Austral Gold signs binding JV for Jaguelito project, Argentina

Austral Gold Argentina SA (AGASA), a subsidiary of Austral Gold Ltd. [AGLD-TSXV; AGD-ASX], has accepted a binding offer letter to enter into a joint venture contract (with Mexplort Perforaciones Mineras SA, a subsidiary of Corporacion America International). Under the terms of the agreement, the parties are to enter into a 50:50 Joint Venture (JV) to identify and develop new precious metal projects in the Indio belt in the Province of San Juan, Argentina and Mexplort is to grant AGASA an earn-in option whereby it may acquire a 50% interest in the Jaguelito project held by Mexplort through a concession granted by the Instituto Provincial de Exploraciones y Explotaciones Mineras de la Provincia de San Juan (IPEEM) in October 2011.

Austral Gold’s CEO, Stabro Kasaneva, said: “We are investing in the Jaguelito project as we believe the project has the potential to discover a high sulphidation deposit of the Alturas – Del Carmen or even Veladero type in Argentina. The Jaguelito project appears to have the same affected volcanic units that host a large zone of alteration having the same age based on evidence of mineralization of silver and gold intercepted in previous drilling campaigns. The deal also represents an opportunity for company’s sponsored by two of Argentina’s most prominent businessmen (Eduardo Eurnekian and Eduardo Elsztain) to create a new mining vehicle in the country.”

Mexplort is to grant AGASA an Option to acquire a 50% interest in the Jaguelito project for the following consideration: US$2 million in exploration expenditures on Jaguelito within two years from the approval of the Option by IPEEM (First Stage), including drilling a minimum of 5,000 metres; US$2 million in exploration expenditures on Jaguelito within two years after completing the First Stage (Second Stage), and US$3 million payment to Mexplort if the Board of the JV Company approves the construction of the project based on a bankable feasibility study.

After completion of the First Stage, AGASA will have 30 days to notify Mexplort of its intention to pursue the Second Stage. This will enable AGASA to maintain the exclusive right to explore Jaguelito and AGASA will be obligated to expend an additional US$2 million. If the Second Stage is completed and the option is exercised, Mexplort will assign and transfer 100% of the Mining Rights on Jaguelito to the JV Company and AGASA must transfer all mining information obtained on Jaguelito to the JV Company.

If AGASA does not complete the First Stage, it will owe Mexplort any amount due under the US$2 million of exploration expenses committed for the First Stage, which must include drilling of at least 5,000 metres.

If AGASA notifies Mexplort of its intention to pursue the Second Stage but does not complete it, AGASA will owe Mexplort any pending balance from the US$2 million committed for the Second Stage.

During the term of the exploration period, comprised by the First Stage and the Second Stage, an Exploration Committee will be created with two representatives from each company and such committee will be chaired by one of Austral’s appointees. The expenditures are subject to a budget prepared by Austral and approved by the exploration committee.

Both parties agree to create a new Company (the JV) that will be owned equally within 60 days from signing the offer letter. The JV will have a board comprised of six members of which each partner will nominate three members. The JV will also have initially two further Governance bodies: an Exploration Committee comprised by four members and an Audit Committee comprised by three members.

Jaguelito is an advanced exploration stage project, a high-sulphidation deposit that has had 30,000 metres drilled.