Valencia Ventures Inc.
TSX VENTURE : VVI

Valencia Ventures Inc.

June 07, 2006 16:05 ET

Valencia Announces Positive Preliminary Assessment Buffalo Gulch Deposit-Idaho Gold Project

TORONTO, ONTARIO--(CCNMatthews - June 7, 2006) -

US$7.5m NPV (US$450 Gold Price)

VALENCIA VENTURES INC. ("Valencia")(TSX VENTURE:VVI) has completed a Preliminary Assessment of the Buffalo Gulch Deposit within the Idaho Gold Project, Idaho, USA. A Base Case study to develop the deposit as a heap leach mining operation, utilizing a US$450 per ounce gold price, has resulted in an undiscounted pre-tax Net Present Value (NPV) of US$7.467Million, with an Internal Rate of Return(IRR) of 49%. The Base Case model generates production of 86,500 ounces of gold over a 2 1/2 year operating life.

The Preliminary Assessment, prepared by Golder Associates Ltd, Toronto, Canada, concludes that, subject to verification of the Mineral Resource, based on a preliminary economic analysis, the Buffalo Gulch Deposit will likely be sufficient to support a profitable mine and heap leach facility. Sensitivity analysis using gold prices ranging from US$425 to US$500 results in (undiscounted) Cash Flows of US$5.305 to US$11.790Million with associated IRR of 36 - 75% respectively.

Valencia Ventures Inc has earned a 51% interest in the project from Beartooth Platinum Corporation (TSX VENTURE:BTP); Beartooth retains a 49% interest in the project.

The Buffalo Gulch Deposit has an Indicated Mineral Resource of 4.5 million tonnes at a grade of 0.8 g/t gold (4.81 million tons at 0.023 oz/ton), contained within a deeply oxidized, potentially heap leachable near surface gold deposit.

Previous explorers have identified significant zones of gold anomalism and have defined measurable gold mineralization at four prospects within the Idaho Gold Project - Buffalo Gulch, Friday/Petsite, Deadwood and Dixie - associated with the Orogrande Shear Zone, a major structure which traverses the 40 km long trend of properties. Gold occurs as disseminations associated with sulphides in broad zones of shearing. Deep weathering has oxidized the primary mineralization creating zones potentially amenable to low-cost bulk mining and heap leach extraction of the gold. Both oxide and sulphide gold deposits are targets for current exploration.

Historical Mineral Resource estimates, prepared by previous explorers, were critically reviewed by Mr. Ken Grace, P.Eng. of Micon International Limited, and in a NI 43-101 Technical Report titled "Review of the Friday-Petsite, Buffalo Gulch, Deadwood, Dixie and Gallaugher Mineral Properties, Elk City Area, Idaho, USA", dated 5 May 2006 for Valencia Ventures Inc., filed with the TSX-V and to be lodged on SEDAR, were deemed compliant with NI 43-101 resource criteria and stated as Inferred or Indicated Mineral Resources, as follows:



Estimated Mineral Resources

BUFFALO GULCH (INDICATED) 4.5 MT @ 0.8 G/T AU ( 115,750 OUNCES)

FRIDAY/PETSITE (INFERRED) 15.2 MT @ 1.1 G/T AU ( 540,000 OUNCES)

DEADWOOD (INDICATED) 1.6 MT @ 0.75 G/T AU ( 38,500 OUNCES)
(INFERRED) 0.7 MT @ 0.75 G/T AU ( 17,000 OUNCES)


At Buffalo Gulch, historical exploration focused on definition of a potentially open pittable oxide mineral resource. Mineralization is oxidized to depths greater than 100m and extensive metallurgical test work by previous operators indicate the gold could be readily recovered by conventional heap leach techniques, with recoveries in excess of 85%. Sulphide mineralization at depth has been inadequately tested and will require further investigation.

Primary gold distribution at Buffalo Gulch, together with pyrite and other sulphide minerals, appears to be along steep structures subsidiary to the main shear zone and along the foliation of the gneisses. However the distribution of gold values within the oxide zone also suggests that substantial modification of the original gold distribution as well as secondary depletion and enrichment of gold occurred during the period of intense Tertiary deep weathering that produced the strong clay alteration and oxidation. In some drill holes the oxide-sulphide interface also appears to be a zone of local gold enrichment.

Historical exploration of the Buffalo Gulch Deposit includes a total of 150 vertical reverse circulation (RC) holes drilled by previous operators, including Idaho Consolidated Metals Corp. (predecessor company to Beartooth) and Bema Gold Corporation from 1985-1988 within an area measuring approximately 425 m by 365 m. This work delineated oxide mineralization and established the existence of the underlying sulphide mineralization. A diamond drill program of 9 HQ size holes totaling 2,762 feet (842 m) was completed in 1996 by Idaho Consolidated Metals Corp.

Extensive metallurgical test work completed by previous operators has indicated favourable gold recovery by conventional cyanide heap leach technology; a trial heap leach test has also been completed.

Prior to establishment of the Option Agreement with Valencia, Beartooth completed drilling at the Friday/Pepsite and Buffalo Gulch prospects. At Buffalo Gulch, Beartooth drilling confirmed the grade and continuity of the gold mineralization intersected by previous operators (See Press Release, September 15, 2004). At the Friday/Petsite prospect, oxide and sulphide gold mineralization occurs within and adjacent to the Orogrande Shear Zone. Gold occurs as disseminated low grade gold mineralization in broad zones of shearing and as higher grade gold in quartz veins. The mineralization is open in all directions and will require further drilling to define the extent of the zone. (See Beartooth Platinum Corp Press Release, July 22, 2004).

Valencia entered into an option agreement with Beartooth Platinum Corporation (TSX VENTURE:BTP) in August, 2004, to earn a 51% interest in the Idaho Gold Project (See Press Release, 24 August, 2004). Assuming management of the Idaho Gold Project in September, 2004, Valencia assembled a project team to compile and evaluate Beartooth and previous explorers' exploration database; preliminary observations indicate there are strong structural controls to the mineralization and potential exists to expand the current resource with additional exploration. Other exploration targets also exist immediately to the south of the Buffalo Gulch deposit at the Buffalo Gulch Central and South Prospects.

The Preliminary Assessment titled "Preliminary Assessment of the Scope and Potential of the Buffalo Gulch Heapleach Project, near Elk City, Idaho", dated May 29, 2006 for Valencia Ventures Inc., Managers of the Idaho Gold Project JV, filed with the TSX-V and to be lodged on SEDAR, prepared by Mr Kirk Rodgers, P. Eng., Senior Mining Consultant, Golder Associates Ltd. has been prepared in accordance with cl 2.3(3) of National Instrument 43-101.

The Base Case (US$450) analysis is based on a Mining Resource of 4.363M tonnes at a grade of 0.685g/t Au, containing 96,087 ounces gold. Mine life is estimated at 21/2 years with a total of 86,479 ounces produced assuming a recovery of 90%. Estimated Capital Costs are US$7.17M, excluding salvage credits at end-of-life, and Operating Costs per Ounce are estimated at US$259.22per oz. A complete copy of the report will be available shortly on SEDAR and the Company's website.

Golders note that this Preliminary Assessment is preliminary in nature and is not adequate to definitively confirm the economics of the project. A Preliminary Feasibility Study or Feasibility Study, as defined under NI43-101 is required for this purpose.

Golders have recommended that additional work is required, including additional drilling to identify down-dip extensions to the current resource, updating of the mineral resource estimation using geostatistical methodology and NI43-101 conventions to incorporate the results of additional drilling and sampling, confirmatory metallurgical testing and further analysis regarding mining parameters such as depth of weathering and requirements for blasting, sizing and agglomeration be completed.

Valencia's President and CEO, Doug Bache, commented, "Although the Buffalo Gulch Deposit represents an excellent opportunity to establish small scale gold production, development of a heap leach gold project in Idaho is beyond the current expertise within the Company and with it's Joint Venture partner, Beartooth Platinum, Valencia has decided to seek proposals from interested parties who have more expertise in this area."

Valencia is a Canadian resource company traded under the symbol VVI on the TSX Venture Exchange. Valencia's development strategy is focused on the exploration and development of precious metal properties, particularly the Cachinal Silver Project in Chile and the Rancheria Silver Project in the Yukon Territory and British Columbia, Canada. The company has recently completed a feasibility study for the Mt. Bundy Gold Project in the Northern Territory, Australia, and is considering various development strategies. With a focus on silver, the company has a number of precious metal acquisitions under consideration.

This press release was prepared by Douglas A. Currie, MAusIMM, Executive Vice President-Exploration & Development of Valencia Ventures Inc and a Qualified Person as defined by cl.2, National Instrument 43-101, who has the ability and authority to verify the authenticity and validity of information contained within this news release.

Statements in this release that are not historical facts are "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned that any such statements are not guarantees of future performance and that actual developments or results may vary materially from those in these "forward-looking statements".

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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