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Mr. Sokhie Puar reports


Candelaria Mining Corp. has signed an agreement to acquire the Caballo Blanco gold project in Veracruz from Molimentales Del Noroeste SA de CV, a subsidiary of Timmins Gold Corp. Pursuant to the terms of the agreement, Candelaria will pay $12.5-million (U.S.) in cash and assume $5-million (U.S.) in contingent liabilities in exchange for the project and all related rights and assets.

Caballo Blanco project overview

Timmins disclosed the results of a preliminary economic assessment on the Caballo Blanco project in its Dec. 18, 2014, news release. Since that time, Timmins focussed on advancing the project, including technical and environmental studies and engagement with government and other stakeholders. The information on the project provided below was extracted from the Timmins 2014 news release. Caballo Blanco is an advanced-stage open-pit, heap leach gold project located next to the Gulf of Mexico approximately 65 kilometres northwest of Veracruz, Mexico. The project consists of two large areas of epithermal gold mineralization, the Northern zone and the Highway zone, contained within 14 mineral concessions covering over 54,732 hectares. Caballo Blanco has easy access via paved roads, on-site power and clean water.

A preliminary economic assessment was completed on Caballo Blanco and reported in a National Instrument 43-101 independent technical report entitled, "Preliminary economic assessment Caballo Blanco gold heap leach, Veracruz, Mexico," dated May 7, 2012 (readdressed to Timmins as of Jan. 28, 2015), prepared by Joseph M. Keane, Brent C. Bailey, Jim Cuttle, Gary Giroux, Stephen Taylor and Dino Pilloto. The PEA discloses a measured and indicated resource of 575,000 ounces of gold (28.9 million tonnes grading 0.62 gram per tonne Au) and an inferred resource of 419,000 ounces Au (24 million tonnes grading 0.54 gram per tonne Au).

                                     MINERAL RESOURCES (1) 

                                     Tonnes           Metal grade         Contained metal
                                  (M tonnes)   Au (g/t)   Ag (g/t)    Au (oz)      Ag (oz)

Indicated mineral resources (2)        28.9       0.62       2.32    575,000    2,150,000
Inferred mineral resources (2)         24.0       0.54       2.50    419,000    1,930,000

(1) As reported by Timmins in the PEA, subject to rounding, and effective as at Jan. 17,
2012. The PEA is preliminary in nature, includes inferred mineral resources that are
considered too speculative geologically to have the economic considerations applied to
them that would enable them to be categorized as mineral reserves, and there is no
certainty that the PEA will be realized. Mineral resources that are not mineral reserves
do not have demonstrated economic viability.
(2) As disclosed in the PEA, mineral resources were estimated using cut-off grade of
0.2 gram per tonne.

To the best of the company's knowledge, information and belief, there is no new material scientific or technical information that would make the disclosure of the mineral resources inaccurate or misleading. For a full discussion of the sampling, analysis, quality assurance, quality control and other technical disclosure relevant to the project, please see the PEA which is available on SEDAR under Timmins Gold's profile.

Pursuant to the requirements of NI 43-101, Candelaria is required to file a technical report to support the above disclosure within 180 days from the date of this news release.

Transaction summary

Pursuant to the terms of the agreement, Candelaria will acquire the Caballo Blanco project in exchange for cash payments to be paid over a period of 12 months as follows:

  • $1.25-million (U.S.) payable on signing of the agreement as a non-refundable deposit;
  • $2.25-million (U.S.) payable no later than 15 business days from the date of the agreement as an additional non-refundable deposit;
  • $6.5-million (U.S.) payment upon closing, which is to occur on or before June 24, 2016;
  • $2.5-million (U.S.) payment at the earlier occurrence of Candelaria receiving permits or June 24, 2017, secured by a promissory note and security interest.

Candelaria has also agreed to assume a $5-million (U.S.) contingent payment obligation owing to Goldgroup Mining Inc.

Private placement

The company announces that it is proceeding with a private placement of up to $8.6-million. The offering will consist of up to 80 million common shares of the company at a price of 10 cents per share for total proceeds of up to $8-million. Up to $3-million of the private placement will also be offered by way of unsecured convertible notes provided that the combined proceeds from the sale of the shares and the convertible notes will not exceed $8.6-million. The notes will bear interest at 6 per cent annually, paid monthly, and will be convertible into common shares of the company for a period of 18 months at six cents per share for the first 12 months and 10 cents per share for the remainder of the term. The company may prepay the convertible notes at any time during the initial 12-month term by paying the holders all remaining interest to maturity in addition to the principal amount.

The proceeds from the private placement will be applied toward the acquisition of the Caballo Blanco project and related assets as described above. A finder's fee may be paid in connection with the private placement.

Completion of the acquisition and private placement is subject to customary closing conditions, including approval of the TSX Venture Exchange.

We seek Safe Harbor.