Kinross to partner with Linear Gold at Ixhuatan

Vancouver — Five years of work on the Ixhuatan gold-copper-molybdenum project have paid off for Linear Gold (LRR-T, LGCFF-O), which recently signed an agreement bringing Kinross Gold (K-T, KGC-N) on as a partner at the 980-sq.-km project.

The joint-venture agreement would see Kinross as operator of the project, in Chiapas, Mexico. Kinross can earn up to a 70% interest in the property by spending US$15 million on exploration over two years 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 within 45 days, Kinross will hand over US$1 million to Linear immediately. 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 another US$55 million within 90 days of a decision from its board of directors to go ahead with mine construction, based on a National Instrument 43-101-compliant feasibility study. If Kinross’s 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 (XSRAF-O, XTA-L) 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 at 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 per tonne, the equivalent of 1 million oz. gold and 4.4 million oz. silver at a cutoff grade of 0.5 gram gold per tonne.

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 (MoS2) from 226 metres down-hole 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 to the northwest, intersecting 184 metres grading 0.77 gram gold, 0.17% copper, and 0.01% molybdenite from 412 metres. 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.