RNC Gold Inc.

November 07, 2005 17:50 ET

RNC Reports on San Andres 43-101 Reserves

TORONTO, ONTARIO--(CCNMatthews - Nov. 7, 2005) -

Not for release in the United States

RNC Gold Inc. (TSX:RNC) ("RNC" or the "Company") today announced that it has filed a National Instrument (NI) 43 -101 compliant technical report that discloses reserves, as of Dec 31, 2004, of 477,078 ounces and resources of 978,915 ounces (including reserves) of gold at the San Andres gold mine in Honduras ("San Andres"). These reserves and resources are more fully disclosed in Schedule 1 appended to this document and the (NI) 43 -101 compliant technical report is filed at www.sedar.com.

Upon completion of the contemplated acquisition of San Andres, RNC will have the following total reserves and resources as detailed in Schedule 1 of this release:

- Proven and probable reserves: 1,405,063 contained ounces of gold;

- Measured and indicated resources (including reserves): 3,382,304 ounces;

- Inferred resources: 1,947,981 ounces

San Andres Acquisition Overview

San Andres is currently owned by a private Belize company (75%) and by a company controlled by J.R. Martin (Chairman & CEO) and T.W. Lough (President & CFO) of RNC (25%). The acquisition cost of San Andres is estimated to be US$22.5 million. This acquisition price is composed of US$16.0 million for 100% of the shares and approximately US$5.5 million for the elimination of debt. Additionally the 75% owners will retain an NSR royalty. This royalty will be calculated as 1% on the first US$20.0 million of annual revenues decreasing to 0.5% on the remaining annual revenues. The cumulative maximum royalty will be US$1.5 million.

RNC has entered into an agreement to exercise the option that it holds to acquire the remaining 25% equity in San Andres subject to regulatory, board and shareholder approvals, completion of the purchase of the other 75% of San Andres and completion of a financing.

RNC (Management) Limited, a company controlled by the aforementioned senior executives of RNC, will sell mobile equipment, cancel all management contracts, cancel an engineering, procurement, construction and management contract with Cerro Quema and cancel all lease agreements with RNC and its subsidiaries. RNC (Management) Limited will receive approximately US$1.0 million for this portion of the transaction which is equal to the purchase price of the mobile equipment being sold. RNC (Management) will also receive US$250,000 for a 0.667% NSR royalty it holds on production from San Andres.

The principals of RNC (Management) have also agreed to accept US$4.0 million in securities of the same type and having the same terms and conditions as those to be issued in a contemplated equity financing to fund the acquisition of San Andres.

Assuming successful completion of the acquisition of San Andres, and construction at Cerro Quema, RNC would have the following production profile:

Expected Sustainable
Gold Production
Production Post
Property Country Status 2006 (oz) 2006 (oz)
La Libertad Nicaragua Producing 70,000 70,000
San Andres Honduras Producing 88,800 70,000
Bonanza Nicaragua Producing 30,000 30,000
Cerro Quema Panama In construction 12,200 50,000
Totals 201,000 220,000

The Company would also control the following reserves and resources
(estimated as at December 31, 2004):

Tonnes Grade g/t Ounces
Proven and Probable
San Andres 17,339,283 0.86 477,078
La Libertad 7,335,455 2.10 495,116
Cerro Quema 10,498,620 1.10 372,487
Bonanza 329,173 5.71 60,382
35,502,521 1.23 1,405,063
Measured and Indicated
(including reserves)
San Andres 38,975,404 0.78 978,915
La Libertad 37,295,263 1.11 1,327,391
Cerro Quema 15,140,850 0.93 451,443
Bonanza 3,925,744 4.16 524,555
95,337,261 1.07 3,282,304
Inferred resources
San Andres 29,700,000 0.65 625,000
La Libertad 5,132,525 0.93 152,717
Cerro Quema 2,768,760 0.50 44,146
Bonanza 25,154,646 1.39 1,126,118
62,755,931 0.97 1,947,981

A more detailed table of reserves and resources is appended to this press release as Schedule 1.

The company would also control in excess of 238,000 hectares of land around the existing mines, much of which is unexplored.


San Andres, Honduras

San Andres is an open pit heap leach gold mine located in the Department of Copan in the interior highlands of western Honduras. The gold and silver mineralization is associated with a high level epithermal, quartz-carbonate-adularia system consisting of veins, stockworks and disseminations.

San Andres has measured and indicated resources (including reserves) as of Dec. 31, 2004 of 38,975,404 tonnes of ore at an average grade of 0.78 g/tonnes representing 978,915 contained ounces of gold.

Historically, mining has been conducted in the Water Tank Hill pit and the East Ledge pit. RNC (Management) recommenced mining in the Water Tank Hill pit during 2000 and mined in excess of 7.5 million tonnes at an average grade of 1.30 g/tonne. The Water Tank pit was exhausted in 2003 and pit reclamation is now complete. In 2002, San Andres discovered the East Ledge pit and, to the end of September 2005, more than 7.8 million tonnes of ore at an average grade of 0.68 g/tonne have been mined from this area.

The current mine plan projects mining in the East ledge pit for approximately one more year before moving to the fully permitted Twin Hills pit. Future mining costs are estimated to be $257 per ounce with ore grades estimated to be 0.89 grams per tonne at an average strip ratio of 0.36 tonnes of waste per tonne of ore. Future gold recoveries from the heaps are estimated at 75%.

Since restart in August 2002, San Andres has produced in excess of 400,000 ounces at an average operating cost of $237 per ounce. To date, the average strip ratio has been 1.11 tonnes of waste per tonne of ore at an average grade of 0.95 g/tonne. Gold recoveries from the heaps have been 80%.

An exploration program is currently underway in the South Extension zone, using a San Andres-owned RC drill, with the goal of joining the East Ledge pit with the Twin Hills pit. Additionally, drilling is underway in the Cerro Cortes area which is adjacent to the East Ledge pit as well as in the Twin Hills South zone. Success on these drill targets will greatly extend the mine life.

A map of the San Andres mining areas and exploration targets is attached.

Cerro Quema, Panama

The Cerro Quema project is located on the Azuero Peninsula in Los Santos Province of southwestern Panama about 190 kilometers southwest of Panama city. Cerro Quema will be developed as an open pit heap leach gold mine with on and off leach pads. Resources at Cerro Quema were estimated as of Dec 31, 2004 to be 15,140,850 tonnes of ore at an average grade of 0.93 g/tonne, representing 451,443 contained ounces of gold.

Annual production over the current six-year mine life is estimated to be approximately 50,000 ounces of gold per year. Future operating costs are estimated to be $227 per ounce. A contract miner to move the overburden and ore will be employed. RNC has acquired an ADR plant, a laboratory, an agglomerator and the conveying equipment while the crushing plant, radial stacker and the electrical generating equipment needs to be sourced. The capital cost to develop this project is estimated to be $10.0 million of which approximately $3.0 million has been incurred. Advancement of this project is waiting for the "dry season". During this January to May period the pads and ponds are to be constructed and the plant is to be assembled. Production is to commence during the third quarter of 2006.

La Libertad, Nicaragua

The La Libertad mine is located approximately 110 kilometers due east of Managua, the capital city of Nicaragua The La Libertad mine is an open pit heap leach gold mine with on and off leach pads. Resources as at December 31, 2004 at La Libertad are estimated to be 37,295,263 tonnes of ore at an average grade of 1.11 g/tonne representing 1,327,391 contained ounces of gold. Operations at La Libertad recently converted to a contract miner. Production is increasing with annual projected production to be approximately 70,000 ounces of gold per year. Future exploration at La Libertad will focus on identified drill targets around the existing mine as well as on the recently acquired Santo Domingo concession that is located within the concession boundaries but approximately 15 kilometers from the existing mining activities.

Bonanza, Nicaragua

The Bonanza mine is located in northeast Nicaragua near the west central border of Region Autonoma Atlantico Norte (RAAN). Bonanza is principally an underground mine with the underground plant feed supplemented by open pit ore and ore purchased from the local "small miners". The present Merrill Crowe precipitate plant has an operating capacity of approximately 550 tonnes per day. This mine has been in continuous production since 1940 with over 2.3 million ounces of gold having been produced.

The 205,000-hectare land package includes 5 past producing mines. Much of the land package remains unexplored. RNC is currently drilling from surface to identify underground ore zones. On the 19,370-hectare concession immediately surrounding the existing mine, mill and town, RNC has numerous exploration targets in three separate sectors along a 20 km northeast trending mineralized corridor.

Little exploration has been conducted on the remaining 185,725-hectare land package surrounding the mine. RNC is actively searching for Joint Venture partners to advance the exploration potential on these concessions. These concessions include the past producing Rosita and Siuna mines.

Qualified Persons

In October 2005, Chlumsky, Armbrust and Meyer, LLC (CAM) conducted a reserve audit of the San Andres Project, Honduras, and in 2003 conducted similar audits of the La Libertad mine, Nicaragua, and Cerro Quema Project, Panama, including detailed reviews of the geological interpretation, data compilation and quality assurance/quality control (QA/QC) procedures. For these projects, feasibility reports had been prepared by Bikerman Engineering & Technology Associates (BETA) on behalf of Minerales de Occidente (San Andres) and RNC Gold Inc. (Cerro Quema and La Libertad). BETA was responsible for the year end 2003 and 2004 Cerro Quema and La Libertad reserve and resource updates under the supervision of Denis Francoeur, P. Geo, M.Sc., the qualified person for RNC Gold Inc. Francoeur is the qualified person for the resource and reserve updates at RNC's Hemco operation in Nicaragua.

About RNC Gold

RNC Gold Inc. is a gold mining company focused on mines and projects in Central America. From its current annual production base of 100,000 ounces of gold, RNC is positioned for growth through the acquisition of San Andres, construction of Cerro Quema, operational efficiencies and through exploration on property surrounding its present mines. The Company's main assets include the La Libertad and Bonanza mines in Nicaragua, and the Cerro Quema project under construction in Panama. The Company has signed a letter of intent to acquire the San Andres mine in Honduras which will increase the annual production base to approximately 170,000 ounces of gold per year. The Company has 40,569,021 common shares outstanding and on a fully diluted basis there are 64,497,736 securities outstanding.

Certain statements included herein, include those that express management's expectations or estimates of future performance, constitute "forward looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, regulatory, competitive and geological uncertainties and contingencies. Such forward-looking statements involve known and unknown risks, uncertainties and other risk factors that may cause the actual financial results, performance, or achievements of RNC Gold to be materially different from estimated future results, performance, or achievements expressed or implied by those forward looking statements. These are discussed in greater detail in RNC Gold's Annual Information Form and other reports filed with Canadian provincial securities commissions at www.sedar.com. RNC Gold expressly disclaims any intention or obligation to update or revise any forward- looking statement whether as a result of new information, events or otherwise.

To view Schedule 1 please click on the following link: http://www.ccnmatthews.com/docs/rnctab.pdf

To view the San Andres map please click the following link: http://www.ccnmatthews.com/docs/rncsan.pdf

Contact Information

  • RNC Gold Inc.
    J. R. Martin
    Chairman and CEO
    (416) 365-9777
    RNC Gold Inc.
    T.W. Lough
    President and CFO
    (416) 365-9777
    The Equicom Group
    Martti Kangas
    (416) 815-0700-ext243