Majestic Announces Agreement to Acquire Remaining 40% of Muping Joint Venture and Commence Mining Operations at Muping Gold Project, Shandong Province, China
730 - 1130 West Pender Street Vancouver, B.C. CANADA V6E 4A4 Telephone: 604-681-4653 Facsimile: 604-568-4902 TSX.V:MJS Email: [email protected]
NEWS RELEASE
Majestic Announces Agreement to Acquire Remaining 40% of Muping Joint Venture and Commence Mining Operations at Muping Gold Project, Shandong Province, China
Vancouver, British Columbia, February 24, 2010 – Majestic Gold Corp. (TSX.V: MJS) ("Majestic") is pleased to announce that it has entered into an agreement (the “Acquisition Agreement”) with seven individuals (the “Muping Group”) to acquire the remaining 40% (the “Muping JV Interest”) of Yantai Zhongia Mining Enterprise (“JVCo”). As part of the proposed transaction, JVCo will acquire the Mining Permit required to commence mining operations at Muping and will commence mining operations.
JVCo is the Chinese joint venture company previously established by Majestic and Shandong Muping Gold Mine. JVCo holds exploration permits and licenses for the “Muping” or “Song Jiagou” mineral property (the “Property”), located near Yantai, in Shandong Province, China. On completion of the acquisition, Majestic’s interest in JVCo and the Muping project will increase from 54% to 94%.
Majestic has entered into the Acquistion Agreement to facilitate commencement of mining operations at the Muping Project. A National Instrument 43-101 compliant geological report filed on SEDAR on May 23, 2006 calculates an inferred mineral resource for the Property as follows:
“At a gold cutoff grade of 0.5 g/t, the Inverse Distance resource estimate is 13.5 million tonnes at an average grade of 0.88 grams / tonne gold. The Kriged resource estimate at the 0.5 g/t cutoff grade is 14.4 million tonnes at an average grade of 0.77 g/t gold. Because of the high nugget effect, the inverse distance estimate is considered to be a more realistic estimate than the kriged estimate.”
The referenced report notes that the resource estimate “…would be improved by the acquisition of more sample data in areas where data is now sparse or absent.” Accordingly, based on work carried out on the Property since 2006, Majestic has commissioned an updated resource estimate compliant with NI 43-101. Majestic expects to receive that report and updated resource estimate by the end of March, 2010. A feasibility study has not been completed and there is no certainty the proposed operations will be economically viable.
The Acquisition Agreement provides that Dahedong Smelter Mill (“Dahedong”) will carry on mining operations on the Property. Dahedong owns two mills with processing capacities of 200 tonnes per day and 1,200 tonnes per day respectively, together with related buildings and other mining facilities, machinery and equipment. Those mining facilities are situated adjacent to and are available and ready for immediate use in mining operations on the Muping Property. The Acquisition Agreement also provides for construction of one new mill and related facilities (collectively the “New Mill”) with an output of at least 5,000 tonnes per day. The cost of acquiring the land for the New Mill will be borne entirely by Dahedong if its capacity does not exceed 5,000 tonnes per day. If Majestic designates a larger capacity mill, the costs of the land will be borne as to 75% by JVCo and 25% by Dahedong. In either event, construction costs will be borne as to 75% by JVCo and 25% by Dahedong.
Under the Acquisition Agreement, mining operations will be carried out by Dahedong at no cost to Majestic. Dahedong will be responsible for mining, transporting and processing ore and tailings and other waste material from the Property for a period of 30 years (the “Mining Term”). Dahedong will also be primarily responsible for dealings with Chinese governmental authorities in respect of Mining Operations. As compensation for the use of Dahedong’s mining assets and equipment during the Mining Term, Dahedong will be entitled to 25% of the net profits (“Net Profits”) of JVCo derived from mining operations during the Mining Term. To cover Dahedong’s operational costs, Dahedong will receive ¥75 per tonnne (Approx. Cdn$11.50/tonne) (the “Mining Fee”) for all mining, transporting and processing services required to produce concentrate suitable for delivery to a refinery or smelter. Dahedong’s share of Net Profits and the Mining Fee will be payable solely from proceeds from the sale of production of gold and other metals from the Muping Property. No cost, expense or other liability will accrue to or be payable by JVCo, Majestic Yantai or Majestic with respect to Mining Operations
The Muping Group is currently awaiting Chinese governmental approval for its acquisition of the Mining Permit and the Muping JV Interest from Shandong Muping Gold Mine. That approval is expected in the near future and Dahedong has agreed to commence mining operations for the benefit of JVCo immediately upon receipt of it. Majestic Yantai will be entitled to receive 60% of Net Profits earned between the date of the Acquisition Agreement and the Closing Date. After Closing, Majestic Yantai will be entitled to receive an additional 15% of Net Profits earned between the date of the Acquisition Agreement and the Closing Date, as well as 75% of all Net Profits of JVCo earned after Closing. The remaining 25% of Net Profits will be distributed to Dahedong by JVCo.
As consideration for the Muping JV Interest, Majestic has agreed to issue 160,000,000 shares (the “Majestic Shares”) in the capital of Majestic to the Muping Group, all of whom are at arm’s length from Majestic. In addition, Majestic has agreed to pay a finder’s fee to a Chinese national, also at arm’s length from Majestic, in the amount of 8,000,000 Majestic Shares.
Completion of the proposed acquisition is subject to acceptance by the TSX Venture Exchange of a filing required to be made by Majestic in respect of the Acquisition Agreement, as well as regulatory approvals required in China. No control person will be created as a result of the proposed acquisition. One member of the Muping Group, who is also the principal of Dahedong, will become an insider of Majestic on closing.
The geological information contained in this news release has been reviewed and approved by Mike Hibbitts, P.Geo., who is a qualified person under the definitions established by National Instrument 43-101.
On Behalf of the Board of Directors MAJESTIC GOLD CORP.
Signed "Rod Husband"
Rod Husband, P.Geo President
Contact:
Investor Relations: (604) 681-4653 or 1-866-282-8398 Email: [email protected] or visit our Website: www.majesticgold.net
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This news release may contain forward-looking statements including but not limited to comments regarding the timing and content of upcoming work programs, geological interpretations, receipt of property titles, potential mineral recovery processes, etc. Forward-looking statements address future events and conditions and therefore, involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements.