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Colombia Crest Gold Corp
Symbol CLB
Shares Issued 96,088,289
Close 2013-08-15 C$ 0.025
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Colombia Crest to acquire 30% of Affinity's Machacala

2013-08-16 09:30 ET - News Release

Mr. Hans Rasmussen reports

COLOMBIA CREST SIGNS LETTER OF INTENT TO PURCHASE NEAR-TERM GOLD-SILVER PRODUCER IN PERU

Colombia Crest Gold Corp. has signed a letter of intent with Affinity Gold Corp. to earn a 30-per-cent interest in its Peruvian gold-silver project in Machacala. Machacala is located in a mining friendly area near Trujillo, Peru, and the project has had extensive exploration and mining activity completed to date -- even today, artisanal miners continue to actively leach tailings from prior mining activities. Companies like Gold Hawk and Meridian have worked on the project, so there is an abundance of information confirming the technical merits of the project. These merits include average grades from 1.3 to two grams per tonne gold and 50.8 to 74 grams per tonne silver from bulk sampling of the mine tailings, which are available on surface for near-term production. Sampling in the underground veins returned average grades of five g/t Au and 155 g/t Ag.

"The Machacala project gives us exposure to both gold and silver production in a mining friendly jurisdiction," exclaimed Hans Rasmussen, president and chief executive officer. "While the equity markets continue to linger, it is clear that cash flow will minimize our dependency on venture capital in the future as we explore for more gold and silver. Diversification is also part of our new strategy and is very important. With annual cash infusions coming in from selling our Bolivian asset -- this asset in Peru now diversifies the company to three mineral rich, mining friendly countries. We are confident that Machacala will deliver cash flow along with exploration upside, leveraging our exposure to my two favourite investment metals, gold and silver."

According to the terms of the letter of intent, Colombia Crest has the option to earn an undivided 30-per-cent legal and beneficial interest in and to the Machacala project in exchange for a total capital investment of $1.5-million over the course of 12 months following the signing of the definitive agreement. The terms and schedule of the capital investment are as follows, subject to modification with mutual consent of the parties:

  1. $10,000 upon execution of this letter of intent;
  2. $40,000 cash payment, 250,000 common shares and 250,000 warrants of the company, both priced in accordance with Toronto Stock Exchange guidelines upon execution of a definitive agreement, which will be not more than 120 days after executing this letter of intent;
  3. $250,000 within six months from execution of definitive agreement for which proceeds are to be used toward development and production expenditures on the mine tailings;
  4. $1.2-million additional over the 12 months following the execution of the definitive agreement for which proceeds are to be used toward accelerating production.

After 12 months and/or $1.5-million (U.S.) expenditure, Colombia Crest will have earned a 30-per-cent interest in the Machacala project and a joint venture arrangement will be formed between Colombia Crest, Affinity Gold Corp. and Corizona Mining Partners LLC, the underlying title owner.

  1. Colombia Crest will receive 75 per cent of net proceeds from the production at Machacala until the full $1.5-million of investment capital is recovered;
  2. All capital costs will be divided: 30 per cent Colombia Crest, 30 per cent Affinity Gold Corp. and the balance 40 per cent Corizona Mining Partners LLC;
  3. Upon Colombia Crest recovering its full $1.5-million of capital invested, the net revenue percentages will revert to: 30 per cent to Colombia Crest, 30 per cent to Affinity and 40 per cent to Corizona Mining Partners LLC.

About Machacala, Peru

The Machacala project is a low sulphidation epithermal gold-silver-copper deposit located in the district of Carabamba, province of Julcan, La Libertad region to the north of Peru, at an elevation of 3,300 metres above sea level. The property is approximately 180 kilometres southeast of the city of Trujillo, capital of the region, and 575 kilometres north of Lima, capital of Peru.

The project was most recently explored by Gold Hawk Resources and Meridian Gold between 1997 and 2004, with a total of 8,500 metres in 45 diamond core and reverse circulation drill holes completed. The project has multiple low sulphidation epithermal gold-silver veins on property, of which 13 have been identified and four have been only modestly exploited where average grades are estimated to be five g/t Au and 155 g/t Ag.

Affinity Gold Corp., under a separate agreement (see Affinity Gold Corp. news release June 13, 2013), will earn a 60-per-cent interest in the Machacala project from underlying owner Corizona Mining Partners LLC, given the following general agreement terms:

  1. A total capital investment of $2-million (U.S.) over the course of two years which will be used toward exploration, development and production expenditures;
  2. 15 million warrants issued over the course of two years in step with the capital investments and project milestones accomplished as responsible for by Corizona Mining Partners LLC.

Additional terms and conditions will be included in the definitive agreement which is expected to be signed by Aug. 31, 2013.

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