MGold Resources Inc.
TSX VENTURE : MNI

June 16, 2011 08:33 ET

MGold Announces an Agreement with Silver Reserve Corp. On the Silver Queen and Klondyke Silver-Gold Properties, Nevada

MONTRÉAL, QUÉBEC--(Marketwire - June 16, 2011) -MGold Resources Inc. ("MGold" or the "Company") (TSX VENTURE:MNI) announces that it has entered into a non binding letter of intent (the "Letter of Intent") with Silver Reserve Corp. ("SRC") of Reno, Nevada, to acquire, through a subsequent option and joint venture agreement (the "Joint Venture Agreement") to be entered in by MGold and SRC, a 50% working interest in the Silver Queen and Klondyke Properties located in Nevada. SRC is a wholly-owned subsidiary of Infrastructure Materials Corp. ("IMC"), a U.S. exploration stage mining company publicly traded on the NASDAQ OTC:BB under the symbol IFAM.

MGold will have an option to acquire a 50% working interest in the Silver Queen Property by incurring exploration expenditures totaling $4 million over a 30 month period further to the conclusion of the Joint Venture Agreement pursuant to the following schedule: $750,000 after 6 months; $650,000 after 12 months, $850,000 after 18 months, $1,150,000 after 24 months and $600,000 after 30 months and by making cash payments of an aggregate amount of $2,000,000 over a 27 month period pursuant to the following schedule further to the conclusion of the Joint Venture Agreement : $150,000 upon completion of project financing; $130,000 after 6 months; $170,000 after 12 months; $200,000 after 18 months; $350,000 after 24 months and $1,000,000 after 27 months.

Mgold will have a similar, separate option to acquire a 50% working interest in the Klondyke Property by incurring exploration expenditures totaling $1,350,000 over a 30 month period: $250,000 after 6 months; $250,000 after 12 months, $250,000 after 18 months, $300,000 after 24 months and $300,000 after 30 months and by making cash payments of $265,000 over a 27 month period: $30,000 upon completion of project financing; $25,000 after 6 months; $25,000 after 12 months; $30,000 after 18 months; $30,000 after 24 months and $125,000 after 27 months.

The completion of the transactions contemplated in the Letter of Intent are subject to the prior approval by the TSX Venture Exchange, the execution of the Joint Venture Agreement, the completion of a satisfactory due diligence review by both MGold and SRC and the completion by MGold of a minimum financing of $1,000,000 before September 1, 2011.

SILVER QUEEN PROPERTY

The Silver Queen Silver Property (the "Property") is located in the Red Mountain Mining District of Esmeralda County, Nevada and is comprised of 147 unpatented mineral claims covering an area of 2,996 acres. The Property is subject to a Technical Report made pursuant National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") dated May 29, 2010 for IMC. The Property is situated 25 miles west of the historic mining town of Silver Peak. The district is characterized by the occurrence of steeply dipping epithermal silver-bearing quartz-calcite veins, and can carry significant amounts of silver-bearing minerals. The Property is underlain entirely by Tertiary volcanic rocks and most of it is within the boundary of a collapsed caldera.

The Property encompasses two sites of historical production called the Mohawk and Silver Queen. The Silver Queen records are not available for review. The Mohawk vein system appears to have produced 106,448 tons averaging 18.7 oz/t silver (1.87M oz silver) mainly from 1921 to the early 1960's, with limited production from 1980-81 (Bruff & Baker, 1982). In 1982 and 1983 further studies were conducted to determine "geologic" and "mining" reserves on the Mohawk. Although a more comprehensive study must be undertaken, as well as a re-categorization of the "Reserves" according to NI 43-101 standards, it is interesting to note that in a report written by Bruff in 1983 the geologic reserve category was estimated at 95,221 tons of 13.2 oz/t silver (1,256,917 oz of contained silver), and in the mining reserve category 84,240 tons of 11.5 oz/t silver for 968,760 ounces of contained silver. As mentioned below, the reader is cautioned that there has not been sufficient work undertaken to classify this historical estimate as current mineral resources as defined in NI 43-101.

In 2008, SRC conducted a very limited drilling campaign which consisted of 2 Reverse Circulation ("RC") and 2 Diamond Drill Holes ("DDH") in the Mohawk area, as well as 4 RC holes in the northern part of the property. Two of the holes near the Mohawk Mine, core hole MOR3 and RC hole CM01 encountered extensive and well mineralized zones of silver within the vein and host altered host rock and are described as follows:

DDHDepth ft.Depth ft.Depth ft.Silver
MOR3FromToTotal(oz/t)
345350514.54
35035557.12
35536057.08
36036559.63

The altered zone in MOR3 returned a 95 ft intersection (true width about 60 ft.) grading 4.05 oz/t silver from 325 to 420 ft including a higher grade zone with a weighted average of 9.59 oz/t silver over 20 ft (345-365 ft).

RC HoleDepth ft.Depth ft.Depth ft.Silver
CM01FromToTotal(oz/t)
35736256.84
36236755.35
36737254.74
38238539.72
385390512.44
39039558.93

The altered zone in CM01 as provided above returned a 60 ft wide (true width about 38 ft.) intersect grading 4.70 oz/t silver from 340 to 400 ft including two higher grade zones with weighted averages of 5.64 oz/t silver over 15 ft from 357 to 372 ft, and 10.46 oz/t silver over 13 ft from 382 to 395 ft. Both of the above mentioned holes were drilled to test the extension and to verify the mineralization in the area of the Mohawk Mine. From surface mapping it appears the Mohawk vein system runs for about 1.8 miles along strike which can ultimately lead to a considerable resource should the width and grades hold out as in the Mohawk mine area. A drill program is currently being planned.

KLONDYKE PROPERTY

The Klondyke Property is located in the Klondyke Mining District in Esmerelda County, Nevada, 15 miles south of the town of Tonopah. The Property is comprised of 118 mineral claims covering an area of approximately 2,438 acres and is situated 5 miles southeast of Allied Nevada Gold's ("ANV") Hasbrouck Property.

Historic mining activity on the Klondyke Property is witnessed by numerous prospect pits, adits and shafts. In 2006 and 2007 SRC mapped the Klondyke and a series of high angle NW and NE trending faults were identified in the field. Also during this mapping campaign, 6 sampling grids were established and rock chips and soil samples collected. Sampling on Grid 2 show that silver-copper-lead and zinc anomalies are usually oriented along NE trends which are in proximity to an intrusive body. In the main area of the workings white quartz veining containing black manganese and iron oxides trend NW and is traceable for 800 ft before dipping below the overburden to the south. The veins in this area range from 5-20 ft wide and appear to be sheeted.

About 200 rock samples from this program yielded some very encouraging silver grades from four different areas. Some good gold grades are provided as well. The best assays and are shown in the following table:

Target Area No.Sample No.Silver (oz/t)Gold (g/t)Cu (%)Lead (%)Zinc (%)
1KD2933761930.081.441.660.17
"KD293282470.190.290.270.07
"CKD15.22.220.123.170.07
2KD2933868.50.030.030.220.44
"RKD30.750.0500.070
3KD29332512.11.750.100.610.08
"KD2933823500.292.740.19
4KD2933416.92.390.040.240.07
"KD2932549.900.040.410.06

The Property is tied onto the southern boundary of ANV's Kondike Flats Property which is contiguous and just south-southeast of the Hasbrouck Property. In the first quarter of 2011 ANV reported some high grade drill intercepts on Hasbrouck such as 525 ft of 0.132 oz/t gold and 2.43 oz/t silver as well as 617 ft of 0.057 oz/t gold and 1.01 oz/t silver in the Saddle Zone. Both Hasbrouck and Klondyke are located within what has been described as "Walker Lane", a 50-mile wide corridor of northwesterly trending strike-slip faults. It is interesting to note that on ANV's presentation map (May 2, 2011) a series of Northwest-Southeast and Northeast-Southwest faults have been interpreted from a gravity survey. These same faults have also been identified on Klondyke. A drilling program on Klondyke is being planned.

The Qualified Person ("QP"), as defined in NI 43-101, responsible for the issuance of this press release is Joel Scodnick, P.Geo., President & CEO of MGold. The QP, has not done sufficient work to classify this historical estimate as current mineral resources. MGold is not treating the historical estimate as current mineral resources, as defined in NI 43-101.

MGold is engaged in mineral exploration for precious and base metals. The Company also has the Burchell Lake Property, which is prospective for gold, copper, and molybdenum, in the Shebandowan area of Northwestern Ontario. MGold has 13,271,324 issued and outstanding common shares.

For further information, please bookmark www.mgold.ca (under construction).

Neither the TSX Venture Exchange nor its Regulation Services Provider, as that term is defined in the policies of the TSX Venture Exchange, accepts responsibility for the adequacy or accuracy of this release.

Contact Information

  • In Canada: MGold Resources Inc.
    Joel Scodnick
    President and Chief Executive Officer
    (705) 522.4439
    (705) 522.8694 (FAX)
    joelscodnick@me.com

    MGold Resources Inc.
    Marc Poitras
    Chief Financial Officer and Director
    (705) 222-1700
    (705) 222-1701 (FAX)
    marc@poitrasca.ca

    In Europe: MGold Resources Inc.
    W. Ian L. Forrest
    Chairman and Director
    +41 79 202 6927
    +41.22.899.9501 (FAX)
    ian@forrestenterprise.com