Linear Gold completes purchase of Goldfields

2009-08-20 16:58 ET - News Release

Mr. Wade Dawe reports

LINEAR GOLD COMPLETES ACQUISITION OF GOLDFIELDS DEVELOPMENT PROJECT

Linear Gold Corp. has completed the acquisition from GLR Resources Inc. of all of its interest in the Goldfields project located near Uranium City, Sask. The acquisition of the Goldfields project, initially announced on May 26, 2009, includes the Box and Athona deposits.

The Goldfields project is host to a total resource of over one million ounces of gold with gold reserves of 601,007 ounces as stated in a National Instrument 43-101-compliant technical report by Bikerman Engineering & Technology Associates Inc. (June, 2007, revision 1, May 12, 2008). The resources and reserves of the Box and Athona deposits are as follows:

Box deposit

• Proven and probable reserve - 10.9 million tonnes at 1.70 grams per tonne gold representing 601,007 ounces including:
  • Proven reserve -- 1.7 million tonnes at 2.025 grams per tonne gold representing 109,619 ounces;
  • Probable reserve -- 9.3 million tonnes at 1.641 grams per tonne gold representing 491,436 ounces;
• Measured and indicated resources (includes reserves described above) -- 16.9 million tonnes at 1.39 grams per tonne gold representing 753,000 ounces including:
  • Measured resources -- 2.4 million tonnes at 1.68 grams per tonne gold representing 129,000 ounces;
  • Indicated resources -- 14.5 million tonnes at 1.34 grams per tonne gold representing 623,000 ounces;
• Inferred resources -- 3.7 million tonnes at 0.93 gram per tonne gold representing 111,000 ounces.

Athona deposit

• Indicated resources -- 10.9 million tonnes at 0.95 gram per tonne gold representing 333,000 ounces;
• Inferred resources -- 2.2 million tonnes at 0.83 gram per tonne gold representing 59,000 ounces.

The Goldfields project is a development ready project with the following highlights:

• Completed 2007 positive feasibility study on the Box deposit with the following economics:
  • NPV, discounted at 8 per cent, of $50.0-million (U.S.) at $603.75 (U.S.) per ounce gold revenues;
  • Internal rate of return of 43.4 per cent using $603.75 (U.S.) per ounce gold revenues.
• Planned production of 90,000 ounces per year based on a 5,000-tonne-per-day operation;
• Excellent process recovery of 93 per cent of the contained gold values;
• Updated preoperating capital expenditures estimated at $63-million (U.S.);
• Environmental permit in place -- no development delays anticipated;
• Prefeasibility study has been initiated on the Athona deposit;
• Both deposits are open-pit minable;
• Both deposits are open at depth;
• Excellent local infrastructure with airport, power, telecommunications, good road system, field office, core shack and living quarters and kitchen facilities for employees;
• Regional exploration upside including the Golden Pond target where previous drill results were reported as 16.57 grams per tonne of gold over 13.6 metres and 5.07 grams per tonne of gold over 15 metres.

Wade Dawe, president and chief executive officer of Linear, stated: "The Goldfields project is a tremendous acquisition and an ideal development project for Linear. We look forward to working with the local communities as well as the Saskatchewan government to advance the development of the project and believe that Canada's political stability represents a strategic advantage for the asset. With manageable capital expenditures of approximately $63-million (U.S.) and planned low-cost production of 90,000 ounces per year, the Goldfields project will be an excellent platform from which Linear will continue a growth and acquisition strategy. In the short term, we are updating the engineering documents for the project and in the final stages of appointing a senior operating executive to manage the development and operation of this exciting project. We are confident that based on current gold prices, the economics and overall value of this project is substantially higher than the already robust results returned in the 2007 feasibility study using gold prices that were capped at approximately $600 (U.S.) per ounce."

Transaction details

The transaction closed in accordance with the definitive purchase and sale agreement dated May 25, 2009, subject to certain non-material amendments agreed between Linear and GLR. Santa Fe Metals Corp. has released Linear from all claims in connection with Linear's acquisition of the Goldfields project and Linear has provided a reciprocal release to Santa Fe. All legal issues related to the transaction have been successfully resolved.

At closing, Linear, through its subsidiary 7153945 Canada Inc., paid GLR $5.0-million (U.S.) in cash and issued 727,273 Linear shares as consideration for the assets. In addition, within 15 days of closing, Linear will reimburse a supplier $200,000 of certain costs and interest on behalf of GLR, and upon completion and delivery of certain previously contracted equipment, Linear will reimburse GLR for deposits made in connection with the contracted equipment in the amounts of $1.8-million (U.S.) and $1.0-million.

Linear highlights following the transaction

Upon completion of the acquisition, Linear will remain a well-financed and strategically positioned company with:

• Over $24-million in cash and cash equivalents;
• 33.4 million common shares issued and outstanding, representing an attractive capital structure for continued growth and consolidation;
• Planned annual production of approximately 90,000 ounces of gold following the development of the Box mine;
• Proven and probable gold mineral reserves estimated to be approximately 600,000 ounces, measured and indicated gold mineral resources estimated to be approximately 1.9 million ounces and inferred gold mineral resources of 500,000 ounces (see attached chart for details);
• Significant potential for growth through exploration outside of the current Box and Athona deposits and continued exposure to Linear's promising Ixhautan gold project in Mexico and Ampliacion Pueblo Viejo, Loma El Mate and Loma Hueca gold properties in the Dominican Republic;
• An updated Box mine technical report, incorporating current economic parameters, in progress and expected to be completed within the next eight to 10 weeks;
• The reinitiation of the Athona prefeasibility technical report that is expected to be completed within the next eight to 10 weeks;
• Management and board of directors with experience operating, developing and financing mining companies;
• A strategic position to leverage planned consolidation within the gold industry.

Peter Dimmell, PGeo, a director of Linear and a qualified person under National Instrument 43-101, has reviewed and approved the scientific and technical information in this news release based on the NI 43-101-compliant report by Bikerman Engineering on the Box mine/Goldfields project, Uranium City, Sask., filed on SEDAR by GLR resources.

                MINERAL RESERVE AND MINERAL RESOURCE
           ESTIMATES FOLLOWING ACQUISITION GOLDFIELDS PROJECT

                           Box       Athona      Ixhuatan
                     deposit(2)   deposit(2)    deposit(3)           Total
Mineral reserves(1)
Proven
Tonnes               1,683,717            -             -        1,683,717
Grade (g/t)              2.025          0.0           0.0            2.025
                    ----------   ----------     ---------       ----------
Ounces                 109,619            -             -          109,619
                    ----------   ----------     ---------       ----------
Probable
Tonnes               9,313,283            -             -        9,313,283
Grade (g/t)              1.641            -             -            1.641
                    ----------   ----------     ---------       ----------
Ounces                 491,436            -             -          491,436
                    ----------   ----------     ---------       ----------
Total proven and
probable
Tonnes              10,997,000            -             -       10,997,000
Grade (g/t)              1.700          n/a           n/a            1.700
                    ----------   ----------     ---------       ----------
Ounces                 601,007            -             -          601,007
                    ----------   ----------     ---------       ----------
Mineral resources(1)
Measured
Tonnes               2,401,000                  1,320,000        3,721,000
Grade (g/t)               1.68          n/a          4.80             2.78
                    ----------   ----------     ---------       ----------
Ounces                 129,000                    203,000          332,000
                    ----------   ----------     ---------       ----------
Indicated
Tonnes              14,500,000   10,878,000     8,050,000       33,428,000
Grade (g/t)               1.34         0.95          2.51             1.49
                    ----------   ----------     ---------       ----------
Ounces                 623,000      333,000       648,000        1,604,000
                    ----------   ----------     ---------       ----------
Total measured and
indicated
Tonnes              16,901,000   10,878,000     9,370,000       37,149,000
Grade (g/t)               1.39         0.95          2.82             1.62
                    ----------   ----------     ---------       ----------
Ounces                 753,000      333,000       852,000        1,938,000
                    ----------   ----------     ---------       ----------
Inferred
Tonnes               3,710,000    2,198,000     7,130,000       13,038,000
Grade (g/t)               0.93         0.83          1.63             1.30
                    ----------   ----------     ---------       ----------
Ounces                 111,000       59,000       374,000          544,000
                    ----------   ----------     ---------       ----------
Notes:
1. The mineral reserves and resources reported herein are based on the CIM
definition standards for mineral resources and mineral reserves adopted
by the CIM Council on Dec. 11, 2005. Mineral resources that are not
mineral reserves do not have demonstrated economic viability. Mineral
resources, as reported, include minable reserves, that is, reserves are a
subset of resources.
2. Mineral reserve and mineral resource estimates for the Box and Athona
deposits were prepared by Bikerman Engineering (June, 2007, revision 1,
May 12, 2008, Box mine/Goldfields project, Uranium City, Sask., Canada).
This report has been filed on SEDAR by GLR resources.
3. The independent qualified person responsible for the Ixhuatan resource
estimates is Gary Giroux, PEng, of Giroux Consultants Ltd. A technical
report prepared to National Instrument 43-101 requirements has been
filed on SEDAR.
4. Totals may not add up due to rounding.