Sutter Gold Mining Inc.

Sutter Gold Mining Inc.

November 02, 2006 12:18 ET

Sutter Gold Acquires Option on Mexican Gold Property

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Nov. 2, 2006) - Sutter Gold Mining Inc. (TSX VENTURE:SGM) today announced that it signed an Exclusive Option Agreement with The Alamo Group, Inc. of Scottsdale, AZ, to acquire a 100% interest (less royalty provisions) in the Santa Teresa mineral concession located in the historic El Alamo gold mining district southeast of Ensenada, Mexico for $500,000 in payments and work commitments.

The concession contains several historic underground gold mines along its approximate 1.5 mile long strike length including the La American, Virgin de Guadalupe, San Vicente and the Aurora-Princessa Group of mines. According to historical records owned by The Alamo Group, underground gold production from mines in the district averaged from one/half ounce per ton to several ounces of gold per ton.

The Santa Teresa concession is located in the northern Baja peninsula of Mexico approximately 60 miles southeast of the port city of Ensenada, Mexico. Mining in the district was initiated in 1888 with the discovery of placer gold resulting in the El Alamo Gold Rush of 1888. Operations quickly went underground as miners followed surface outcroppings of quartz veins down to the shallow water table at about 50 feet. Mining generally ceased in 1905 due to political unrest and the lack of infrastructure which would have allowed underground production to continue below the shallow water table.

Santa Teresa geology is characterized by a series of thin highly enriched quartz veins. The vein system located in this area consists of five main parallel, near vertical, auriferous quartz veins and numerous shorter parallel companion veins. As with the California Mother Lode gold system, a majority of the gold in the quartz is considered "free" gold and amenable to simple gravity recovery.

Chairman Hal Herron stated, "In light of a $617/ounce gold price, the acquisition of the Santa Teresa concession is a significant stepping stone to expanding Sutter's presence in proven areas of earlier gold production. This is a project that Sutter's management and technical staff understand very well as it is a low sulfide quartz vein gold system like Sutter's advanced stage project in the historic Mother Lode of California. We understand the geology, the mineralogy and the milling of this type of ore, not to mention the tremendous upside potential of both projects. I believe our shareholders will be pleased to know that they will have ownership of two gold projects in historically prolific gold mining districts."

Mr. Herron added, "Even though we are extremely busy moving the Sutter operation forward with our drilling efforts we plan to embrace this rare opportunity with the appropriate dedication of time and money to quickly produce a NI 43-101 compliant Geologic Report to outline our exploration plan including our plan for diamond core drilling the property."

The Exclusive Option/Purchase Agreement calls for an initial payment of $15,000 and $40,000 in SGM common stock upon signing a more comprehensive Definitive Agreement and a year one $100,000 work commitment. Once the Definitive Agreement is signed, annual payments to The Alamo Group will run for an additional four years as follows: year 2, $50,000 ($25,000 in cash and SGM common stock); year 3, $75,000 ($35,000 payable in cash and $40,000 in SGM common stock); year 4, $100,000 ($50,000 payable in cash and $50,000 in SGM common stock) and year 5, the balance of the $500,000 purchase price, if any due, in cash. The Alamo Group will retain a 3% net smelter royalty if gold is selling for $650/ounce or greater and 1.5% if gold is selling for less than $650/ounce. SGM has the right to purchase one half of the net smelter royalty for $1 after The Alamo Group has received $2,000,000 in royalties from commercial operations on the concession.

Mr. Jim Rasmussen, AIPG Certified Geologist, is a Qualified Person, as defined by NI 43-101, and has reviewed this release.

About Sutter Gold Mine

The Sutter Gold project contains a 3.2 mile segment of the Mother Lode belt from which 10 historic mines produced 2.3 million ounces of gold. The historic mines bracket a one-mile-long portion of the Mother Lode belt with no historic gold production and which contains the Lincoln and Comet zones. The Lincoln and Comet zones were blind discoveries that did not outcrop at surface and which represent the first significant new gold discoveries made along the Mother Lode belt in the last 50 years. The Sutter Gold project has been the subject of considerable modern exploration activity, most of it centering on the Lincoln and Comet zones, which are adjacent to each other and together referred to as the Lincoln project. A total of 85,085 feet of drilling have been accomplished in 190 diamond drill holes, and modern underground development consists of a 2,850-foot declined ramp with 2,400 feet of crosscuts plus five raises. The historic gold production was documented in a detailed report completed by Mark Payne, the consulting geologist to Sutter Gold and a qualified person as defined by National Instrument 43-101. Further information is available at the Company's website at

The TSX Venture Exchange has in no way passed upon the merits of the proposed transaction and has neither approved nor disapproved the contents of this news release.

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