VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 01/21/13 -- Duncastle Gold Corp. ("Duncastle") (TSX VENTURE: DUN)(FRANKFURT: 5D3) announced today that it has signed a Letter Agreement (the "Agreement") with Armex Mining Corp ("Armex") whereby Duncastle intends to sell 100% of its interest in the Yankee-Dundee Project in Southeast British Columbia to Armex in exchange for advance royalty payments, royalty payments, and production payments.
The Yankee-Dundee Project includes numerous past-producing, high-grade mines including the two largest mines in the Ymir Camp, being the Yankee Girl and the Ymir mines. The Ymir camp produced 883,000 tonnes of ore at an average grade of 10 g/t gold and 60 g/t silver for a gross total production value of over $500 million at today's prices according to historical government records, ranking it as the largest silver producing camp in the British Commonwealth for a period during the 1930s. Duncastle consolidated most of the Ymir camp and completed numerous drill programs, totaling over 7,700 meters in 48 holes and identifying a high-grade extension of the Yankee Girl mine that is near existing mine workings. Duncastle personnel inspected some of the mine workings in 2006 and found them to be in very good condition. Armex plans to use these workings as a basis for underground exploration and mining activities.
Terms of the Agreement with Armex include the following:
1. Grant a 2.5% NSR royalty to Duncastle on production from the mine, with Armex holding the right to repurchase the royalty at any time on the basis of $1,000,000 for each 1% NSR;2. Pay Duncastle advance royalty payments as follows: a. $50,000 on or before February 28, 2013, failing which Duncastle will receive 500,000 common shares of a publicly listed company to be identified by Armex ("Pubco"); b. $50,000 18 months after a notice of work (permit) is granted; and c. $50,000 on the anniversary of the second payment and annually thereafter until the commencement of commercial production.3. Advance royalty payments under 2b) and 2c) that are not made within 60 days of their respective due dates can be completed by issuing the equivalent number of shares in Pubco to Duncastle, calculated at the prevailing market price at the time of issue.4. Pay Duncastle production and additional payments as follows: a. $250,000 upon the commencement of commercial production; b. $250,000 upon the first anniversary of commencement of commercial production; and c. additional production payments aggregating $1,000,000 payable from 30% of net revenues as defined in the Agreement;5. Armex has the right to satisfy the production and additional payments by paying the aggregate sum of $1,250,000 any time during the first year of commercial production.6. Armex shall assume all of Duncastle's obligations per the existing option agreement between Duncastle and BGM Diversified Energy for those claims subject to that agreement.
All share issuances contemplated by the Agreement are subject to TSX and regulatory approval.