Mengold Resources Inc.
TSX VENTURE : MNI

Mengold Resources Inc.

April 03, 2006 12:48 ET

Mengold Options Two Shebandowan Properties Burchell Lake and Goldcreek Properties

MONTREAL, QUEBEC--(CCNMatthews - April 3, 2006) - Mengold Resources Inc. (TSX VENTURE:MNI) (the "Company" or "Mengold") has entered into an agreement to earn up to a 100% interest in the 1,700-hectare (4,200-acre) Burchell Lake Property and the 5,700-hectare (14,100-acre) Goldcreek Property (the "Properties") which are both located in the Shebandowan area of the Thunder Bay Mining Division in Ontario. The Burchell Property is prospective for copper-gold mineralization and the Goldcreek Property is prospective for gold mineralization. Both properties are qualified by independent NI-43-101 Reports conducted by Geologica Consulting Group. The Reports will be filed with SEDAR.

Under the terms of an agreement (the "Agreement") with Helm Exploration Ltd. ("Helm"), Mengold may acquire the benefits of two option agreements (the "Option Agreements") on the Burchell Lake and Goldcreek Properties under which Helm is the optionee. Both Properties are subject to a 3% Net Smelter Return Royalty payable to the original optionors (the "Optionors") of the Properties.

BURCHELL LAKE PROPERTY

The Burchell Lake Property is located 110-km west of Thunder Bay on the western side of the Shebandowan Greenstone Belt (SGB). The Burchell Lake Property which encompasses 18 blocks covering 104 mining claims, is on trend within the western SGB between two previous producing mines, the North Coldstream copper and Huronian-Ardeen gold mines, and two developed prospects, the Snodgrass-Moss Lake gold prospect and the East Coldstream gold prospect. The North and East Coldstream deposits are less than 5-km to the northeast of the Burchell Lake Property and the Huronian-Ardeen and Snodgrass-Moss Lake deposits are approximately 10-km and 5-km to the west-southwest, respectively.

Less than 5 km to the northeast of the Burchell Lake Property is the East Coldstream Property, currently held by Alto Ventures, where Noranda produced approximately 102 million pounds of copper, 22,000 oz gold and 440,000 oz silver from 2.7 million tonnes of ore between 1955 to 1967. Approximately 5-km to the west of Burchell is the Snodgrass-Moss Lake low-grade gold deposits According to Moss Lake Gold Mines Ltd., the Moss Lake deposit hosts an indicated resource of 60 million tonnes grading 1.1 gpt gold or 2.1 million contained ounces of gold. Within this large resource is a higher grade core of measured and indicated resources of 475,000 tonnes grading 6.2 gpt gold defined by underground drifting and detailed diamond drilling.

In the Burchell Lake area, disseminated to semi-massive sulphide hosted VMS style and disseminated low-grade gold mineralization appear to be the most prospective targets for exploration. On February 14, 2006, it was announced that, on the Hamlin and Deaty Properties held by the East West Resources - Mega Uranium joint venture, located just south and contiguous to the Burchell Property, the more recent results attained by the joint venture, which has been conducting an ongoing drill program, included 72m of 0.42% copper or 0.74% copper equivalent (including 0.29 gpt silver, 0.107 gpt gold and 0.321 ppt moly).

The most significant mineralization identified to date on the Burchell Lake Property is south and east of Hermia Lake which consists of disseminated sulphides containing copper-gold mineralization hosted generally within felsic volcanic rocks, chert, and silicified amphibole-magnetite-chlorite schist (mafic schist). Disseminated low-grade gold mineralization was encountered on the property in a drill program conducted by Belore Mines in 1976 which returned 96m of 0.23% copper.

The Shebandowan Greenstone Belt is part of the Wawa Subprovince of the Archean Superior Province in the Canadian Shield. Meta-volcanic rocks are the dominant rock type in the SGB with lesser amounts of intercalated coeval intrusive and meta-sedimentary rocks. Underlying the Burchell Lake Property are felsic to mafic meta-volcanic rocks, lesser chemical meta-sedimentary rocks (chert and iron formation) and concordant gabbro and diorite intrusive bodies. These rocks are complexly folded and deformed and are intruded by the syenitic Hermia Lake Stock.

Over a 4-phase 39-month period, the Agreement provides for a total work commitment of $1.2 million which is comprised of an airborne geophysical survey covering the entire property; compilation of all available historical data; line-cutting of a grid; detailed ground geophysics; and diamond drilling.

GOLDCREEK PROPERTY

The Goldcreek Property is located approximately 70-km west of Thunder Bay in the Shebandowan area of northwestern Ontario. Inco's Shebandowan mine located about 10-km west-northwest of Goldcreek produced 2.6 million tonnes at 2.25% nickel, 1.00% copper and 2.68 gpt PGE's (OMNDM). The mine is located on the Crayfish Creek Fault (main break). The Goldcreek Property which hosts several gold showings is comprised of 33 unpatented blocks totaling 358 claim units.

Work to date has identified five mineralized zones on the Goldcreek Property, namely the I-Zone, North Zone, South Zone, Ternowesky (T) Zone and Creek Zone. On a site visit, the independent Geologica Consulting Group collected 12 grab samples from a variety of showings on the property. One of the showings, the I-Zone, located in the northwest of the property, is characterized by a syenitic dyke with quartz-healed ladder veins containing 3% - 5% pyrite returned assays ranging from 0.07 gpt gold to 6.46 gpt gold. A diamond drill hole in 1995 was collared to intersect this gold-bearing dyke and 134.5ft of core (true width of around 12ft - 15ft) assayed 0.126 opt gold. The drill was set up sub-parallel and downdip to the dyke to cut the gold-bearing ladder veins at right angles.

In the southeastern most part of the property, the T-Zone, Creek (West) Zone, North and South Zones have historically returned anomalous gold assays in an extremely altered felsic metavolcanic sericite-quartz-tourmaline schist with abundant pyrite and subordinate copper oxide minerals. Grab samples from the T-Zone typically average in the order of 0.05 opt gold. Brecciated Felsic Tuffs in this area suggest that the volcanic vent is proximal and it could host a gold deposit of economic significance.

Over a 4-phase 39-month period, the Agreement provides for a total work commitment of $2 million which is comprised of an airborne geophysical survey covering the entire property; compilation of all available historical data; line-cutting of a grid; detailed ground geophysics; and diamond drilling.

AGREEMENTS

Pursuant to the terms of the Option Agreements, the exploration programs on each of the two Properties (collectively, the "Exploration Programs") are divided into four phases which in aggregate totals $3.2 million.

The Agreement requires Mengold to raise a minimum of $500,000 by April 30, 2006 (the "Initial Financing"). The terms and pricing of the Initial Financing will be determined shortly.

The Initial Financing will be on a best efforts basis. If the Company fails to complete the Initial Financing by the April 30, 2006 deadline, then Mengold has the option to terminate the Agreement with no further obligations on the part of either the Company or Helm. If the Initial Financing is successfully completed by the April 30, 2006 deadline or Mengold elects to otherwise proceed with the Agreement, then Helm will immediately transfer to the Company the entire benefit of the Option Agreements, including all rights and obligations, subject to the following:

a) all cash payments to be made by Helm to the Optionors pursuant to the Option Agreements shall instead be made by Mengold;

b) all issuances of common shares of Helm to the Optionors contemplated by the Option Agreements shall be replaced by issuances to the Optionors of an equivalent number\, on a one for one basis,\ of common shares of Mengold;

c) Mengold shall assume the obligations of Helm pursuant to the Option Agreements to incur certain exploration expenditures on the Properties totalling up to $3.2 million; and

d) as consideration for the transfer of the Option Agreements, Mengold shall be required to make certain specified cash payments to Helm and to issue certain specified numbers of common shares in the share capital of the Company to Helm.

Upon the Successful Completion of the Initial Financing (the "Phase I Start Date"), Mengold shall:

a) make a cash payment of $150,000 to Helm;

b) make an aggregate payment of $23,500 to the Optionors, comprising $10,000 in respect of the Goldcreek Property and $13,500 in respect of the Burchell Lake Property;

c) issue an aggregate of 850,000 common shares to the Optionors, comprising 500,000 common shares in respect of the Goldcreek Property and 350,000 common shares in respect of the Burchell Lake Property;

d) make an aggregate payment of $3,525 to Helm, comprising $1,500 in respect of the Goldcreek Property and $2,025 in respect of the Burchell Lake Property;

e) issue an aggregate of 1,100,000 common shares to Helm comprising 600,000 common shares in respect of the Goldcreek Property and 500,000 common shares in respect of the Burchell Lake Property;

f) make a subsequent cash payment of $50,000 to Helm to fund the remaining costs of Phase I of the Exploration Programs on the Properties;

g) by June 30, 2006 complete Phase I of the Exploration Programs; and

h) on June 30, 2006, make an aggregate payment of $40,000 to the Optionors, comprising $20,000 in respect of each of the Properties, and an aggregate payment of $6,000 to Helm, comprising $3,000 in respect of each of the Properties.

Any additional funds remaining from the Initial Financing in excess of working capital requirements may be expended by Mengold, at its discretion.

Between the Phase I Start Date and June 30, 2006, Mengold shall undertake to raise up to $5,000,000 or such lesser amount as may be agreed upon among the parties to the Agreement in writing (the "Second Financing") by way of either one or more private placements, a prospectus offering or a combination of such financing methods.

If Mengold succeeds in raising a minimum of $5,000,000 or such lesser agreed-upon amount under the Second Financing on or prior to June 30, 2006 ("Successful Completion of the Second Financing"), Mengold shall immediately begin Phase II of the Exploration Programs (the "Phase II Start Date").

If there is no Successful Completion of the Second Financing, then no further payments, expenditures or issuances of shares shall be required of the parties and the Agreement shall be immediately terminated.

The Agreement provides for aggregate payments, share issuances and exploration expenditures by Mengold in the following amounts during each of the three subsequent phases of the Exploration Programs:



Phase II (to be completed by June 30, 2007):

$75,000 and 1,100,000 shares to the Optionors
$11,250 and 1,350,000 shares to Helm
$600,000 in exploration expenses

Phase III (to be completed by June 30, 2008):

$100,000 and 1,350,000 shares to the Optionors
$15,000 and 1,650,000 shares to Helm
$900,000 in exploration expenses

Phase IV (to be completed by June 30, 2009):

$140,000 and 1,700,000 shares to the Optionors
$21,000 and 1,800,000 shares to Helm
$1,500,000 in exploration expenses


Upon completion of Phase I, Mengold will have acquired a 5% interest in each of the Properties. Upon completion of Phase II, Mengold will have acquired an additional 20% interest in the Properties for a cumulative total of 25%. Upon completion of Phase III, Mengold will have acquired an additional 25.1% interest in the Properties for a cumulative total of 50.1%. Upon completion of Phase IV, Mengold will have acquired an additional 49.9% interest in the Properties for a cumulative total of 100%. In the event the Agreement terminates, then Mengold's interest, earned to date, shall remain subject to the obligation to pay a 3% Net Smelter Return Royalty to the Optionors.

If the requirements of each phase are not completed by each of the respective deadlines set forth above, then the Company shall have no further payments, expenditures or issuances of shares of the Company and the Agreement shall be immediately terminated.

At any time, the Company may, at its sole discretion, terminate the Exploration Program on one of the Properties (the "Terminated Property"), while continuing the Exploration Program on the other Property (the "Continued Property"). In such event, the Company shall return the entire benefit of the Option Agreement that corresponds to the Terminated Property to Helm, other than the interest earned to date by Mengold, and no further payments, expenditures or issuances of shares, as set forth herein, shall be required in respect of the Terminated Property.

Under the Agreement, Mr. Joel Scodnick, P.Geo., President and Chief Executive Officer of Helm will be retained as a consultant to the Company and will be awarded 100,000 common share purchase options ("Options") by the Company pursuant to the Company's stock option plan. Upon the Successful Completion of the Initial Financing, such number of Options shall be increased to a number equal to 2% of the then total number of issued and outstanding common shares of the Company.

Joel Scodnick, P.Geo., is an independent geological consultant, based in Sudbury, Ontario. Mr. Scodnick has over 20 years of experience in mineral exploration and mining development, primarily in the precious metals sector. His breadth of involvement ranges from acting as project manager of exploration over numerous field seasons to underground experience at the Lamaque Gold Mine in Quebec, and the Velardena Silver Mine in Velardena, Mexico. Mr. Scodnick has considerable experience in property evaluation and has authored numerous technical reports and business plans, including a Competent Persons Report for the London-based AIM Exchange. Mr. Scodnick also has extensive public company experience. In 1982, Mr. Scodnick graduated with a B.Sc. in Geology from Concordia University in Montreal after previously graduating with an honours distinction in electromechanical engineering technology from Algonquin College in Ottawa. Currently, he is a director of SearchGold Resources Ltd. and Graniz Mondal Inc., both TSX.V-listed companies.

The Exploration Programs will be supervised by Mr. Scodnick, the qualified person, who will be responsible for quality control of assaying and reporting.

FINDER'S FEE

A finder's fee will be paid in accordance with the following schedule:

a) $1,350 in cash and 5% of the share amount paid to Helm & Optionors at signature;

b) 5% of cash paid and 5% of the number of common shares issued to Helm & Optionors at the end of Phase I;

c) 4% of cash paid and 4% of the number of common shares issued to Helm & Optionors at the end of Phase II;

d) 3% of cash paid and 3% of the number of common shares issued to Helm & Optionors at the end of Phase III; and

e) 3% of cash paid and 3% of the number of common shares issued to Helm & Optionors at the end of Phase IV.

The securities to be issued pursuant to the Agreement and any private placement(s) will be subject to a four-month hold period. All of the transactions described above are subject to the approval of the TSX Venture Exchange.

THUNDER BAY SYMPOSIUM

Mengold will have maps and rock samples on display at Booth-26 at the Northwestern Ontario Mines & Minerals Symposium on April 4th and 5th at the Valhalla Inn in Thunder Bay, Ontario.

Mengold Resources Inc. is a Quebec-based mineral exploration company. The Company is actively exploring its copper-zinc prospective Mountain River Property, near Ste-Anne-du-Lac, Quebec. The Company also holds the PGM-chrome prospective Thetford Property in the Eastern Townships of Quebec and the copper-zinc prospective Needle Lake Property near Dryden, Ontario. Mengold has 10,772,370 common shares outstanding (13,689,037 shares fully diluted).

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

Contact Information

  • In Canada
    Mengold Resources Inc.
    Douglas G. Reeson
    C.F.O. and Director
    (416) 533-0323
    (416) 533-2890
    or
    In Europe
    Mengold Resources Inc.
    W. Ian L. Forrest
    President and Director
    011.41.22.809.9511
    011.41.22.899.9501
    or
    In Canada-Helm Exploration Ltd.
    Joel Scodnick
    President and Chief Executive Officer
    (705) 522-4439
    (705) 522-8694 (FAX)
    jscodnick@xplornet.com