AMN - MADAGASCAR: Prophecy to acquire gold project

Prophecy Development Corp has entered into a binding letter agreement to acquire the Dabolava Gold Project in Madagascar. It will acquire six mining claims covering 375sqkm and other assets, which together constitute the project for total consideration of at least $5 million.

It will pay the seller $1 million upon closure of the transaction, $1 million on the first and second year anniversaries of the closing date and $2 million when it obtains its first Dabolava project mining licence.

For every troy-ounce of gold reserve that is compliant with the JORC Code from Dabolava by the dates to be agreed to in a definitive agreement to be executed, a one-time payment of $2 per troy-ounce shall also be paid to the seller. This payment is subject to a minimum cumulative discovery of 1 million ounces.

The project is approximately 200km west-southwest of the capital Antananarivo and is accessed via 400km of paved highways, a portion of which traverses the property. It is 140km west of the town of Antsirabe that hosts an airport and residents with mining experience.

Gold has been mined at Dabolava since 1900 and continues to be mined on a very limited scale.

The project covers 375sqkm in six permits and consists of several mineralised areas, the most explored being Dabolava East, Takadora, Mountain of Gold and Anjoma. The exploration included airborne geophysical surveys, ground magnetometer survey, IP surveys and 11,349 soil samples. The work was carried out from 2004 to 2008 by Pan African Mining Corp (PAF) with Sprott Asset Management as a shareholder.

PAF only completed 11,863 metres of diamond drilling mostly focused on the Dabolava East area before it was acquired by the seller, a major coal mining company, in 2008, for approximately $157 million in cash. The project has been on care and maintenance since late 2008.

Prophecy intends to commission a preliminary economic assessment on Dabolava East and potentially fast track Dabolava East through the permitting process.

Prophecy’s executive chairman John Lee said, “Prior work on Dabolava had shown over 10km of gold-bearing trends highlighted by quartz gold drill intercepts of over 100 g/t gold.

“In addition to Dabolava East, Takadora, Mountain of Gold and Anjoma, the large land package contains several other prospective areas with extensive artisanal historic mine workings that warrant consideration for exploration.

“While the project development is at an early stage, there are promising signs that Prophecy is embarking on a very unique district-scale gold project that draws very few modern and historical comparisons.”

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