Red Dragon Resources Corp. Announces Property Acquisition in Chileadmin
Wednesday, August 20th 2008
Red Dragon Resources Corp. announces that it has signed a heads of agreement with Compania Minera Viento Norte, a Chilean mining company, to acquire a variable interest in and to a group of mineral concessions in northern Chile known as the Valle Hermosa Project.
The Valle Hermosa Project is located approximately 245km northwest of Santiago, the capital city of Chile and 43km northeast of the town of Illapel in Chile’s fourth region. The Project is located in a valley at 1,100m above sea level (ASL) with surrounding hill sides up to 1,500m ASL. It is accessible by paved road and electrical power can be obtained from the Chilean Central Interconnected System (SIC) approximately 14km to the south.
The Project is underlain by Cretaceous age intrusive and volcano-sedimentary rocks that exhibit porphyry style hydrothermal alteration and mineralization. The extensive alteration is visible over a 16km(2) area and is mostly argillic. Historic and active mine workings are located in the southwest and northeast margins of the valley with the adjacent hillside where outcrop exposure is more prevalent. Samples from surface working and dumps consist of quartz and sulphide veined argillically altered medium grained felsic intrusive rock. Disseminated and vein sulphide are mostly weathered to limonite and malachite, however samples from short shafts often contain sulphides (pyrite, chalcopyrite, and bornite) that are commonly replaced by chalcocite, suggesting the potential for a zone of supergene enrichment.
Pursuant to the HOA, the Company has agreed to purchase up to 50% of MVN’s 100% interest in the Project by way of an option agreement (the “Option”) enforceable under the laws of the Republic of Chile, which will provide for installment payments over the next five years of up to a total of US$9 million. The first installment, payable on signing of the Option is US$300,000. The Company plans an initial geophysical survey with follow-up drill testing in the first year.
In addition to the US$9 million, the Company, at its discretion, is entitled to acquire an additional 20% interest in and to the Project by making a further cash payment of US$7,500,000 within eight years of the execution date of the HOA, provided a Bankable Feasibility Study has been concluded at such time. In the event that the Company acquires the additional 20% interest, it will also have a right of first refusal to acquire MVN’s remaining 30% interest in the Project.
In consideration for the Option, the Company has also agreed to exploration and property acquisition expenditures over the first five years of US$8,250,000 that will be allocated as to 70% for exploration expenditures and 30% for the costs to acquire mining rights and surface rights for the Project.
The Company and MVN have agreed to incorporate a company in Chile to hold their respective beneficial interests in the Project.