SOURCE: Pele Mountain Resources Inc.

May 10, 2006 16:25 ET

Pele Mountain Completes Acquisition of Farquhar Claims

TORONTO -- (MARKET WIRE) -- May 10, 2006 -- Pele Mountain Resources (TSX-V: GEM) ("Pele" or the "Company") announced today that Pele Gold Corporation ("Pele Gold"), a wholly owned subsidiary of the Company, has expanded its 100-percent owned Highland Gold Project in northern Ontario by acquiring 8 additional patented mining claims (the "Claims") located approximately 25 kilometres northeast of Wawa. Further to Pele's press release dated March 6, 2006, Pele Gold has finalized and closed its acquisition from Farquhar Mines, Limited (the "Vendor") of a 100-percent interest in these Claims. With this acquisition, Pele Gold now owns a 3.5-kilometer contiguous portion along the Gutcher Lake Stock contact within the Goudreau Localsh Deformation Zone.

As consideration for the purchase of the Claims, the Company has paid a total $75,000 in cash to the Vendor, issued 200,000 common shares of Pele to the Vendor (at an aggregate attributed value of $75,000), and granted to the Vendor a 2.5-percent net smelter return royalty in respect of the Claims ("NSR"). Pele Gold retains the right to buy back up to 50% of the NSR (being a 1.25% NSR) for a total of $2-million (the "Buy Back Amount") during the first five years after closing. After the fifth year following the closing date, the Buy Back Amount shall increase by a factor of five percent per year. The 200,000 common shares of Pele issued to the Vendor are subject to the standard four-month statutory hold period from the date of issuance.

The Claims were originally transferred to the Vendor by Algoma Central and Hudson Bay Railway Company (the "Original Owner") back in 1927. As part of this original transfer of the Claims, the Original Owner reserved certain royalties (the "Original Royalties") in the form of perpetual rent-charge, which continues to be an encumbrance that continues to run with the Claims (in addition to the NSR due to the Vendor noted above). The Original Royalties range from 2 to 5 percent of market value on gold, silver, copper or nickel, and in respect of Iron Ore siderite, pyrites or other sulfides between $0.10 and $0.15 per long ton of raw ore. On other minerals, the royalty is not less than fifteen cents per long ton of raw ore, and not more than five percent of its market value at date of shipment.

Pele Mountain Resources is focused on mineral exploration within the established mining camps of northern Ontario. Pele has acquired and developed a diverse portfolio of diamond, gold, base metal, and uranium properties, which provide exposure and leverage both to discovery and to the increased global demand for natural resources. Pele is active on five project fronts, including diamond exploration at Festival and Alliance funded by partners Goldcorp and Trigon Exploration Canada, gold and base metal exploration at Ardeen funded by partners Maple Minerals Corp and East- West Resource Corporation, and in-house exploration at its Highland Gold and Sudbury Offset properties. Pele stock trades on the TSX Venture Exchange under the symbol "GEM."

Currently, Pele has a total of 59,412,145 common shares issued and outstanding, including the issuance of the 200,000 common shares to the Vendor referenced above.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. Some of the statements contained in this release are forward-looking statements, such as estimates and statements that describe Pele's future plans, objectives or goals, including words to the effect that Pele or management expects a stated condition or result to occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements.

Contact Information

  • For further information please contact:
    Al Shefsky
    President
    (416) 368-7224
    or visit the Pele website at www.pelemountain.com