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Brazilian Metals Group to acquire block of prospective iron ore tenements in Brazil

Brazilian Metals Group (ASX: BMG) has entered an option agreement to acquire a highly prospective block of iron ore tenements in addition to its Rio Pardo iron project in Northern Minas Gerais, in Brazil.

BMG paid US$70,000 for the option to acquire the Catuti block, plus payments of US$20,000 per month during the 7 month evaluation period (to the end of March 2012). If evaluation drilling produces results, BMG will acquire a 100% interest in the Catuti mineral claims.

Surface sampling has indicated consistent iron mineralisation of between 18% and 55% iron (block average of 30% Fe) (based on XRF1 testing).

The new tenement block is called the Catuti block, and is located in the Mato Verde area, 13 kilometres west of the city, in close proximity to the Company’s other key iron ore projects – Rio Pardo and Gema Verde.

The acquisition of the Catuti block of tenements fits neatly with BMG’s portfolio of iron ore projects in the region, as well as adding another project area that is prospective for large iron deposits and have the potential for development into a low cost, large scale export mining operation.

About the Catuti Block

The Company has, subject to a 7 month period of evaluation, entered into an agreement to acquire the Catuti block, which comprises a block of 4 iron ore tenements, over an area of 80 square kilometres.

The landscape of the project area is highly accessible, and consists largely of rolling fields and patches of native scrub with occasional rocky sub-crops. There are a number of sub-cropping areas, with consistent iron mineralisation from surface sampling of between 18% and 55% Fe based on XRF2 testing.

During the evaluation period the Company intends to drill test areas associated with the high magnetic trends and sub-cropping areas of iron mineralisation. BMG plans to commence the evaluation drilling once landholder agreements are finalised, which it anticipates will be around the beginning of October 2011.

Additional consideration will be paid to the vendors of US$430,000 upon signing a definitive agreement.  Further staged payments totalling US$11 million would be payable over the subsequent 3 years. There will be no requirement for royalty payments to be made. BMG retains a right to withdraw from the project and any ongoing payment obligations at any time.

Gema Verde project

BMG aims to define a maiden JORC resource for the Gema Verde project by October 2011. Currently, there is an exploration target of 370 to 680 million tonnes at 16.6% to 19.9% Fe for the project.  The initial JORC resource is expected to fall within this range.

Metallurgical test work is continuing, with Mineral Engineering Technical Services Pty Ltd (METS) retained to undertake the work.

BMG has until February 2012 to complete its evaluation of the Gema Verde project and elect to proceed with its acquisition.

Of particular interest, the Gema Verde project ground adjoins, and is an extension of, Hong Kong listed Honbridge’s significant Block 8 resource (currently 2.6 billion tonne resource at 20% Fe3) in the Vale do Rio Pardo Project which is currently in definitive feasibility stage.

Testwork conducted by Honbridge has demonstrated that the material is readily upgraded to pellet feed grade. Honbridge has estimated that the operating costs at its Vale do Rio Pardo project will be below USD30 per tonne, making it one of the lowest operating cost producers.

BMG has continued to progress its Rio Pardo project, with the recent focus on metallurgical test work by METS for the Josilene–Scorpion prospect. This has a continuous mineralised zone which so far has been tested over a 13 km strike length within BMG’s tenement holding.

The company has an exploration target of 2 to 3 billion tonnes, and anticipates a program of infill drilling to deliver a JORC resource by mid-2012.

Rio Pardo project

BMG has continued to progress its Rio Pardo project, with the recent focus on metallurgical test work by METS for the Josilene–Scorpion prospect. This has a continuous mineralised zone which so far has been tested over a 13 kilometre strike length within BMG’s tenement holding.

The company has an exploration target of 2 to 3 billion tonnes, and anticipates a program of infill drilling to deliver a JORC resource by mid-2012.