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ALBUQUERQUE, NM–(Marketwire – Sep 26, 2011) – Lone Star Gold, Inc. (OTCBB: LSTG) (“Lone Star” or “the Company”) is pleased to announce the Company signed a letter of intent (LOI) on September 23, 2011, committing to the acquisition of an option to purchase a 70% interest in a gold-silver project consisting of 2 properties in Mexico: San Luis and La Colorada.
The ~1409-acre (570-hectare) project is located in the municipality of Ocampo, 192 miles (310 km) from the capital city of Chihuahua, in southwest Chihuahua State. Access to the project is by paved roads with the exception of the final 19 miles (31 km).
In March 1996, the project geologist sent a 1-ton shipment from the properties to be processed at a float plant to the southeast in Parral, which yielded the following mineral results: 6.1 grams per ton (gpt) Gold, 4,672 gpt Silver, 4.03% copper, 23.3% lead, and 13.8% zinc. Payment for the 1-ton shipment amounted to $4,388.20 pesos (at current conversion rates, approximately $316.01 USD; at the time, gold was trading at around $400/oz and silver at less than $6/oz). Lone Star management currently has possession of the float plant receipt that confirms both the mineral results and payment transaction.
The Company intends to develop an exploration plan to further evaluate the project’s potential mineral resource while determining the potential sites that represent the best potential for silver and gold deposits. At the same time, Lone Star believes the project justifies the immediate construction of onsite plant, which would be expected to begin producing 120 tons per day in less than 6 months time. (The company estimates that 120 tons per day should at today’s price deliver circa $10,000,000 Per Annum).
The deal structure includes Lone Star initially acquiring the option to purchase a 70% interest in the San Luis and La Colorada properties (as accomplished through the signing of the LOI). The Company will then have a 60-90 day due diligence window, during which time 40-50 samples are to be collected (chip, quartz vein, and fault structure). Based on positive due diligence sampling results, a Definitive Option agreement would be signed, which outlines a 3-year, $2,000,000 work commitment and cash consideration for the properties.
The Company would incrementally transfer a total of 425,000 shares of Lone Star’s common stock over a 2-year period following the signing of the Definitive Option to Purchase. The deal also includes a 3% Net Smelter Royalty (NSR), with a 2% NSR buy-out option for $2,000,000 (the owners would retain a 1% NSR).
Lone Star Gold will be drawing from the recent USD$15 million equity financing agreement with Hong Kong based equity investor North American Gold Corp to fund the new venture.
“This new project is an ideal fit with our goal of rapidly becoming a mid-tier producer in the short term,” stated Daniel Ferris, Lone Star Gold’s Company President. “By expanding our portfolio in the region with mining projects that have the potential of production, we’re in a far better position to take advantage of today’s higher gold and silver prices through projects that can be brought into production for a fraction of the cost of much larger projects.”
ADDITIONAL INFORMATION
To learn more about Mexico’s gold industry, the Company, and regular news updates, visit Lone Star Gold’s official website:http://www.lonestargold.com.
ABOUT LONE STAR: Lone Star Gold, Inc. is a publicly traded (OTCBB: LSTG) gold exploration and development company based in Albuquerque, New Mexico. The Company’s aggressive acquisition and exploration approach is strategically focused on proven, stable precious metal regions in America and Mexico. Currently, Lone Star owns concessions covering 800 hectares in the La Candelaria project in Chihuahua, Mexico, which the Company is evaluating to determine the potential sites that represent the best potential for silver and gold deposits.
ON BEHALF OF THE BOARD OF DIRECTORS,
Lone Star Gold, Inc.
Daniel Ferris, Company President
This press release contains statements that are forward-looking and which involve a number of risks and uncertainties. Such forward-looking statements are within the meaning of that term in Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements in question are based on Lone Star Gold, Inc.’s current expectations and projections about future events, based on information currently available. The forward-looking statements found in this press release may also include statements relating to Lone Star Gold, Inc.’s anticipated financial performance, business prospects, new developments, strategies, and similar matters. Lone Star Gold, Inc. provides no assurance regarding the actual outcome of the events contemplated by any forward-looking statements included in this release. Lone Star Gold, Inc. disclaims any obligation to update any of its forward-looking statements, except as may be required by law.
