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Treasury Metals to buy 100% of Pico Machay gold project from Pan American

May 20, 2011 10:24 AM ET
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Treasury Metals (CVE:TML) said Thursday that it has agreed to purchase 100% of the Pico Machay gold project from Pan American Silver (TSE:PAA), through the acquisition of certain Pan American subsidiaries.

The Pico Machay property is a high-sulphidation gold deposit that lies within the northern extent of the Southern Peru Epithermal Gold-Silver Belt.

The 4,823 hectare project is in near-term mine development stage, and  preliminary engineering and metallurgical testwork are expected to support a low-cost, heap leach operation, with low capital investment required. Current measured and indicated resources at Pico are estimated at 270,000 ounces, plus an additional 450,000 inferred ounces.

According to Treasury, it estimates that Pico has the potential to initially produce 50,000 to 75,000 ounces of gold per year.

“Treasury Metals will be well-positioned to deliver on a multi-asset growth strategy in the Americas, with near-term production potential at Pico Machay in Peru, and ongoing exploration at the Goliath Gold Project in Dryden, Ontario," said president and CEO Martin Walter.

The company, whose management previously owned Pico Machay, said the two projects represent a growing global resource of two million ouonces of gold, plus a considerable amount of exploration potential, bringing it one step closer to becoming a diversified Americas-focused gold producer.

In the region surrounding Pico Machay, there are already a number of existing mining operations, including Gold Field's and Buenaventura's Chucapaca, and Minera IRL's Corihuarmi gold project.

Treasury said the deal, which is conditional upon regulatory and other approvals, will also provide the company with an operating base in Peru to facilitate additonal exploration and expansion in South America.

In exchange for the 100% stake, Treasury will pay a total of US$21 million in cash and issue 11.5 million common shares to Pan American, which will hold a near 20% stake in Treasury. To close the transaction, Treasury has to complete an equity offering to fund the cash portion of the consideration, it said.

To date, the majority of drilling has been completed to define the main deposit area at Pico, with limited exploration of possible resource extensions along stike or at depth. So far, nine exploration targets have been identified.

At Treasury's Goliath gold project, the company is conducting a 30,000 metre program to expand the current mineral resource.

The Pico deal is expected to close by the end of July.

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