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Magna Gold Corp
Symbol C : MGR.P
Shares Issued 27,075,000
Close 2018-09-25 C$ 0.40
Recent Sedar Documents

Magna Gold to acquire Mercedes property in Mexico

2018-10-11 13:26 ET - News Release

Mr. Francisco Zepeda reports

MAGNA GOLD CORP. ANNOUNCES DEFINITIVE AGREEMENT FOR PROPOSED QUALIFYING TRANSACTION

Magna Gold Corp. has entered into an arm's-length option agreement dated Sept. 25, 2018, with Beatriz Fong, an individual resident in Sonora state, Mexico. The agreement is subject to regulatory approval.

Pursuant to the agreement, the corporation will acquire from the seller an option to acquire a 100-per-cent undivided interest in two mining claims located in the municipality of Yecora, Sonora, Mexico, for a four-year period. The property consists of two contiguous claims covering an aggregate area of approximately 345 hectares and is located approximately 250 kilometres east-southeast along Federal Highway 16 from the state capital, Hermosillo.

In consideration of the grant of the option, Magna Gold will: (i) pay to the seller an aggregate of $1.34-million (U.S.) plus VAT (value-added tax) of 16 per cent, paid in instalments commencing on the sixth month from the effective date and ending on the 48th month from the effective date; (ii) issue to the seller a 3-per-cent net smelter return royalty, capped at $3.5-million (U.S.) and subject to the right of the corporation to acquire all three percentage points of the net smelter return royalty at a price of $500,000 per percentage point, within the first three years of commercial production of the Mercedes property; and (iii) conditional on the completion of a going-public transaction within six months of the effective date, issue 2,442,105 common shares of the corporation to the seller. On the effective date, the discounted market price of the common shares was 30 cents per common share.

The proposed transaction will constitute the corporation's qualifying transaction, pursuant to TSX Venture Exchange Policy 2.4 -- Capital Pool Companies. The proposed transaction does not constitute a non-arm's-length qualifying transaction under exchange policies and, as such, shareholder approval is not expected to be required in connection with the transaction. Following completion of the proposed transaction, it is anticipated that the corporation will be listed on the exchange as a Tier 2 mining issuer. No concurrent financing is anticipated to occur in connection with the proposed transaction.

Pursuant to Policy 2.4, sponsorship of a qualifying transaction of a capital pool company is required, unless an exemption is obtained. The corporation intends to seek a waiver to the sponsorship requirement. There is no assurance that an exemption will be granted.

Mercedes property

The Mercedes property is an exploration property located within the Sierra Madre Occidental province, a historically productive, regionally extensive Tertiary volcanic field which stretches from the United States/Mexico border to central Mexico. Previous work at the La Lamosa area, one of the mineralized targets within the mining concessions, reports disseminated gold mineralization hosted within an andesitic and rhyodacitic volcanic complex intruded by a quartz-feldspar porphyry (QFP). Gold and silver are target commodities sought at Mercedes, and the property exhibits textures and alteration consistent with high-sulphidation epithermal mineralization, typical of important discoveries in the region.

The project is located 43 kilometres from Alamos Gold's three-million-ounce Mulatos gold mine, 40 kilometres from Agnico's one-million-ounce La India gold mine, and adjacent to Minera Alamos's Santana and Santa Rosa projects. Infrastructure and support services are available to the project -- paved Federal Highway 16 passes through the western portion of the claims. Electricity, mail, phone services and accommodation are available at the nearby villages of Yecora and Santana. An electrical line passes through the property, as it parallels the paved highway.

The Mercedes property is located toward the western edge of the mineral province and is predominantly underlain by intrusive rocks, granodiorite-monzonite plutonic rocks, and quartz-feldspar porphyry dikes and stocks exposed by erosion of intermediate and felsic volcanic packages of the lower and upper volcanic sequences.

The thick volcanic sequences are characteristic of the region and form much of the Sierra Madre Occidental. Outcrop in key areas of the property is strongly altered, brecciated intrusives and some propylitically altered volcanics. Zoned assemblages of silica, vuggy silica, phyllic, argillic and distal propylitic alteration are recognized. The main prospect area, La Lamosa, is a prominent, highly oxidized red ridge, visible from the highway. At least two additional similar targets are clearly identified within the claim boundaries.

In addition to a small artisanal shaft developed on a thin quartz vein in the southeast of the property, previous exploration work includes two phases of drilling and extensive surface sampling by other explorers. In 1996, Compania Minera Fernanda SA de CV completed 15 reverse circulation holes for a total of 1,018 metres. In 2008, Norma Mines SA de CV drilled 10 diamond drill holes for a total of 1,133 metres. Both drill programs tested the La Lamosa area. Records for the reverse circulation drilling are incomplete, though reference to the results indicates continuous, consistent gold and silver intercepts from beneath the alteration zone on the ridge. Diamond drilling conducted later by Norma Mines did confirm the presence of broad anomalous grades, but did not quite replicate the tenor of those previously reported. Gold occurs in oxide, mixed oxide/sulphide and sulphide reported in previous drilling, with pyrite being the primary sulphide mineral along with minor amounts of enargite. Selected drill mineralized intercepts are shown in the attached tables.

     SUMMARY OF 2008 DIAMOND DRILL HOLE PROGRAM AS REPORTED BY NORMA MINES SA DE CV
 
Hole         From (m)     To (m)     Interval (m)     Au (ppm)     Ag (ppm)     Prospect 

08MER001           0        144              144         0.49         12.4     La Lamosa
including          0         32               32         0.86          8.2              
including         51        144               93         0.44         16.0             
08MER002           0        113              113         0.37         11.6     La Lamosa
including         26         27                1         3.32         28.6             
including        110        113                3         1.17         20.2             
08MER003           0         57               57         1.15         13.5     La Lamosa
including         11         24               13         1.22         20.5             
including         34         35                1        16.02         53.6             
including         35         36                1         7.67         42.8             
including         41         42                1         4.52           21               
08MER004          60       61.5              1.5         0.05        121.5     La Lamosa
08MER005        25.5       28.5                3        0.005         84.7     La Lamosa
08MER006                          No significant intervals                     La Lamosa

           SUMMARY OF 1996 RC DRILLING PROGRAM AS REPORTED 
                BY COMPANIA MINERA FERNANDA SA DE CV
 
Hole                              Total depth (m)    Average hole grade
                                                     Au (ppm)   Ag (ppm)   

YRC-2                                         90       1.743       24.5     
YRC-3                                        100       1.711       40.5     
YRC-4                                         60       1.825       34.4     
YRC-5                                         45       1.840       25.6     
YRC-6                                         72       1.713       27.4     
YRC-7                                         66       1.687       52.0     
YRC-8                                         70       1.861       34.1     
YRC-9                                         70       1.534       44.1     
YRC-10                                        66       2.056       75.0     
YRC-11                                        70       1.681       50.7     
YRC-12                                        48       1.264       18.0     
YRC-13                                        70       1.901       68.2     
YRC-14                                        86       1.830       67.2     
Total RC drilling program                    913       1.749       44.1     

Over the course of the years, several companies have carried out rock geochemistry work on the property. Obtained reports show strong oxidation in the form of hematite/limonite/jarosite staining and strong silica, vuggy silica and argillic alteration. The attached table shows the latest National Instrument 43-101 technical report data verification sampling.

   ASSAY RESULTS FROM CHIPS ROCK SAMPLING ON SURFACE 
                AT THE MERCEDES PROPERTY 
       (Dale Brittliffe, PGeo, October, 2010)

Sample   Au (ppb)  Ag (ppm)  Cu (ppm)  Pb (ppm)  Zn (ppm)

986063       821      40.8      21.1     619.7        15
986064       185       100  > 10,000      28.7       358
986065       179         1     118.5       140        49
986066       648       2.3      83.2       158         6
986067      1375       5.9      23.4       493         5
986068       475       5.6       8.1     298.6         3
986069       561      17.5      18.8     416.2         3
986070      1634      14.6      14.1     786.1         3
986071       549       8.8      12.4     603.9         3
986072      2072      57.7      45.8   6,921.9        13
986073        94       3.7      61.1     513.5         4
986074       195       8.2        85  > 10,000         9
986075       136         4      22.7     395.5         2
986076        51       0.5        14     824.5         3
986077        12       0.2      35.4      38.6        10
986078        44       0.7      22.2   2,193.1         3

A mineral exploration program is being designed to both evaluate the property, and determine the grade and extent of the La Lamosa area. The program will consist of diamond drilling, property-wide geological mapping and prospecting, including collection of chip samples and soil sampling. The exploration will be designed to evaluate La Lamosa and identify additional analogous zones.

All technical information in this press release has been reviewed and approved by Mr. Brittliffe, an independent consultant to the corporation and a qualified person under NI 43-101.

Management of the resulting issuer

Subject to the approval of the TSX-V, upon completion of the proposed transaction, it is currently anticipated that the board of directors of the corporation will consist of three individuals who are currently directors of the corporation, the biographies of whom are provided herein: Arturo Bonillas Zepeda, Laura Cristina Diaz Nieves and Alexander Tsakumis. Miguel Angel Soto y Bedolla has been appointed as the vice-president of exploration of the corporation. Other than the foregoing officer and proposed directors, it is anticipated that there will be no additional insiders of the corporation upon completion of the proposed transaction. Prior to completion of the qualifying transaction, management intends to appoint a new individual to act as chief financial officer of the corporation.

Mr. Bonillas, Sonora, Mexico -- chief executive officer, secretary and a director

Mr. Bonillas is a Mexican citizen and has over 35 years of experience in Mexican mining and exploration. He is currently the chairman of the advisory board of Discovery Metals, a Mexican-focused base metals exploration company listed on the Toronto Stock Exchange, and a director of Telson Mining Corp. (formerly Telson Resources Inc.), which trades on the TSX-V. He is the former president and co-founder of Alio Gold Corp., formerly Timmins Gold Corp. During his 10-year tenure with Timmins Gold, he oversaw its transition from exploration and development to mid-tier gold producer, and guided it to several years of positive reserve and resource growth, throughput and production.

Mr. Tsakumis, British Columbia, Canada -- a director

Mr. Tsakumis has over 25 years of investment experience with private and public companies. Mostly recently, Mr. Tsakumis was the vice-president of corporate development at Alio Gold for nine years, where he played a pivotal role in the development of the corporation from a junior exploration company to a production company. He has also acted as director and vice-president of corporate development for various publicly traded companies, one of which has its securities traded on the New York Stock Exchange, for over 10 years.

Ms. Nieves -- a director

Ms. Nieves is a citizen of Mexico and is currently a lawyer. She is a founding partner at the firm DBR Abogados SC, which specializes in mining and corporate law, where she has gained extensive experience and knowledge on mining companies. She has served the mining and exploration industry for over 25 years as legal counsel to several North American public companies. Ms. Nieves has also served as a director of Marlin Gold Mining Ltd. until May, 2012, and is currently a director of Goldplay Exploration Ltd., both of which are listed on the TSX-V. Ms. Nieves holds law degrees from both the Universidad Ibero-Americana, where she studied European and North American Law, and Universidad Femenina de Mexico, where she obtained her law degree.

Mr. Soto -- vice-president of exploration

Mr. Soto is a Mexican citizen. He has over 40 years of experience in Mexican mining and exploration, and over 25 years of experience as a senior executive of several exploration companies. Widely recognized as one of the top mining professionals in the country, Mr. Soto is a co-founder of Timmins Gold and played an important role in the transition of Timmins Gold from an exploration company to an operating company. During that time, he led the increase of San Francisco's gold resource from 611,000 ounces to 2.4 million ounces. Mr. Soto is an active member of the Society of Economic Geologists.

Completion of the transaction is subject to a number of conditions, including, but not limited to, exchange acceptance and, if applicable, pursuant to exchange requirements, majority of the minority shareholder approval. Where applicable, the transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the transaction will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the management information circular or filing statement to be prepared in connection with the transaction, any information released or received with respect to the transaction may not be accurate or complete and should not be relied upon. Trading in the securities of a capital pool company should be considered highly speculative.

We seek Safe Harbor.

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