Partners to accelerate Tirisano (May 11, 2004)

Partners Etruscan Resources (EET-T) and Mountain Lake Resources (MOA-V) have lined up a black empowerment company to help them accelerate development of the Tirisano diamond mine in South Africa.

Mvelaphanda Exploration has agreed fund an estimated $8.2 million expansion of the processing plant, on the Nooitgedacht 131 IP property near Ventersdorp, to a capacity of 300 tonnes per hour. Mvelaphanda is also responsible for running the plant at an average effective utilization rate of at least 72% for 30 days. The empowerment company must also fund all working capital requirements at the mine during the option period.

Mvelaphanda has until July 31, 2005 to earn its 50% interest in Nooitgedacht.

Once the expanded plant is up and running, Mvelaphanda can then earn a 50% stake in two adjacent properties (Hartbeestlaagte 146 IP and Zwartrand 145 IP) by building a second plant for the nearby Blue Gum diamond deposit, about 3 km south of Tirisano.

Mvelaphanda must also complete a bulk sampling program and feasibility study, including a valuation of the two properties. The company must then spend an amount equal to 50% of each property’s valuation to take its half-interest. Based on current figures, including a grade of 2.8 carats per 100 cubic metres, Mvelaphanda’s expenditures would come to $38 million, including the construction of a 600-tonne-per-hour processing plant.

Thereafter, Mvelaphanda will set up a joint venture with Etruscan Diamonds. Etruscan Diamonds is owned 51% by Etruscan Resources, 25% by Mountain Lake, with the remaining 24% held by several private investors, including officers and directors of Etruscan. Mvelaphanda Exploration is owned 50% by South Africa’s Trans Hex Group and 50% by Mvelaphanda Resources.

Trans Hex will act as operator of the joint venture that will be managed by a committee consisting of an equal number of Etruscan Diamonds and Mvelaphanda Exploration representatives.

Etruscan says the deal will allow it to focus its efforts on acquiring and developing other properties in the Ventersdorp district where it already holds 31 properties. The company recently identified several large targets via an airborne gravity survey designed to trace gravel runs over the entire 5,000-sq.-km district.

In addition to the funding, Mvelaphanda brings with it its status as a black economic empowerment company, which will allow the projects to comply with impending South African legislation aimed at expanding mining opportunities to historically disadvantaged persons. The Empowerment Charter includes goals of 15% ownership by disadvantaged groups in mining ventures within five years and 26% ownership within 10 years.

The agreement still requires board and regulatory approvals.

Late last year, an independent resource update at Tirisano pegged the deposit’s in situ indicated resource at 12.3 million cubic metres averaging 2.8 carats per 100 cubic metres, representing an 18% increase in volume from the previous estimate (T.N.M., Sept. 1-7/03).

Shares in Etruscan were off 15 at $1.80 in afternoon trading in Toronto following the news on May 11; for their part Mountain Lake shares were 7 higher at 90.