for that company. It is contemplated that funding for any project company would initially be provided by Mandorin through shareholder loans made to the project company.

The alliance partners have agreed to initially focus efforts in the gold and coal industries.

The terms of all contemplated transactions in connection with the strategic alliance will be subject to all applicable regulatory approvals.


Mandorin has been engaged for the past several months in identifying appropriate advanced stage projects that are considered suitable for acquisition and advancement. Mandorin has now entered into the first agreement which provides for Mandorin or nominees to acquire a 100% beneficial interest in an advanced gold project referred to as the "Klipwal Mine" in South Africa.

The Klipwal Mine is located approximately 60 kilometres outside Piet Retief, South Africa. Reported recent (1981 to 2003) historical production from the Klipwal Mine is 170,000 ounces at a recovered gold grade of approximately 4.4 grams per tonne. The vendor, who operated the mine between September 2000 and November 2003 reported a yield of 5.0 g/t from 174,000 tons milled at a average reported head grade of 6.3 g/t. The mine has been on care and maintenance since the provisional liquidation of the holding company in 2003 triggered by steadily falling gold prices.

Mandorin believe that there is potential to expand the mine's mineral resources and reserves (currently not NI 43-101 compliant) from downdip and strike extents as well as various identified satellite ore bodies, both outcropping and underground. Potential also exists to upgrade / modernise the installed metallurgical plant to improve metallurgical recoveries and throughput.

The Klipwal Mine currently has a nominal, installed milling capacity of 7,000 tonnes per month and hoisting and leaching (CIP) capacity of a nominal 15,000 tonnes per month. The current Mining Licence covers 7,927 hectares and the mine site supports a substantial infrastructure inventory, including mine accommodation, equipped workshops, spares, offices and laboratory. The Klipwal Mine holds a current Mining Authority under the South African Minerals Act of 1991 and is reported to have a fully funded Environmental Management Fund in place.

The purchase price payable for the acquisition of 100% beneficial interest of the vendors in the Klipwal Mine and certain shareholder loans advanced for the Klipwal Mine totals 7.5 million Rand (approximately Cdn.$1,353,000), payable as to 3,250,000 Rand (approximately Cdn.$586,000) by the issuance of common shares in the capital of Mandorin and the balance through settlements with the Klipwal Mine's outstanding creditors. The issue price for the Mandorin shares will be based on the weighted average closing price of the common shares of Mandorin for the 14 business days prior to the issue date of the shares. The vendors are parties at arm's length to Mandorin.

Further to the strategic alliance with the Investment Group mentioned above, it is proposed that a project company named Duration Gold Limited ("Duration JV Co") will acquire the Klipwal Mine. In keeping with the anticipated contributions of the parties to the formation of Duration JV Co Mandorin and the Investment Group's investors initially each have a 39% interest in Duration JV Co (for a total majority interest of 78% in Duration JV Co).

Closing of the acquisition of the Klipwal Mine is subject to completion of due diligence by Mandorin, including receipt of audited financial statements in connection with the Klipwal Mine, and receipt of applicable regulatory approvals.


The Company plans to raise a further Cdn.$1,600,000 by way of a non-brokered private placement financing from the sale of up to 22,857,143 units at a price of Cdn.$0.07 per share. The securities issuable under the private placement will have a hold period of four months from closing. The Company will pay finder's fees allowable under TSX Venture Exchange policies. The private placement is subject to compliance with applicable securities laws and to receipt of regulatory approval.

The proceeds from the proposed private placement will allow Mandorin to undertake/finalise additional due diligence investigations on advanced prospective projects, the progressing of the Klipwal Mine acquisition by Duration JV Co (Mandorin will be advancing, by manner of shareholder loan, the cash component, as per the agreement terms outlined above, to Duration Gold Limited), and for working capital.


The Company has recently appointed Mr. Peter Haworth, BSc. (Eng), MBL, Pr.Eng, Pr.Sci.Nat as Vice-President of Mineral Reserve Development. Peter has extensive experience and is suitably experienced and qualified to be considered a "Qualified Person" for the purposes of National Instrument 43-101. Peter is supported by a growing group of technical staff identified by Mandorin as having key skills required in the furthering of its business.


"I am pleased to report that the Mandorin management team are poised to realize shareholder value, well within the timeframes set by the Board. This recent initiative is the result of a focused drive to fulfill the previously stated objectives for the company. We are committed to building a company with a substantial, growing and diversified resource/reserve base concurrent with the goal to realize some short term revenue from early gold production. The proposed Klipwal acquisition is the first project to reach a maturity level considered by management to be suitable for public release, however I am pleased with progress on other potential project acquisitions that are currently at an advanced stage of due diligence review.

I am also pleased to have Peter and a growing technical team on board to strengthen the management group."


On behalf of Mandorin Goldfields Inc.

Malcolm L. Stevens, Executive Chairman and President

Errol Smart, Director and Chief Executive Officer

This press release does not constitute an offer to sell or a solicitation to buy any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended ("the U.S. Securities Act") or any state securities law and may not be offered or sold in the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. Statements in this press release other than purely historical information, including statements relating to the Company's future plans and objectives or expected results, constitute forward-looking statements. Forward-looking statements are based on numerous assumptions and are subject to all of the risks and uncertainties inherent in the Company's business, including risks inherent in mineral exploration and development. As a result, actual results may vary materially from those described in the forward-looking statements.

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

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