Gold Aura Signs Agreement Protecting its Interest in The Sao Chico Project Clearing the Way for Commencement of Project Development

Thursday, Jul 02, 2009

Gold Aura Limited is pleased to announce that its Brazilian subsidiary Gold Aura do Brasil Mineração Ltda. has moved to protect its interest in the Sao Chico gold property in Para State, Brazil, by entering into an

agreement to acquire an effective 60% interest in the Sao Chico Project via acquiring 100% of the Sao Chico Project and paying a 40% Net Profit Royalty. GOAB believes the Sao Chico Project can be put into limited production by the end of the calendar year, building up to an annualised production rate of some 20,000 ozs per annum at a cash operating cost of less than US$200/oz and less than US$340/oz after the Net Profit Interest Royalty payment. As production is initially planned from near surface mining utilizing equipment that can mostly be hired from local sources, capital expenditure to commence production is expected to be less than US$450,000.

Background

GOAB is advancing the development of Sao Chico. Details associated with the Sao Chico Project are outlined below.

Previously GOAB had acquired a 60% interest in the Sao Chico Project via an Agreement entered into with Brazilian citizens Ademir and Jandira (A&J) who had acquired 100% of the Sao Chico Project through a separate agreement entered into with the original owner Waldimiro.

Waldimiro then initiated court action in the Itaituba Court, Para State, to rescind his agreement entered into with A & J which had committed to transfer the Sao Chico Project to A&J.

Interim Court Judgement

On 12 May 2009, the Itaituba Court handed down an interim court judgement in favour of Waldimiro whereby an injunction “Liminar” was granted to suspend the agreement Waldimiro had entered into with A&J and provisionally transfer total control of the Sao Chico Project back to Waldimiro. This control includes the right for Waldimiro to undertake exploration on the granted Exploration Licence within the Sao Chico Project area and apply for the conversion of Garimpeira Permits into Exploration Licences for all those PLGs within the Sao Chico Project area that have their mineral rights confirmed by the Brazilian Department of Mines.

Following the Itaituba Court decision, GOAB also entered into a binding agreement with Waldimiro to protect its interest.

A final Itaituba Court decision on the injunction is expected following the hearing of an interlocutory appeal filed by A&J before the Para State Court of Appeals in early July.

The agreements with A&J and Waldimiro protect GOAB’s interest in the Sao Chico Project regardless of which party wins the Court cases.

Agreement with Waldimiro

GOA is now pleased to announce that GOAB has moved to further protect its interest in the Sao Chico Project by entering into an agreement with Waldimiro which details the operational and financial nature of the parties’ relationship. This agreement would become operational upon a provisional court judgement in Waldimiro’s favour coming into effect.

Key terms of the agreement entered into with Waldimiro are as follows;

Acquisition of assets

Waldimiro will sell and GOAB will buy a 100% interest in Concessions currently controlled by Waldimiro. The Concessions include an Exploration Licence (or AP - approximately 15km2) which covers the immediate Sao Chico area of interest as described in “About Sao Chico” below and Applications for PLGs which cover around 115km2 including the Exploration Licence. Although the Exploration Licence can be transferred immediately to GOAB, the Applications for PLGs that have their mineral rights confirmed first have to be transformed into applications for exploration licences. When the respective exploration licences are granted they will be transferable into GOAB.

Mineral holding

The exploration licence will be transferred into GOAB immediately on the permanence of the injunction (noted above) being granted to Waldimiro. An extraction permit (guia de utilização) can then be applied for within the Exploration Licence which would enable mining and processing of up to 50,000 tonnes a year of gold ore for the term of validity of the exploration licence while evaluation of the property for a larger underground operation is undertaken.

As PLGs can only be held by Brazilian Nationals, Waldimiro will immediately apply for any Applications for PLGs, for which the mineral rights are confirmed, to be converted into one or more applications for Exploration Licences. Once so converted and the exploration licences having been granted, Waldimiro will then immediately transfer them into GOAB.

Mining Facilities

Waldimiro to provide the land for all required facilities associated with production

Obligations of Waldimiro 

Transfer the existing Exploration Licence to GOAB, apply for Exploration Licences over the PLGs that have their mineral rights confirmed , transfer new Exploration Licences to GOAB and apply for one or more extraction permits (guias de utilização) which would allow a mining operation to be undertaken at Sao Chico up to the allowed levels;

Compensation payable by GOAB to Waldimiro

- R$200,000 (A$127,000) 14 days following the ruling on A & J's interlocutory appeal against the injunction being dismissed (a decision expected early July 2009);

- R$100,000 over 4 months following the ruling on A & J's interlocutory appeal against the injunction being dismissed.

- A Gold Royalty of R$15 ($10) per oz of gold production;

- A 40% Net Profit Interest Royalty (“NPI Royalty”).

Both the Gold and NPI Royalties are to be paid in the month following production.

About Sao Chico

The current knowledge of the property has provided encouragement for GOAB to, in conjunction with the decreed owner, to commence planning for a small scale mining operation under an extraction permit (guia de utilização) as provided for under Brazilian Mining Law. Evaluation of the Sao Chico Project for a larger underground operation will also be undertaken at this time. Early indications are that the small scale operation could be strongly cash positive, with operating costs below US$200/ounce before NPI Royalty payments. All labour, mining equipment and infrastructure can be sourced either locally or from within Brazil.

To date, five (5) steeply dipping shear hosted veins have been identified and are covered by up to 5m of alluvial material. These are up to 3m wide and are expected to extend along strike for at least 1,000m at an average expected width of 1.0m.

Small scale alluvial gold mining has been previously undertaken at Sao Chico by garimpeiros (local miners) who have encountered gold grades varying from a trace up to in excess of an ounce per tonne, particularly in the uppermost portion of the veins where supergene (secondary) gold enrichment has occurred.

Recent investigation at Sao Chico have revealed that the veins are weathered to depths of up to 10m below the alluvial cover and are amenable to free digging by excavator. This has prompted a review of the procedure by which the property would be developed. It is now proposed that the veins would initially be open cut mined in the weathered zones in one or two benches down to the commencement of hard rock. As previous and current garimpeiro operations in the weathered portions of the veins at Sao Chico have encountered significant supergene enriched gold development, GOAB is targeting a gold grade of around 20g/t. While a grade of 20g/t is being targeted and that test work to determine if this is achievable will be undertaken, it should be noted that this grade is conceptual in nature and that there has been insufficient work undertaken to date to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

The open cut (and later underground hard rock) operation would be undertaken under an extraction permit (guia de utilização) which provides for mining and processing of up to 50,000 tonnes a year of gold ore per year for the term of the exploration licence. It is anticipated that an extraction permit and the required accompanying environmental licence could be granted in time to allow mining to commence by December 2009. Over the expected strike length of the five veins (a combined length of at least 5 km) it is anticipated that there is sufficient tonnage available to sustain the operation commencing at a rate of 50 tonnes per day and increasing to 100 tonnes per day after two months, until at least the end of 2012.

Discovery of additional veins under the alluvial cover is considered likely and if this occurs it would extend the potential mine life.

It is proposed that underground hard rock mining would commence November 2011 at a rate of 50 tonnes per day and increasing to 100 tonnes per day after 6 months.

The gold grade obtained by GOAB from surface rock sampling and channel rock sampling from within the shaft and drive developed on the Sao Chico vein has been determined to be around 15g/t. and this is the grade targeted in the underground operation. While a grade of 15g/t is being targeted and that test work to determine if this is achievable will be undertaken, it should be noted that extrapolation of this grade is conceptual in nature and that there has been insufficient work undertaken to date to define a Mineral Resource and it is uncertain if further exploration will result in the determination of a Mineral Resource.

It is expected that all required mining and processing equipment is either locally available or available within Brazil and could therefore be hired without the need for any significant capital expenditure. Tailings dam capacity is already available and can be readily expanded and there is an ample water supply available from an on-site dam. Access is excellent as the property lies within a cleared farm area and lies along the main arterial road in the region. It is estimated that costs prior to production would be less than US$450,000, although there would be some final payments associated with the project acquisition.

About Gold Aura

Gold Aura’s principal activity is the global exploration for world class mineral resources. Its current focus is commencement of gold mining activities at Sao Chico in Brazil, the BacTech funded Joint Venture on Fergusson Island in PNG and evaluation of the vein style polymetallic (zinc-tin-copper-silver dominant) mineralisation discovered at Croydon.

Source: Gold Aura