Kinross to JV Linear Gold’s Ixhuatan project

Vancouver – Five years of work paid off when Linear Gold (LRR-T, LGCFF-O) reached an agreement with Kinross Gold (K-T, KGC-N) to joint venture Linear’s 98,000-hectare Ixhuatan gold-copper-molybdenum project in Chiapas, Mexico.

The agreement would see Kinross as project operator, able to earn up to a 70% interest in the property by spending US$15-million on exploration and paying US$101-million to Linear, plus a production decision fee of up to US$15-million.

Provided the plan gets a green light from the boards of directors of both companies and a definitive agreement is drawn up in the next 45 days, Kinross will hand over US$1 million to Linear immediately and spend US$15 million on exploration over the next two years. An additional US$45-million payment to Linear would then secure a 60% interest in the project.

Kinross could up its interest to 70% by paying a further US$55 million within 90 days of a decision from its board of directors to go ahead with mine construction, based on a NI 43-101 compliant feasibility study. If Kinross’ board decides to go ahead with production, the company would owe Linear US$5 million if the proven and probable gold reserves and gold equivalent silver reserves are between 2 and 2.49 million oz., US$10 million if those reserves are between 2.5 and 2.99 million oz., and $15 million if reserves are greater than 3 million oz.

Linear acquired Ixhuatan in October 2003 from Swiss mining house Xstrata (XTA-L, XSRAF-O) as part of a package of early stage exploration assets in southern Mexico and the Dominican Republic, formerly held by Australia’s MIM Holdings. Xstrata had bought out MIM earlier in 2003.

In the first few years on Ixhuatan, Linear drilled off the Campamento deposit, which hosts measured and indicated resources of 17.6 million tonnes grading 1.8 grams gold and 7.8 grams silver, the equivalent of 1 million oz. gold and 4.4 million oz. silver at a cutoff grade of 0.5 gram gold.

More recently the company has been working to define the Cerro la Mina gold, copper, and molybdenum discovery, a prominent hill lying some 1.4 km northeast of the Campamento deposit. One of the strongest recent results from Cerro la Mina is hole 25, which intersected 2 metres of 0.73 gram gold per tonne, 0.62% copper, and 0.03% molybdenite (MoS) from 226 metres downhole and then hit 108 metres of 0.54 gram gold, 0.28% copper, and 0.02% molybdenite from 470 metres depth.

Hole 26 extended the area of known mineralization at Cerro la Mina by 140 metres, intersecting 184 metres grading 0.77 gram gold, 0.17% copper, and 0.01% molybdenite from 412 metres depth. Mineralization remains open at depth and and in several directions.

Linear is also exploring other prospective areas of the Ixhuatan property, with some drilling success at the Laguna Grande, Western, and Caracol targets.

The large property is in the northwestern corner of Chiapas state, immediately southwest of the past-producing Santa Fe gold-silver-copper mine, which is what initially drew MIM to the area.