Weststar Executes Letter of Intent to Acquire High Grade Past Producing Gold and Silver Mine in Jalisco, Mexico
VANCOUVER, BC -- (Marketwire) -- 03/29/11 --
Weststar Commences Regional Asset Consolidation of Near-term and Producing
Gold
and Silver Projects
Vancouver, BC - March 24, 2011: Weststar Resources Corp. (TSX-V: WER -
FSE:
HN3) (the 'Company' or 'Weststar')) is pleased to announce the
Company has
entered into a Letter of Intent with Lekona Minerals Incorporated
('Lekona')
under which Weststar has been granted an option to acquire up to an 80
percent
undivided interest in the La Paloma concessions (the 'La Paloma
concessions' or
the 'Property'). The La Paloma concessions are located in the State of
Jalisco,
Mexico and comprise 160 hectares. The Property lies at the very southern
end of
the Sierra Madre Occidental physiographic province.
La Paloma Property - Epithermal Gold and Silver Mineralization
Snowden Industry Mining Consultants Ltd. ('Snowden') was contracted to do a
site
visit and take samples to support the opinion of mineral occurrence. This
report
was written to be compliant with the requirements of National Instrument
43-101
Standards of Disclosure for Mineral Projects ('NI 43-101') for the
purposes of
this acquisition.
Snowden, during its site visit, collected 10 samples from outcrops
and
structures found during their site visit. The samples were representative
of the
area being evaluated and channel samples were taken across structures
with a
conscious effort made to include sample from the full width of the
structure of
interest as shown below in Table 1. The Company was excited to
receive the
sample assays which returned gold values of up to 49.20 grams / tonne
('g/t')
gold. Silver values were as high as 385 g/t. Eight (8) of the ten (10)
samples
returned very good to excellent grades. These eight (8) samples were taken
from
inside the old mine workings. The other two (2) samples were taken at the
tunnel
entrances outside the old mine. As expected these two (2) samples taken
from
outside the mine in wall rock (chip sample numbers 1 & 7) at the
tunnel
entrances returned lower values of gold. The samples were sent to ALS
Chemex
Laboratories in North Vancouver, B.C. and in the report Snowden has
confirmed
presence of gold and silver mineralization. In addition it concludes that
the La
Paloma concessions host epithermal style mineralization and is a
property of
merit.
Table 1: Gold and Silver Assays from Samples
-------- ------- -------- -------- -----------------------
| Sample | Gold | Silver | Sample | Notes |
| Number | g/t | g/t | Type | |
-------- ------- -------- -------- -----------------------
| 1 | 0.01 | 1.60 | Chip | Tunnel 3 Entrance |
-------- ------- -------- -------- -----------------------
| 2 | 8.77 | 222.00 | Chip | Outcrop near peak |
-------- ------- -------- -------- -----------------------
| 3 | 4.44 | 385.00 | Chip | Entrance of Tunnel 1 |
-------- ------- -------- -------- -----------------------
| 4 | 0.39 | 87.40 | Chip | Inside Tunnel 1 |
-------- ------- -------- -------- -----------------------
| 5 | 1.90 | 211.00 | Chip | Artisanal Workings |
-------- ------- -------- -------- -----------------------
| 6 | 1.41 | 131.00 | Chip | Artisanal Workings |
-------- ------- -------- -------- -----------------------
| 7 | 0.16 | 4.40 | Chip | Tunnel 5 Entrance |
-------- ------- -------- -------- -----------------------
| 8 | 10.10 | 26.60 | Chip | 5m inside Tunnel 5 |
-------- ------- -------- -------- -----------------------
| 9 | 49.20 | 119.00 | Chip | Extension of Tunnel 1 |
-------- ------- -------- -------- -----------------------
| 10 | 0.87 | 15.60 | Chip | Artisanal Workings |
-------- ------- -------- -------- -----------------------
Snowden recommends that Weststar undertake a phased exploration
program of
mapping, geophysics and drilling and estimate the cost to be in the
order of
$1.4 million.
The exploration history on the area and concession is described as dating
back
many hundreds of years. Natives of the area mined and worked silver prior
to the
arrival of the Spanish. The first known record of mining in the
area was
described in 1543 by Juan Fernandez de Hijar who identified the mines
in the
Guachinango, Etzatlan and Guajacatlan districts (C. Rene de Leon
Meza). The
Property was, at one time, owned by Industrias Peñoles, S.A.B. de
C.V. who
relinquished it in 1980. Mexican corporations are not required to file
reports
on their activities, so programs up to this date are unknown.
In 1983 and 1984 the Consejo de Recursos Minerales (CRM), a government
agency,
drained and entered the northern end of the main tunnel of the Veta
Ancha
workings and sampled an exploration drift approximately 100 metres
from the
1928 planned mining to the northwest. Based on this work CRM
reported a
'potential reserve' of 750,000 tonnes grading 4.19 g/t Au and 123 g/t Ag
from
the CRM. This estimate must be considered an historical resource as it
does not
meet the NI 43-101 definitions for a resource or reserve as stated in
sections
1.2 and 1.3. A qualified person has not done sufficient work to
classify the
historical estimate as current mineral resources, the issuer is not
treating the
historical estimate as current mineral resources and the historical
estimate
should not be relied upon.
In 2006, a small leach plant was constructed on the old foundations to
process
material collected during the clean-up of tunnel #1. Sampling of the
tunnels was
also carried out. Further exploration was carried out in 2008 which
outlined
new targets of interest and additional tunnels, not identified in the
1928
reports.
La Paloma Property - Production History
The Piedra Bola mine hosts gold and silver mineralization and was the
target of
historical mining. On the La Paloma concessions, the mineralized zone
extends
approximately 1,500m southeast to northwest and it was exploited until a
1928
workers strike terminated mining operations. Documentation from 1927 and
1928
offers detailed accounts of the mining operation. The 1927 Report of
Production
indicates that 41,090 tonnes were mined at an average grade of 5.87 gpt
gold and
507 gpt silver. Plans for 1928 proposed that 44,300 tonnes were to be
excavated
at an estimated grade of 6.64 gpt gold and 500 gpt silver. A qualified
person
has not done sufficient work to classify the historical estimate as
current
mineral resources, the issuer is not treating the historical estimate as
current
mineral resources and the historical estimate should not be relied
upon. The
main travel and communication tunnel at 1,563ms elevation runs 1500
meters
northwest to southeast with entrances to the northwest and a cross-cut
tunnel
140 metres to the northeast. Previous exploitation occurred above the 1563
level
in the mine to the northwest along 300m of strike length. Plans for 1928
were to
develop below the 1563 level. Exploration shafts and tunnels were
being
developed as the mine shut down.
Weststar intends upon completion of financing to begin the first phase of
work
which will include the securing and rehabilitation of the underground
shafts and
adits and begin to define a mine plan based on reconfirming the historic
block
of ore.
Mitch Adam, Weststar's President states, 'We are excited to have entered
into
this agreement to acquire the La Paloma gold and silver mine in
Mexico. The
Property is an advanced project and we expect to commence our
exploration
activities as soon as we obtain TSX Venture Exchange approval of
the
Acquisition. WestStar plans on working quickly to the eventual re-opening
of the
mine.'
La Paloma Property - Terms of Acquisition
Lekona currently holds an option to acquire an 80% interest in the La
Paloma
concessions from Minera Sierra de Oro S.A. de C.V. ('Minera') under an
option
agreement between Lekona and Minera dated September 15, 2010 (the
'Option
Agreement'). Lekona has exercised a portion of the option granted
under the
Option Agreement and currently owns a 20% undivided interest in the La
Paloma
concessions.
The Option Agreement provides for the following payments:
(a) a non-refundable deposit of $50,000.00 (paid);
(b) a payment of $300,000.00 (paid), together with a
transfer of
2,000,000 common shares in the capital stock of Lekona (transferred),
which
obligations have been satisfied and in consideration for which
Lekona has
acquired an undivided 20% interest in the Property;
(c) on or before April 30, 2011, a further payment of
$300,000.00 the
issuance of 1,000,000 common shares in the capital stock of Lekona
and the
expenditure of $200,000.00 on or in respect of the Property. In
consideration
for the foregoing, Lekona shall acquire a further 20% interest in the La
Paloma
concessions, for an aggregate 40% interest in the Property;
(d) on or before October 30, 2011, a further payment of
$400,000.00 and
the issuance of 1,000,000 common shares in the capital stock of
Lekona. In
addition, a further $ 250,000.00 is to be expended on or in respect
of the
Property and a National Instrument 43-101 Standards of Disclosure for
Mineral
Projects ('NI 43-101') level report is to be generated. In consideration
of the
foregoing, Lekona shall acquire a further 20% interest in the Property,
for an
aggregate 60% interest in the Property;
(e) on or before October 30, 2012, a final payment of
$2,000,000.00, the
issuance of an additional 2,000,000 shares in the capital stock of
Lekona and
the expenditure of a further $750,000.00 on or in respect of the
Property. In
consideration of the foregoing, Lekona shall acquire a further 20%
interest in
the Property, for an aggregate 80% interest in the Property.
In addition to the foregoing, in the event that Lekona receives a NI
43-101
compliant report, acceptable to both parties, drawn in accordance
with NI
43-101, indicating that there are resources of gold and silver in the
Property
exceeding 4,000,000 ounces and 150,000,000 ounces, respectively, Lekona
shall
deliver to or to the order of Minera 5,000,000 common shares in the
capital
stock of Lekona. The NI 43-101 shall be undertaken and paid for by Lekona
on or
prior to October 31, 2014, or within 12 months following Lekona
acquiring the
80% undivided interest in the Property, as contemplated by the Option
Agreement,
which ever event occurs first.
The Option Agreement further provides that upon Lekona acquiring 80%
of the
Property, Lekona and Minera will form an 80/20 joint venture and
continue
development of the Property with Lekona acting as operator.
La Paloma Property - Acquisition of Lekona's Interest
In consideration of an assignment by Lekona to Weststar of all of
Lekona's
right, title and interest in and to the La Paloma concessions
(the
'Acquisition'), including the 20% undivided interest held by it therein
and its
rights under the Option Agreement, Weststar has agreed, subject to
completing a
financing of not less than $5,000,000.00 to:
(a) pay, on Closing the sum of $3,000,000.00;
(b) to issue, on Closing, 5,850,000 common shares in the
capital of
Weststar to Lekona and 650,000 common shares in the capital of
Weststar to
Minera; and
(c) to assume all of the unfulfilled obligations of Lekona
under the
Option Agreement, including the payments of cash and shares due to
Minera
thereunder.
All cash payments due to Minera under the Option Agreement shall be made
to or
to the direction of Minera. All issuances of shares in the capital
stock of
Lekona otherwise due to Minera under the Option Agreement shall be replaced
with
the issuance of common shares in the capital stock of Weststar and issued
to or
to the order of Lekona.
La Paloma Property - Due Diligence
Weststar is entitled to conduct customary due diligence on the
Property,
including environmental and/or geological performance reviews, a review
of all
studies, analyses, reports and findings related to the Property, and
standard
legal due diligence examination, including review of all documentation
relating
to the title to assets of the Property and the Option. Weststar
has
substantially completed its due diligence investigations.
The technical information in this news release has been prepared in
accordance
with the Canadian regulatory requirements set out in NI 43-101 and
reviewed on
behalf of the Company by Thomas Clarke, Pr.Sci.Nat, a qualified person
and a
Director of the Company.
The Acquisition is subject to the acceptance of the TSX Venture Exchange.
On Behalf of the Board
Mitchell Adam, President
Weststar Resources Corp.
'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.'
Suite 4006 - 1011 West Cordova Street,
Vancouver, B.C. V6C 0B2
Tel: (604) 678-5308
Fax: (604) 678-5309
Website: www.weststarresources.com
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Source: Weststar Resources Corp. via Thomson Reuters ONE
[HUG#1501112]
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