Trevali Mining Corporation
TSX : TV
OTCQX : TREVF
FRANKFURT : 4TI

Trevali Mining Corporation

May 18, 2011 12:41 ET

Trevali Signs Option to Acquire Huampar Silver-Gold Mine, Peru

Advanced Precious Metal Project With Near Term Production Potential

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 18, 2011) -Trevali Mining Corporation ("Trevali" or the "Company") (TSX:TV)(OTCQX:TREVF)(FRANKFURT:4TI) is pleased to announce that it has signed a memorandum of understanding ("MOU") to acquire 100% ownership in the past producing Huampar Silver-Gold mine located in west-central Peru. Site infrastructure is well developed and includes a historic, non-NI43-101 compliant, mineral reserve* of 874,412 tonnes averaging 1.3 g/t gold, 209 g/t silver, 3.31% lead and 3.63% zinc in addition to minor copper mineralization. Existing mine infrastructure is well maintained and includes a 600-person camp and a fully permitted 400-tonne-per-day (tpd) mineral processing plant is on site. The large 1,450-hectare land package has seen limited historic exploration and Trevali believes that there is excellent potential to discover additional mineralization with the ultimate aim of recommencing mining operations.

"As a former producing precious metal mine with a lead-zinc association, Huampar represents an excellent opportunity to increase the Company's silver exposure and comports well with Trevali's philosophy for rapid expansion through the acquisition of advanced, near-term production properties," stated Dr. Mark Cruise, Trevali's President and CEO. "Huampar shares many analogies with our Santander project and I am confident that our integrated mine and exploration team will quickly add value to the project. Our intent is to rapidly advance the project to a production decision."

LARGE PROPERTY PACKAGE – EXCELLENT LOCATION

The Huampar Mine is comprised of 43 concessions for an aggregate total of 1,450 hectares. It is located approximately 80 kilometres north-east of Lima and approximately 80 kilometres to the south-east of Trevali's Santander Mine in the southern portion of the Central Peruvian Polymetallic Belt (Fig. 1). Access to the property is via the Carretera Central, the principal highway servicing the central Andes, a distance of 150 kilometres by road from Lima.

To view Figure 1 please click on the following link: http://media3.marketwire.com/docs/fig1TV.pdf

HISTORIC RESERVES*

Modern mining of several polymetallic veins began in 1956 and continued until 1991 when power shortages forced mine closure. Production initially commenced at 250 tpd and processed approximately 2.5 million tonnes of ore with an average grade of 1.6 g/t Au, 185 g/t (5.4 oz/ton) Ag, 3.8% Pb and 5.0% Zn.

Mining continued intermittently from 1997 to early 2000 at approximately 400 tpd and advanced studies examined the feasibility of increasing expansion to 800-to-1000 tpd. Mining operations closed in 2000 due to the lack of development headings and low commodity prices.

Historic production focused on the Finlandia vein system (Finlandia, Suecia, San Juan veins and their associated splays), as well as the Aurelio, Colqui and Condor Pasa veins (Table 1).

Table 1: Principal historic ore* bodies with approximate mined dimensions
MineralizedMax MinedVeinMax Mined
StructureLength (m)Width (m)Depth (m)
Aurelio4501.3300
Finlandia System25001.2420
Colqui3500.96220
Condor Pasa System2001.2300

Prior to closure several reputable third-party geological and engineering consulting companies conducted reserve calculations on Huampar. The most recent study, conducted by MRDI Canada in 1999 using a polygonal estimate method based on underground sampling of drifts, cross-cuts and raises, calculated that Huampar contained reserves* (non-NI 43-101 compliant) of 874,412 tonnes grading 1.3 g/t gold, 209 g/t silver, 3.31% lead and 3.63% zinc in addition to minor copper mineralization. Mining ceased in mineralization and the vein-hosted system remains open for expansion at depth and along strike.

A calculation of the in situ metal value (undiluted, assuming 100% recovery) using three-year average metal prices indicates that the formerly producing Huampar Mine was primarily a precious metal / silver deposit (Fig. 2).

To view Figure 2 please click on the following link: http://media3.marketwire.com/docs/fig2TV.pdf

*The Company cautions that the reserve estimates were prepared before the introduction of NI 43-101, and are therefore historical in nature. The Company is not treating such reserve as a current reserve or resource under NI 43-101. Investors are further cautioned that a qualified person has not yet completed sufficient work to be able to verify the historical reserve, and therefore they should not be relied upon.

GEOLOGY

The district contains numerous styles of mineralization many of which have been mined since at least Spanish colonial time, including high-grade polymetallic (precious and base metal) vein systems (Huampar, Constancia-Coricancha, Casapalca, Morococha), polymetallic carbonate replacement and skarn deposits (Poderosa, Felicidad, Casapalca, Morococha) and copper porphyries (Toromocho).

The property is located in the south-central portion of the Central Peruvian Polymetallic Belt and is underlain by a moderately folded, 200-metre-to-1-kilometre thick package of andesitic volcanic rocks of the Calipuy formation. Underlying the volcanics is an approximately 1-km thick package of strongly folded and faulted carbonates and clastic sediments. Included in this package are the Jumasha, Chulec and Santa Formation limestones, proven host sequences throughout Peru, including the Company's Santander Zn-Pb-Ag project as well as many mines within the greater Huampar district (Felicidad and Poderosa mines).

The property is transected by several large scale (plus-5-km long) ENE-trending fracture zones. Structurally controlled mineralization is primarily hosted within sub-vertical, ENE-trending vein-fault systems. Mineralized veins typically have significant strike lengths (plus-1-km) and considerable depth potential (plus-800m).

Previous exploration was limited to drifting on exposed veins and expansion of existing underground cross-cuts designed to test for and intersect (successfully) sub-parallel structures. No exploration in the modern sense has occurred on the property (geophysics, geochemistry, drilling).

MINERALIZATION

The principal Finlandia system is comprised of at least five major veins of variable widths ranging from 0.2-to-2.5 metres and averaging approximately 1-metre wide over an aggregate distance of ~5-kilometres strike length. The Aurelio vein system, approximately 2 km north of Finlandia, is a gold and silver rich vein system with an average width of 1 metre and a length of approximately 400 metres. The Condor Paso vein system is located some 6 km south of the Finlandia and is traceable for 2-km strike. All vein systems remain open for expansion.

Polymetallic precious and base metal mineralization is hosted in steeply dipping lateral and vertically extensive epi-mesothermal vein-fault systems. Veins show multiple (at least 7) stages of mineralization with variable sulphide mineral assemblages and gangue textures (coliform to coarse euhedral quartz). Principle minerals include coarse crystalline galena and sphalerite ± chalcopyrite and tetrahedrite. Gangue minerals are dominantly quartz ± pyrite, siderite with lesser amounts of barite, muscovite and cinnabar. Gold occurs as fine disseminations of free gold within both sulphides and quartz.

Mineralization was exploited using a combination of cut and fill and shrinkage mining methods from surface to depths ranging from 50-to-450 metres. Similar polymetallic mines in the district contain vertically continuous economic mineralization over intervals of 500-to-1000 metres suggesting good-to-excellent additional expansion potential at depth.

METALLURGY

Historic mill feed is reported to have a moderate work index of 12-to-14. Historical metallurgical recoveries were excellent, producing quality concentrates in part due to the coarse nature of the mineralization and low pyrite content.

To view Photos 1 and 2 please click on the following link: http://media3.marketwire.com/docs/photosTV.pdf

Huampar produced three concentrates – a gravity concentrate to recover gold, a lead-silver concentrate and a zinc concentrate. The most recently available metallurgical data may be summarized as follows (Table 2):

Table 2: Historic metallurgical recoveries – Huampar
Au g/tAg g/tPb%Zn%
ROM - 67,734 t mined2.281152.894.18
Pb Concentrate26.52236547.29
Zn Concentrate0.9310.2758
Gravity Concentrate1461335674.2
Plant Recoveries91.84%93.5%96.7%94.2%

TREVALI'S ASSESSMENT

The deepest levels of the former workings are not readily accessible at present. Trevali's due diligence and assessment sampling predominately focused on surface exposures of the known vein systems and other exploration targets. Samples were collected from outcropping vein mineralization, former mineral stock-piles, tailings material, various gangue alteration assemblages and host-wallrock (Fig. 3). Assay results ranged from below detection limits to very high grade, and support the validity of historic reports and production records in addition to identifying several high priority exploration targets.

Table 3: Summary Results
ProspectChannel IDWidth (m)Ag g/t-(oz/t)Au (g/t)Cu (%)Pb (%)Zn (%)Notes
Aurelio VeinHPR-C-20 (3 samples)1.70448.2-(13.1)1.530.030.430.20Vein and wall rock
HPR-C-19 (3 samples)3.1588.2-(2.6)1.100.010.190.22Vein and wall rock
Aurelio DisseminatedGrab-1 (1 sample)--40.2-(1.2)0.070.000.050.00Altered volcanics
Aurelio TailingsGrab-2 (1 sample)--307.6-(9.0)0.490.074.802.14
Colqui VeinHPR-C-21 (2 samples)0.65158.6-(4.6)0.050.080.630.06Partial vein exposed in old mine working
Finlandia Vein SystemHPR-C-1 (1 sample)2.5154.9-(4.5)1.700.097.9416.26Vein exposed in old mine workings
HPR-C-2 (1 sample)2.5488.6-(14.2)0.770.2913.5733.28Vein exposed in old mine workings
HPR-C-3 (1 sample)2.8027.1-(0.8)0.510.010.090.02Veinlets and altered volcanics above workings
HPR-C-4 (1 sample)2.7039.8-(1.2)1.430.040.130.04
HPR-C-5 (1 sample)1.0092.6-(2.7)1.120.030.130.04
Finlandia Total2.3163.9-(4.8)1.090.104.7410.791.7 km length
Finlandia-Colqui2.03163.6-(4.8)1.040.104.5210.213.5 km length
Finlandia TailingsGrab-3 (2 samples)--197.9-(5.8)na0.9518.678.48
Condor Pasa V-1CDP-C-2 (1 sample)0.2575.3-(2.2)0.040.051.350.04Narrow vein. Not principle structure
Condor Pasa V-2CDP-C-5 (1 sample)0.8091.7-(2.7)0.100.051.750.22Vein exposed at surface
Condor Pasa TailingsGrab-4 (3 samples)--264.0-(7.7)0.411.013.513.69

Finlandia surface samples HPR-C-1 and 2 are located 1.7 kilometres east of channels HPR-C-4 and 5. Including the Colqui - Finlandia systems and channel samples HPR-C-1 through 5 and HPR-C-21 the results define an approximately 3.5-km wide zone of structurally-controlled zone of mineralization.

Aurelio surface channel sampling covered approximately 250 metres of vein strike length. The Aurelio lineament is traceable for approximately 4 km and is hosted within a large zone of strong albite-sericite-quartz-pyrite alteration that is approximately +7-km long and 1-km wide. Aurelio sampling confirmed high-grade polymetallic mineralization within the structure and further identified the potential for disseminated mineralization within the strongly altered volcanics. Based on surface mapping and historic data review the Company believes that the Aurelio vein has excellent potential for resource expansion.

Structures at Condor Pasa are not well exposed on surface consequently samples were collected from waste dumps and two smaller veins adjacent to the principal mineralized structure (Fig. 3).

Based on due diligence review of historic data and surface sampling and mapping, all mineralized structures (Finlandia, Colqui, Aurelio, Condor Pasa) are considered to have good-to-excellent potential for near term resource definition and expansion, particularly down-dip along structures.

To view Figure 3 please click on the following link: http://media3.marketwire.com/docs/fig3TV.pdf

OPTION AGREEMENT

Trevali has signed the legally binding MOU with Nassau-registered Nueva Condor Inc. (NCI) wherein NCI has agreed to grant to Trevali the exclusive option to acquire all the outstanding shares of its Peruvian subsidiary Nueva Condor S.A., 100% owner and holder of the Huampar property and associated mining rights (the "Option").

The term of the Option will be 4 years and will have the following terms:

  • US$50,000 on signing (paid).
  • 1,000,000 Trevali shares – issuable upon Trevali exercising the option.
  • 3% NSR of which 2% may be purchased in 1% tranches at any stage for payments of US$1.5 and US$2 million respectively.
  • Annual payments of US$100,000 commencing on the first anniversary of the agreement which payments will be deductible from any NSR payments made to NCI.

Furthermore Trevali has retained the services of key NCI personnel for a monthly retainer fee of US$5,000 which fee will be capped at US$300,000.

Trevali expects the formal option agreement outlining rights of both parties will be completed shortly.

The Option is subject to relevant TSX regulatory approvals.

Qualified Person and Quality Control/Quality Assurance

EurGeol Dr. Mark D. Cruise, Trevali's President and CEO and a qualified person as defined by National Instrument 43-101, has supervised the preparation of the scientific and technical information that forms the basis for this news release. Dr. Cruise is not independent of the Company, as he is an officer and shareholder.

The work programs at Santander were designed by, and are supervised by, Mark D. Cruise, President & CEO, Trevali, Tim Kingsley (Senior Geologist) and Tansy O'Connor-Parsons (Chief Geochemist), who together are responsible for all aspects of the work, including the quality control/quality assurance programs. On-site personnel at the project rigorously collect and track samples which are then security sealed and shipped to ACME Laboratories, Vancouver, for assay. ACME's quality system complies with the requirements for the International Standards ISO 9001:2000 and ISO 17025: 1999. Analytical accuracy and precision are monitored by the analysis of reagent blanks, reference material and replicate samples. Quality control is further assured by the use of international and in-house standards. Blind certified reference material is inserted at regular intervals into the sample sequence by Trevali personnel in order to independently assess analytical accuracy. Finally, representative blind duplicate samples are routinely forwarded to ACME and an ISO compliant third party laboratory for additional quality control.

ABOUT TREVALI MINING CORPORATION

Trevali Mining is advancing two polymetallic deposits to production in Canada and Peru – the Halfmile and Santander projects respectively. In Canada, Trevali holds the Halfmile and Stratmat polymetallic deposits near Bathurst, New Brunswick, and the Ruttan copper-zinc deposit in northern Manitoba. Site development is in progress at Halfmile with proposed production at 2,000-tonnes-per-day anticipated to commence in 2011.

At Santander, in conjunction with Glencore International A.G., development is underway with mine commissioning and production expected to commence at 2,000-tonnes-per-day in late 2011 with full production to follow immediately thereafter. Additionally, through its wholly owned subsidiary Trevali Renewable Energy Inc., the Company is undertaking a significant upgrade of its Tingo run-of-river hydroelectric power generating facility along with transmission line upgrades and extensions to allow, in addition to supplying power to the mining operation on the property, the potential sale of surplus power into the Peruvian National Energy Grid.

The common shares of Trevali are currently listed on the TSX (symbol TV). For further details on Trevali, readers are referred to the Trevali's web site (www.trevali.com) and to Canadian regulatory filings on SEDAR at www.sedar.com.

On Behalf of the Board of Directors of TREVALI MINING CORPORATION

Mark D. Cruise, President

This news release contains "forward-looking statements" within the meaning of the United States private securities litigation reform act of 1995 and "forward-looking information" within the meaning of applicable Canadian securities legislation. Statements containing forward-looking information express, as at the date of this news release, the Company's plans, estimates, forecasts, projections, expectations, or beliefs as to future events or results and the company does not intend, and does not assume any obligation to, update such statements containing the forward-looking information. Such forward-looking statements and information include, but are not limited to statements as to: the accuracy of estimated mineral reserves and resources, anticipated results of future exploration, and forecast future metal prices, anticipated results of future electrical sales and expectations that environmental, permitting, legal, title, taxation, socio-economic, political, marketing or other issues will not materially affect estimates of mineral reserves. These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies.

These statements reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by the company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Many factors, both known and unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this news release and the company has made assumptions and estimates based on or related to many of these factors. Such factors include, without limitation: fluctuations in spot and forward markets for silver, zinc, base metals and certain other commodities (such as natural gas, fuel oil and electricity); fluctuations in currency markets (such as the Peruvian sol versus the U.S. dollar); risks related to the technological and operational nature of the Company's business; changes in national and local government, legislation, taxation, controls or regulations and political or economic developments in Canada, the United States, Peru or other countries where the Company may carry on business in the future; risks and hazards associated with the business of mineral exploration, development and mining (including environmental hazards, industrial accidents, unusual or unexpected geological or structural formations, pressures, cave-ins and flooding); risks relating to the credit worthiness or financial condition of suppliers, refiners and other parties with whom the Company does business; inadequate insurance, or inability to obtain insurance, to cover these risks and hazards; employee relations; relationships with and claims by local communities and indigenous populations; availability and increasing costs associated with mining inputs and labour; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses and permits and the presence of laws and regulations that may impose restrictions on mining,; diminishing quantities or grades of mineral reserves as properties are mined; global financial conditions; business opportunities that may be presented to, or pursued by, the Company; the Company's ability to complete and successfully integrate acquisitions and to mitigate other business combination risks; challenges to, or difficulty in maintaining, the Company's title to properties and continued ownership thereof; the actual results of current exploration activities, conclusions of economic evaluations, and changes in project parameters to deal with unanticipated economic or other factors; increased competition in the mining industry for properties, equipment, qualified personnel, and their costs. Investors are cautioned against attributing undue certainty or reliance on forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Company does not intend, and does not assume any obligation, to update these forward-looking statements or information to reflect changes in assumptions or changes in circumstances or any other events affecting such statements or information, other than as required by applicable law.

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