TERMS OF YANG WEN CHONG PROPERTY AGREEMENT AMENDED TO A JOINT VENTURE
On May 8th, 2004, Pinnacle Mines Ltd. (“Pinnacle”) announced that it had executed a formal purchase contract with Yunnan Geology and Mineral Resources Co., Ltd. (“YGM”) to acquire, subject to regulatory approval, a 100% interest in the Yang Wen Chong (‘YWC”) gold property located in the highly prospective southeast region of Yunnan Province, PRC, as initially announced on April 21, 2004. As consideration for YWC, Pinnacle was to pay YGM a total of 28,000,000 RMB (Cdn$4,179,000) over a two year period following the signing of the purchase contract. In addition, in connection with the purchase of YWC, Pinnacle agreed to pay a finder’s fee of up to 700,000 shares.
During 2004, Pinnacle advanced a total of 3,270,000 RMB (Cdn$488,000) to YGM towards the purchase price for YWC. However, in late 2004, Pinnacle began renegotiating its relationship with YGM and has now reached an agreement with YGM to form a Sino-Foreign Joint Venture to further explore and develop YWC (the “Joint Venture”). Under the terms of a letter agreement dated January 26, 2005 the Joint Venture will be deemed to have an initial registered capital of 28,000,000 RMB and Pinnacle has agreed to pay to YGM a further 3,730,000 RMB (Cdn$557,000) on or before January 31, 2005 (the “January 2005 Payment”) as consideration for a 25% interest in the Joint Venture. Initially YGM will own 75% of the Joint Venture but has granted Pinnacle the option to earn up to an additional 45% of the Joint Venture by spending 12,600,000 RMB (Cdn$1,880,000) on exploration and development of YWC over a five year period. Pursuant to the terms of the letter agreement, Pinnacle will earn, beyond its initial 25% ownership, an additional 1% of the Joint Venture for every 280,000 RMB (Cdn$42,000) spent on exploration at YWC. If, prior to the five year anniversary date of the letter agreement, Pinnacle has spent 12,600,000 RMB in exploration, it will own 70% and YGM will own 30% of the Joint Venture. YGM has agreed to apply for all necessary business licenses and government approvals to form the Joint Venture which is anticipated to take approximately 9 months to complete. In the event regulatory approval for the Joint Venture is not received, YGM has agreed to refund the January 2005 Payment of 3,730,000 RMB (Cdn$557,000) to Pinnacle; however the Company will forfeit its previous payments totalling 3,270,000 RMB (Cdn$488,000).
The YWC property is a 51.2 square kilometre mineral exploration license located in Fu Lin County, Yunnan Province, PRC. During the period 1996-2000, YWC was part of a joint venture between YGM and BHP Exploration. To date, 8 holes have been drilled on the property, numerous trenches, test pits and tunneling have been completed. One hole is reported by the BHP/Yunnan Geological team to have a gold mineralized intersection of 1.63 grams/tonne (g/t) over 83 metres. In addition, significant mineralization has been identified over a length of 3 kilometres in the contact/alteration zone between a Devonian siltstone/mudstone and a Cambrian Limestone. Individual trenches chip sampled have widths and grades varying from 3.25 g/t over 10.63 metres to 3.15 g/t over 98.15 metres. The mineralization is open along strike and dip. The contact zone is well defined. These exploration results are not compliant with National Instrument 43-101, and have been obtained from BHP Exploration reports on YWC. However, Pinnacle management believes the results and calculations were generated using accepted and proven geologic and engineering practices and are reliable and relevant.
In June 2004, Pinnacle’s conducted some preliminary field work at YWC during which time Pinnacle collected and analyzed 37 rock-chip samples, mostly from the mineralized zones. Assay results corroborate all gold zones that were sampled although it was difficult to determine some sample traverse sites because of surface disturbance of key exploration trenches by artisan miners. The rock-chip sample traverses were:
6.0 m @ 2.03 grams per tonne (g/t) gold
40.0 m @ 1.86 grams per tonne (g/t) gold
20.0 m @ 1.80 grams per tonne (g/t) gold
30.0 m @ 1.22 grams per tonne (g/t) gold
3.0 m @ 4.42 grams per tonne (g/t) gold
Pinnacle has filed a National Instrument 43-101 technical report on YWC dated July 31, 2004 (which is available for viewing on SEDAR) in which the report’s author states that the property is a target-rich environment for Carlin-type gold deposits and recommends continued exploration of existing targets. The author further indicates that that routine reconnaissance on YWC would likely identify new targets and that local infrastructure appears adequate for a future mine.
Pinnacle is currently outlining a regional sampling and trenching program for YWC which it anticipates completing within the next few months.
Pinnacle currently has $1,600,000 in cash and is adequately funded to satisfy the January, 2005 Payment to YGM, complete its required exploration expenditures for 2005 on the Silver Coin and Kansas projects in British Columbia, and satisfy its estimated general and administrative expenses for the ensuing year.
Pinnacle Mines Ltd. is a Canadian based mineral exploration and development company whose activities are international in scope. Its primary assets are located in both Canada and China. In Canada, Pinnacle holds title or options on several properties in Northwestern British Columbia, in proximity to numerous past and producing mines including the Silbak-Premier Mine and Barrick Gold’s famed Eskay Creek Mine. In China, Pinnacle’s current focus is in Southeast Yunnan, an area being increasingly considered for its potential to host significant mineral resources including “Carlin” style gold deposits.
On behalf of the Board
“Andrew W. Bowering”
President
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for the adequacy or the accuracy of the content of this news release.
This news release includes forward-looking statements, including statements relating to the Company's future exploration programs, financial position and anticipated expenditures. The words "plan", "expect", "believe", "intend", "anticipate", "forecast", "target", "estimate" and similar expressions identify forward-looking statements. Forward-looking statements are based on assumptions made by and information currently available to the Company. Investors are cautioned that these forward- looking statements are neither promises nor guarantees, and are subject to risks and uncertainties that may cause future results to differ materially from those expected. The Company does not undertake to review or update these forward-looking statements.