The Increible Share Purchase Agreement

 On October 10, 2019, Western Atlas Resources Inc. announced that it had signed a Share Purchase Agreement to acquire from Gran Colombia Gold Corp. (“Gran Colombia”) all of the outstanding shares of Medoro Resources International Ltd. (“Medoro”). Medoro holds mining rights to the Increible 4A and Increible 4B concessions near the town on El Callao, Bolivar State, Venezuela (the “Increible Project”), but is presently unable to make use of the rights due to the Venezuelan government’s nationalization of the gold industry in 2011 through the “Ley Orgánica que Reserva al Estado las Actividades de Exploración y Explotación del Oro de 2011”.

As described in Western Atlas’ press releases of September 3 and October 10, 2019, the purchase price for the acquisition of Medoro shall be US$20,000,000, to be satisfied by the issuance to Gran Colombia of 59,115,555 common shares of Western Atlas to be issued at a deemed price of C$0.45 per share.

The closing of the acquisition of the Increible Project will take place upon the occurrence of both the following events (the “Closing Triggers”):

2. the current government of Venezuela being replaced by an internationally recognized and democratically elected government; and
3. completion of the lawful transfer and registration of transfer to Medoro (or to one or more of Medoro’s Venezuelan subsidiaries) of the Increible Project by Venezuelanauthorities of competent jurisdiction.

While Medoro holds the mining rights to the Increible 4A and Increible 4B concessions, it is unable to use the rights due to actions by the Venezuelan government which will require Medoro to complete a process of restitution which is the second of the two Closing Triggers described above.

 

Disclosure of Historical Resource Estimate

Western Atlas considers the most recent resource estimate which was reported by SRK Consulting (UK) Ltd (“SRK”) in 2009 for the Increible Project and which is disclosed in this news release to be relevant and reliable, but notes that it is a “historical estimate” as defined in NI 43-101 of the Canadian Securities Administrators.  Western Atlas further notes that:

1. The historical resource estimate was prepared 11 years ago.
2. The most recent site visit by the author of the technical report described in this news release was in 2008, and therefore the estimates it contains are not current.
3. The historical resource estimate uses the CIM Definitions in place at the time it was produced.
4. The economics of exploiting the resource will have changed since the historical resource estimate was prepared.
5. Ownership of the Increible Project is currently no longer with Medoro Resources Ltd. (which merged with Gran Colombia in 2011), but with Gran Colombia’s subsidiary Medoro.
6. No Qualified Person (as defined in NI 43-101) has done sufficient work to classify this as a “current mineral resource” and Western Atlas is not treating the historical mineral resource estimate as a current mineral resource estimate.
7. For the estimate to be reported as a current resource estimate, there would need to be a site visit by a Qualified Person, further pit optimization and other work would need to be undertaken to confirm that the mineralization still has reasonable prospects to be mined, and ownership of the concession would also need to be confirmed.

 

About the Increible Project

Introduction

Unless otherwise stated, the information that follows relating to the Increible Project is derived from a report titled “Updated Independent Technical Review of the Increible Gold Prospect, Bolivar State, Venezuela” (the “2009 Independent Technical Review”) which was prepared by SRK for Medoro with an Effective Date of April 27, 2009, under the Guidelines of National Instrument 43-101 and accompanying documents 43-101F1 in place at that time.

The Qualified Person responsible for the above report was Dr. Mike Armitage, C.Eng., C.Geol., who remains a full time employee of SRK. Dr. Armitage has reviewed the text of this note and has confirmed that it provides a fair and reasonable summary of the 2009 Independent Technical Report, which contains the most recent estimates and data available to Western Atlas.

Western Atlas considers the estimate respecting the Increible Project prepared by SRK to be relevant and reliable, but notes that it is a “historical estimate” as defined in NI 43-101 of the Canadian Securities Administrators.  See “Disclosure of Historical Estimates” below.

Summary and Conclusions of the 2009 Independent Technical Review

SRK Consulting (UK) Ltd (SRK) was commissioned by Medoro Resources Ltd. (“MRL”, which merged with Gran Colombia in 2011) to conduct a review of the Increible Project, and most notably the historical mineral resource estimates on the project prepared by Lions Gate Geological Consulting Inc. (“LGGC”) in November, 2008.

The authors responsible for the LGGC estimate were Susan Lomas, P.Geo., and Ali Shahkar, P.Eng. who were at the time both registered with the Association of Professional Engineers and Geoscientists of British Columbia as a Professional Geoscientist and Professional Engineer, respectively.

SRK’s work was managed by Dr Mike Armitage who completed two site visits to the Increible Project, the most recent being between November 10-12, 2008.

Neither SRK nor any of its employees employed in the preparation of the 2009 Independent Technical Review had any beneficial interest in the assets of MRL, and SRK was paid a fee for this work and other project related work in accordance with normal professional consulting practice.

The Increible Project is located in the El Callao area of the State of Bolivar, and comprises two adjacent concessions covering a total of 2,217 hectares which lie immediately to the north of, and adjacent to, Crystallex International Corporation’s La Victoria prospect and 3 kilometres (km) north of the town of El Callao.

Exploration for gold in Bolivar State dates back to before Venezuelan independence in 1811 and most likely prior to the Spanish occupation. The El Callao mining district itself is historically the most prolific gold producing region in Venezuela, with a recorded output of 6 million ounces since 1870.

Despite the El Callao district’s impressive production history and Increíble’s numerous artisanal workings, little modern exploration had taken place on the property until Bema Gold Co. commenced work in late 1993. This work included line cutting, soil and panel sampling, trenching, airborne magnetic and radiometric surveying, underground mapping and sampling, assaying, and limited metallurgical studies, structural studies and finally RC and diamond drilling.

The exploration carried out by MRL largely comprised further mainly infill drilling at the three key prospects of La Cruz, La Sofia and El Tapon. In total, the database used by LGGC to produce the historical mineral resource estimate included in the 2009 Independent Technical Report comprised information from some 581 drillholes, representing some 90,000m of drilling in total.

In preparing the 2009 Independent Technical Report, SRK reviewed the above database and concluded that the data was of sufficient quality to support the historical mineral resources estimates prepared by LGGC.

The stratigraphy around Increible comprises a single volcano-sedimentary cycle of the Pastora Botanamo Province. Sub-aqueous extrusion of mafic volcanics appears to have been followed by intermediate and felsic volcanism, and eventually by the deposition of clastic sedimentary formations. This package of rocks was then intruded by mafic and felsic dykes and sills, and late granitoid stocks and plutons.

The gold mineralization at Increible occurs in association with the Lo Increíble Shear Zone which is comprised of a complex system of splays and bifurcating faults which strikes northeast-southwest and extends for at least 15km along strike, some 7km of which is through the Increible Project, where it is up to 1.5km wide in outcrop.

The ore bodies themselves comprise shallow to steeply dipping zones of quartz-carbonate veining and disseminated sulphide mineralization containing gold which are typically continuous for hundreds of metres along strike and down dip and which vary up to tens of metres in thickness.

The historical mineral resource estimates prepared by LGGC were produced by the ordinary kriging of the available assay data into 3D block models produced for each deposit and following a statistical and geostatistical analysis of composted assay data to which top cuts were applied derived separately for each deposit based on an analysis the assay data available for each.

LGGC’s resulting historical mineral resource estimate given in the table above was reported using the CIM Definitions that were in place as at the Effective Date of the 2009 Independent Technical Report. So as to ensure that only mineralization that had reasonable prospects to be developed was included in the estimate this was reported at a 0.5g/t Au block cut-off and assumed the mineralization would be mined by open pit mining, apart from a deep high grade zone at La Cruz, which LGGC and SRK considered had the potential to be exploited by underground mining, and which was reported using a 4.0g/t Au cutoff.

The historical open pit mineral resource was also restricted to mineralization within a certain depth from surface which was determined by a pit optimization study carried out by SRK. Notably this assumed a gold price of USD$750/ounce, a metallurgical recovery of 85%, unit mining, processing and administrative costs of USD$2, USD$10 and USD$3 per tonne respectively and a slope angle of 45%. The metallurgical assumptions were based on limited test work which had been undertaken by a previous owner of the licence, Crystallex, which indicated the mineralization should be amenable to processing using a relatively conventional carbon-in-leach (CIL) based circuit.

In all cases, those blocks above the limits determined as above and where there were at least three drill holes within 30m of the center of the block were reported as a historical measured resource, those blocks where there were at least two holes within 40m were reported as an historical indicated resource and areas where the spacing was up to the limits of the search ellipse (typically between 100 and 200 m) were classed as Inferred. In addition, all of the resource described above with potential to be mined underground was classed as historical Inferred as the continuity requirements for this will be higher and the block cut-off had introduced a more irregular outline.