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Geologix Options Peru Properties to Rae Wallace Mining Company

Published: 14:50 07 Apr 2010 BST

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In an environment where companies jostle to acquire properties and source funding for their development, it is important to take a more focused approach. Rather than embarking on too many development endeavours, development of some properties through option agreements have proven to be more beneficial in many occasions. In what could be a similar development, Toronto and German listed Geologix Explorations Inc. (TSX: GIX, Frankfurt: GF6) has completed an option agreement with Rae Wallace Mining Company (RWMC) granting RWMC the right to earn a 100% interest in eight of the Company's Peruvian properties.

Given the diversity of its project portfolio, the decision to option out some of its properties should be viewed in a positive light. GIX has properties in Nevada, Mexico and Peru, providing exposure to multitude of minerals but predominantly to gold and copper. Prior to this transaction, GIX has executed anotehr option agreement with Empresa Minera Los Quenuales S.A. ("EMLQ"), a Peruvian subsidiary of the Glencore group, granting EMLQ an option to earn up to a 70% interest in the Company's La Joya Project in Peru. While infusing cash flow to GIX, these option sgreements are expected to help GIX focus on its key assets in Mexico. 

It is important to take a closer look at these two transactions as they mark an important development in GIX story. The transaction with EMLQ paves the way for EMLQ to earn an initial 51% interest in the property by completing US$2 million in expenditures over three years. In year one, the agreement calls for a minimum commitment of 1,500 metres drilling. Upon successful completion of these expenditures, a joint venture will be formed (49% GIX and 51% EMLQ).

The option agreement with RWMC meanwhile covers the Liscay, Largatija, Lachoc, Mirko, San Felipe, Sura, Toro Blanco and Cayhua properties which are currently owned 100% by Geologix. Portions of The Liscay, Largatija, Lachoc, and Mirko properties are subject to 2% precious metals NSR and a 1% base metals NSR payable to Newmont Peru S.A.

Confirming the company’s changing focus to Mexico Dunham Craig, President & CEO stated that the company’s development plans for the newly acquired Tepal and Libertad projects in Mexico would require considerable corporate and technical efforts and option agreements would enable them to focus on Mexico. Peruvian property assets advanced by a company with sound technical expertise and a decided focus on Peru said Craig. In any event, GIX continues to have exposure to Peru through shareholding in RWMC.

The company may consider similar option arrangements to develop its Nevada projects. GIX’s Silver Cloud project in Nevada covers a very large hydrothermal alteration zone in volcanic rocks that also hosts Great Basin Gold's Hollister (Ivanhoe) deposit (819,000 tonnes @ 35.3 g/t gold and 195 g/t silver, proven and probable). Silver Cloud lies 20 km southeast of Newmont Mining's Midas deposit that contains 4 million ounces of gold and 45 million ounces of silver. The RO meabnwhile is located at the northern end of the Battle Mountain Eureka trend, a structural lineament known to host other giant gold deposits in northern Nevada. Given the location of these properties, finding a partner to develop should be hardly challenging.

Mexico is a mining friendly jurisdiction with a history of gold and silver production. We work with a number of companies with assets in Mexico and are familiar with the mining environment and geological prospects of the country. Going by our initial research, GIX appears to be an interesting story. We are meeting GIX management in Calgary and will keep readers updated.

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