June 29, 2011
Further to its press release of
May 3rd, 2011
, Pan American Goldfields, Ltd., a
corporation (OTCBB: MXOM) (the "Company"), has entered into a binding letter agreement (the "Letter Agreement") with Minera Rio Tinto, S.A. de C.V., ("MRT") and Marje Minerals S.A., entities organized under the laws of the United Mexican States ("MM"), to increase its interest from 40% to 80% in the
project located in Chihuahua State,
. MRT will retain a 20% participating interest, subject to dilution under a definitive joint venture agreement to be finalized between the parties. Under the Letter Agreement, the Company shall direct the preparation of the feasibility study evaluating the future development of the
The Letter Agreement provides that the parties will use their best efforts to negotiate, finalize and execute definitive agreements, which will amend and restate the existing agreements between the parties related to the
project. The definitive agreements are expected to be completed in 60 days. The Letter Agreement is binding on the parties. Pending completion of the definitive agreements, the Company has the right to immediately commence preliminary work and analyses on the
project and propose preliminary work plans and budgets for the joint venture.
A. Restructuring of Cieneguita Project Ownership
According to the previous agreement, MRT had the right to earn a 54% interest in the
project under which MRT made an investment in the Company and financed a small startup mining operation to extract ores up to a depth of 15 meters, as well as providing the initial US
towards the completion of a bankable feasibility for the
project as a whole. The
43-101 compliant resource consists of a measured and indicated 20 million tonnes averaging 0.74 grams per tonne Au and 51.8 grams per tonne Ag. The Company originally had the right to the 20% of the net cash flows from the first 15 meters mined and 40% thereafter.
Since MRT began mining operations in 2010, material processing has progressed to the point where gold and silver recoveries into a bulk sulfide concentrate are excellent, about ninety percent. However, the current drought conditions have significantly reduced through-put at the operation due to a lack of process water availability. It is important to note that the infrastructure required to provide adequate water in compensation for the current and unanticipated severe drought conditions, has not been installed by MRT.