Glencairn to take over Libertad, Cerro Quema (May 30, 2006)

Junior gold producer Glencairn Gold (GGG-T, GLE-X) will take on a new producing mine and an advanced development project under a deal with Yamana Gold (YRI-T, AUY-X, YAU-L).

Glencairn will issue 26 million shares to buy the La Libertad gold mine in Nicaragua and another 6 million to buy the Cerro Quema project in Panama. Adding in 5.8 million Glencairn shares Yamana owns already, the transaction gives Yamana an 18.4% stake in the company.

Glencairn plans a financing for $12.5 million to raise working capital for the projects, and Yamana will subscribe for $2.5 million of that. Yamana will also have a seat on Glencairn’s board.

The payoff for Yamana is that it gets out of two smaller assets and can concentrate on the larger projects it acquired in the takeovers of RNC Gold and Desert Sun Mining. It retains the San Andres mine in Honduras, which it acquired along with Libertad and Quema in the RNC takeover.

La Libertad, 110 km east of Managua, is slated to produce 45,000 to 50,000 oz. gold in 2006. It had proven and probable reserves of 7.3 million tonnes grading 2.1 grams gold per tonne at the end of 2004, and had produced 27,747 oz. in the nine months ending in September 2005. At that marker in 2005, it had produced its gold at a cash cost of US$428 per oz. Glencairn’s president Kerry Knoll said La Libertad “always had difficulty meeting targets,” largely because it was undercapitalized.

The mine has a measured and indicated resource, including its reserve, of 37 million tonnes grading 1.1 grams gold per tonne, and another 5 million tonnes grading 0.93 gram per tonne in inferred resources.

Glencairn sees potential for improved production at Libertad through converting the operation to permanent leach pads; ore on the pads is frequently removed before leaching has had enough time. A tertiary crushing circuit, which will allow for finer crushing, is also in the company’s plans.

In addition, Glencairn will look at reprocessing some previously leached material that carries gold grades around 1 gram per tonne. Knoll said he expected some savings in costs, especially around purchasing and electrical power, from bringing La Libertad and Glencairn’s Limon mine, northwest of Managua, under the same ownership.

Cerro Quema, 190 km southwest of Panama City, has 15 million tonnes in measured and indicated resources, grading 0.93 gram gold per tonne. A 2002 feasibility study by RNC calculated a reserve of 10.5 million tonnes at 1.1 grams, that could produce 60,000 oz. annually for four years. Yamana has a 60% interest, and a private company, Carena Equities, owns the rest.

Knoll said Glencairn’s first step would be to reach a deal with the partner to allow Glencairn to develop Cerro Quema as a wholly-owned project.

Picking up the reins at Glencairn as president and chief executive is Peter Tagliamonte, who managed the development of Desert Sun’s Jacobina gold project in Brazil; the hire gives Glencairn some additional operating expertise. Knoll moves to chairman of the Glencairn board, and chairman Ian Macdonald continues as a director.