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Intrepid Mines Limited: Intrepid and Vale Sign Heads of Agreement in Respect of Tujuh Bukit Sulphide Copper-Gold Project

^{Published on 2009-07-09 17:10:53, Last Modified on 2009-07-09 17:11:03 - Market Wire}
 

BRISBANE, AUSTRALIA--(Marketwire - July 10, 2009) - Intrepid Mines Limited (TSX:IAU)(ASX:IAU) ("Intrepid" or the "Company") is pleased to report the signing of a Heads of Agreement ("HOA") with Vale Exploration Pty Ltd, a wholly-owned subsidiary of Vale S.A (NYSE:VALE) ("Vale"), the world's second largest Mining Company, granting Vale an option to acquire rights to Intrepid's Tujuh Bukit sulphide copper-gold project in Indonesia (see map and "About Tujuh Bukit" below.) Under the terms of the HOA, Vale could earn a 60% shareholding in a joint venture company holding the rights to the Tujuh Bukit project by, amongst other terms, spending a total of US$40 million. Intrepid and its Indonesian alliance partner, PT Indo Multi Niaga ("PT IMN") would retain the remaining 40% interest in the sulphide copper-gold project, and would be free carried by Vale through to completion of a bankable feasibility study.

Importantly, Intrepid and PT IMN, would continue to retain sole rights to the oxide gold-silver deposit which sits above the sulphide copper-gold deposit (see Figure A).

The negotiation of an HOA is a significant achievement for Intrepid and a major step forward in delivering on a strategy to become a significant mid-tier Australian gold mining company.

Commenting on the agreement, Brad Gordon, Intrepid's CEO said: "We are extremely pleased to have such an important and respected partner working with us on this tremendously exciting discovery. At the same time, we believe that the terms of this agreement very positively reflect both the sulphide deposit's potential and the real contributions that our team and organisation have to make in its potential development."

HEADS OF AGREEMENT

The significant features of the HOA are:

- Vale's total expenditure of US$40 million is made up of:

1) Payments to Intrepid and PT IMN totalling US$6 million (US$2 million within five days of signature of a formal agreement and an additional US$4 million on 11 January 2010).

2) An additional payment of US$24 million to Intrepid and PT IMN should Vale exercise its option to acquire a 60% interest in the sulphide copper-gold project (such payment conditional upon certain milestones relating to forestry reclassification and permitting).

3) A minimum expenditure program of US$10 million on the sulphide copper-gold deposit over the three-year option period ("option period").

- Intrepid will remain as manager of the project during the option period, operating under the direction of a Technical Committee comprising representatives of Intrepid and Vale.

- Vale to sole fund a pre-feasibility study and a bankable feasibility study on the sulphide deposit.

The HOA specifies the general commercial terms that have been agreed between the parties, and is at this time non-binding, with Vale and Intrepid anticipating that the formal, binding documentation will be completed by 30 September 2009.

BACKGROUND

Preliminary work undertaken by Intrepid at Tujuh Bukit has identified the scope for two distinct projects:

- An oxide gold-silver project ("oxide cap"), at which 2.57 million ounces of gold equivalent resources have already been estimated; and

- A sulphide copper-gold porphyry and high-sulphidation ore body beneath the "oxide cap", which has been intersected by holes GTD 29, 35, 42, 46, and 56.

The chart below illustrates the two distinct projects.

To view Figure A, please visit the following link: [ http://media3.marketwire.com/docs/iau709figurea.pdf ]

The oxide gold-silver project is an ideal project for Intrepid to develop with PT IMN, without the need for assistance from a major mining company. The Company expects that the successful development of this project will catapult Intrepid into the ranks of the significant mid-tier Australian gold mining companies. The Company believes that the development of the sulphide copper-gold project will take considerably longer and will likely require significant funding before production can be commenced. In recognition of the financial hurdles, Intrepid conducted an informal search for an ideal partner for the sulphide copper-gold project, resulting in the HOA being executed with Vale.

Importantly, the HOA signed with Vale recognises Intrepid's position as a growing gold producer by:

- Enabling Intrepid to retain its existing 80% interest in the oxide gold-silver project (with Indonesian alliance partner PT IMN holding the remaining 20%) and to continue its progression;

- Providing Intrepid with assistance to progress and develop the potentially very large sulphide copper-gold project; and

- Delivering significant cash payments to Intrepid (as opposed to farm-in amounts that must be spent on the project) which strengthen Intrepid's balance sheet and enable it to pursue its growth ambitions.

Intrepid was advised by Gryphon Partners in relation to the process to identify a partner for Tujuh Bukit and the negotiation of the proposed transaction.

ABOUT TUJUH BUKIT

Tujuh Bukit is located in the province of East Java, Indonesia and covers an area of approximately 11,600 hectares, about 205 kilometres southeast of Surabaya, the provincial capital. The project site has a potentially large porphyry and high sulphidation epithermal gold-silver-copper system, which is underneath a significant, near-surface, gold-silver oxide cap.

Preliminary exploration, including diamond drilling on two (Zones A&C) of multiple zones being examined around the oxide deposit, has determined a National Instrument 43-101-compliant aggregate Inferred oxide resource of 2.57 million ounces gold equivalent (gold + silver) grading - 1grams per tonne (g/t) at 0.5g/t gold equivalent cut off (see Intrepid news releases dated 27 July 2008 and 17 December 2008). Additional drilling on Zones B and B South have also encountered encouraging mineralisation, confirming additional gold-silver potential (see Intrepid news release dated 2 March 2009).

Deeper drilling below the oxidized zone of the project intersected extremely encouraging assays from a related but separate porphyry copper-gold zone, including one hole, GTD 08-35, that intercepted 627 metres of 0.5 g/t gold and 0.5% copper (see Intrepid news release dated 17 July 2008).

ABOUT VALE

Vale is the second largest diversified metals and mining company in the world and the largest publicly traded company in Latin America by market capitalization (approximately US$90 billion). Vale is the world's largest producer of iron ore and pellets, key raw materials for the steel industry, and one of the largest producers of nickel. The company also produces copper, manganese, ferroalloys, bauxite, alumina, aluminium, coal, cobalt, PGMs, among other raw materials important to the global industrial sector. Vale shares are traded on the New York Stock Exchange - NYSE (VALE and VALE.P), on the Sao Paulo Stock Exchange - BOVESPA (Vale3 and Vale5), on the Madrid Stock Exchange - Latibex (XVALP and XVALO) and on the Euronext Paris (Vale3 and Vale5).

ABOUT INTREPID MINES LIMITED (INTREPID)

The new Intrepid is a low cash cost, Australian-based precious metals producing company focused primarily on its Paulsens gold mine in Western Australia and its advanced exploration Tujuh Bukit project in Indonesia. The Company was built on a series of strategic mergers with companies with complementary strengths and capabilities, which have presented strong opportunity for growth and sustainability. Intrepid has built a strong team of highly-skilled and internationally experienced resource sector professionals. Intrepid has cash on hand of US$39 million and no debt. The Company trades on the ASX and TSX under the symbol IAU.

To view Figure B, please visit the following link: [ http://media3.marketwire.com/docs/iau709figureb.pdf ]

FORESTRY ACTIVITIES

The Indonesian Forestry Law restricts non forestry activities within protection forests and prohibits mining using an open pit method in protection forest areas. Accordingly, Intrepid's Alliance partner, PT IMN, is working with relevant Indonesian authorities to allow for a review of forest land status.

FORWARD-LOOKING STATEMENTS

This announcement contains certain forward-looking statements, relating to, but not limited to Intrepid's expectations, intentions, plans and beliefs. Forward-looking information can often be identified by forward-looking words such as 'anticipate', 'believe', 'expect', 'goal', 'plan', 'intend', 'estimate', 'may' and 'will' or similar words suggesting future outcomes, or other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future outcomes, or statements about future events or performance. Forward-looking information may include reserve and resource estimates, estimates of future production, unit costs, costs of capital projects, and timing of commencement of operations and is based on current expectations that involve a number of business risks and uncertainties. Factors that could cause actual results to differ materially from any forward-looking statement include, but are not limited to, failure to establish estimated resources and reserves, the grade and recovery of ore which is mined varying from estimates, capital and operating costs varying significantly from estimates, delays in obtaining or failures to obtain required governmental, environmental or other project approvals, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development of projects and other factors. Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied.

Shareholders and potential investors are cautioned not to place undue reliance on forward-looking information. By its nature, forward-looking information involves numerous assumptions, inherent risks and uncertainties, both general and specific, that contribute to the possibility that the predictions, forecasts, projections and various future events will not occur. Intrepid undertakes no obligation to update publicly or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information, except as required by law.

Statements relating to gold resource estimates are expressions of judgment, based on knowledge and experience and may require revision based on actual production experience. Such estimates are necessarily imprecise and depend to some extent on statistical inferences and other assumptions, such as gold prices, cut-off grades and operating costs, which may prove to be inaccurate. The drill programme at Tujuh Bukit is insufficiently advanced to define a resource estimate and it is uncertain if further drilling will result in the determination of a resource statement at the project.

QUALIFIED PERSON

The information in this announcement that relates to exploration results is based on information compiled by or under the supervision of Malcolm Norris, who is a full-time employee of Intrepid Mines Limited. Mr Norris has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and a Qualified Person as defined in the Canadian National Instrument 43-101 (standards of Disclosure for Mineral Projects). Mr Norris consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

The information in this announcement that relates to mineral resources is based on information compiled by or under the supervision of Dr. Phillip Hellman, who is an independent consultant to Intrepid Mines Limited and a Director of Hellman & Schofield Pty Ltd. Dr Hellman has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as an Independent Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves" and an Independent Qualified Person as defined in the Canadian National Instrument 43-101 (standards of Disclosure for Mineral Projects). Dr Hellman consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Dr Hellman has undertaken independent verification sampling and assaying of drill core with a close agreement of results with those previously reported. A 40 x 40 x 6 metre block model was used for the quoted estimates. If smaller selective mining units are considered it is estimated that an approximate 10 to 20% lift in grade may result. In future, increasing the drilling density in areas of higher gold grades is anticipated to achieve a higher grade outcome.

SAMPLE ANALYSIS

Intrepid exercises a strict chain of sample custody in its drilling program at Tujuh Bukit. Joint Venture personnel remove core from the drill rig and deliver it to a project geologist who logs the core and marks the core into two metre sample intervals. Intrepid and Joint Venture personnel supervise the immediate splitting, sawing and bagging of samples, and packaging of groups of samples for dispatch to the laboratory. The remainder of the split core remains on site.

Samples are securely packaged, batched, and then transported under supervision to Intertek's laboratory facility in Jakarta. At the laboratory, the samples are prepared by crushing and pulverizing and a 30 gram charge is assayed for gold by conventional fire assay and/or atomic absorption methods. Multi-element ICP analysis is carried out using a multi-acid digestion process. All samples that contain silver and/or copper, lead, and zinc values that exceed the upper detection limits for ICP are re-analysed by conventional atomic absorption methods to determine the absolute values of these metals.

GOLD EQUIVALENTS

The gold equivalent ratio for silver has been set at 65:1 based on US$650/oz gold (Au) and US$10/oz silver (Ag.) Historical bottle roll tests have shown recoveries of 83% Au and 84.5% Ag, supporting a 65:1 ratio. Recently received CIL metallurgical testing results from Zone C achieved recoveries of approximately 90% for both Au and Ag at a grind of 80% passing 75 um. Comparable recoveries for both gold and silver in the recent tests from 4 composite samples from Zone C oxide material also support the 65:1 gold equivalence ratio.