Fortuna Mining / FVI, FSM (TSE, NYS)

Continuum invites Fortuna to earn into San Jose

2005-11-16 10:00 ET - News Release

See News Release (C-CNU) Continuum Resources Ltd

Dr. Lawrence Dick of Continuum reports

CONTINUUM RESOURCES LTD. ANNOUNCES EARN-IN AGREEMENT WITH FORTUNA SILVER MINES, INC. AT THE SAN JOSE SILVER-GOLD DEPOSIT, OAXACA, MEXICO

Continuum Resources Ltd. has reached an agreement with Fortuna Silver Mines Inc. in which Fortuna can earn a 70-per-cent interest in Continuum's 80-per-cent share of the San Jose silver/gold deposit located in Oaxaca, Mexico. The agreement, which is subject to exchange acceptance, requires Fortuna to spend $2-million in exploration over the next 24 months, primarily on diamond drilling, and includes a $1-million private placement into Continuum by Fortuna at a price of 20 cents per share. At the termination of the drill program, and based on a National Instrument 43-101 resource calculation, Fortuna will pay Continuum 50 U.S. cents for each ounce of silver or silver equivalent in the measured resource category and 35 U.S. cents for each ounce of silver or silver equivalent in the indicated resource category, corresponding to the interest of Fortuna in the deposit.

Exploration drilling and underground sampling by Continuum at San Jose, since 2004, have been focused on defining the dimensions and grade of one mineralized zone, or shoot, called the Trinidad zone. The Trinidad zone occupies approximately 400 metres of strike length along the epithermal vein system, which can be traced in outcrop on Continuum's property for three kilometres. Surface geochemistry and historic mine workings indicate the potential for additional zones of silver/gold mineralization along the three-kilometre strike length of the epithermal system.

Recent underground channel sampling of the Bonanza vein on the newly excavated level No. 6 (150 metres in depth) within the Trinidad zone returned an average grade of 10.2 grams per tonne gold and 1,102 grams per tonne silver, over a minimum true width of 2.26 metres. The vein is underlain by a stockwork zone grading up to 6.52 grams per tonne gold and 482 grams per tonne silver over a true width of 14.8 metres.

An inferred resource estimate, which is compliant with National Instrument 43-101, was carried out on the Trinidad zone by Independent Mining Consultants (IMC) in Tucson, Ariz. This estimate calculated an inferred resource of 15.8 million ounces of silver equivalent (Ag Eq) within 1.562 million tonnes grading 314 grams per tonne Ag Eq, at a 113-gram-per-tonne Ag Eq cut-off. At a cut-off grade of 170 grams per tonne Ag Eq, the inferred resource is 971,549 tonnes grading 424 grams per tonne Ag Eq, totalling 13.18 million ounces of silver equivalent. The resource was calculated using a gold price of $400 (U.S.) and a silver price of $7.50 (U.S.). Table No. 1 outlines the inferred resource estimate and equivalent grade calculations.

Fortuna plans to drill test the entire strike length of the San Jose epithermal system, with the objective of defining additional mineralized zones and upgrading the Trinidad resource.

The earn-in agreement

Continuum has entered into an agreement with Minerales de Oaxaca to acquire up to an 80-per-cent interest in the San Jose property. Fortuna's agreement with Continuum allows it to earn up to a 70-per-cent interest in Continuum's 80-per-cent interest, or a 56-per-cent overall interest in the San Jose project.

Fortuna also has the right to earn a 60-per-cent interest in Continuum's interest in the Taviche silver project, located approximately 14 kilometres east of the San Jose deposit, and other silver projects of Continuum in Oaxaca. The properties that cover the Taviche district contain several past-producing underground silver mines, very similar in geologic setting to San Jose.

To earn its interest, Fortuna will spend $2-million on drilling at San Jose on or before Dec. 1, 2007. A minimum of $1-million will be spent on or before Aug. 1, 2006. When Fortuna has completed drilling at San Jose, it will prepare an National Instrument 43-101 resource calculation.

Within 30 days of completion of a mutually acceptable resource calculation, Fortuna will pay Continuum an amount equal to 56 per cent of the resource at a price of 50 U.S. cents for each ounce of silver or silver equivalent in the measured resource category and 35 U.S. cents for each ounce of silver or silver equivalent in the indicated resource category.

Fortuna will also subscribe for a private placement of five million shares of Continuum at a price of 20 cents per share for proceeds of $1-million. Continuum shall use the proceeds from the private placement to perform a minimum of $500,000 worth of exploration on the Taviche claim group, located outside of the San Jose property. Fortuna shall have the option to acquire a 60-per-cent interest in Continuum's interest in other silver projects in Oaxaca in which Continuum has or acquires an interest by spending the greater of twice the amount expended by Continuum on that particular property and $500,000.

The San Jose property

The San Jose project is located in the Taviche silver/gold district, 43 kilometres south of the city of Oaxaca in the southern of Mexico. High-grade silver/gold mineralization is hosted by a system of epithermal quartz veins and hydrothermal breccias. The vein system is exposed for three kilometres on the surface, within Continuum's property limits. Historically, only 800 metres of strike length, to a maximum depth of just 130 metres below the surface, have been exploited.

Underground mapping and sampling have revealed three north-south-striking zones of silver/gold mineralization in the vicinity of the Trinidad shaft which include, from east to west:

the Bonanza vein, which grades an average of 10.2 grams per tonne gold and 1,102 grams per tonne silver over a minimum width of 2.26 metres, along 40 metres of exposed strike length;
the footwall to the Bonanza vein, which has yielded 14.5 metres of true width grading 6.52 grams per tonne gold and 482 grams per tonne silver in a first crosscut and 17.1 metres of true width grading 3.8 grams per tonne gold and 449 grams per tonne silver in a second crosscut; and
the Fortuna vein, situated 40 metres west of the Bonanza vein, grading an average of 2.29 grams per tonne gold and 421 grams per tonne silver over a minimum true width of 2.37 metres, along a strike length of 66 metres.

Two exploration drill holes were completed in 2001 beneath the lowest mine workings and confirmed the depth potential of the orebody. One of the holes intersected, a 25.6-metre core interval grading 3.25 grams per tonne Au and 436 grams per tonne Ag, within which a 12.4-metre interval averaged 5.66 grams per tonne Au and 730 grams per tonne Ag. The second hole intersected 6.5 metres averaging 3.31 grams per tonne Au and 540 grams per tonne Ag.

Gold-equivalent inferred resource

In May, 2005, Continuum disclosed a National Instrument 43-101 inferred resource estimate for the Trinidad zone, the most northerly of the zones of silver/gold mineralization known to occur at San Jose. The resource estimate was calculated from underground channel sampling and diamond-drill results. The estimate is tabulated below for a range of cut-off values. At a cut-off of four grams per tonne Au equivalent (Au Eq), the zone contains an inferred resource estimated at 202,620 ounces Au Eq grading 9.02 grams per tonne Au Eq. A brief report, dated June 5, 2005, prepared by Independent Mining Consultants Inc. has been posted by Continuum on SEDAR.

TABLE NO. 1: SAN JOSE
INFERRED RESOURCE ESTIMATE

Cut-off Cut-off
grade grade
Au Eq Ag Eq Ag Eq Au Ag
gpt gpt Tonnes gpt gpt gpt

2.0 113 1,562,321 314 1.76 215
3.0 170 971,549 422 2.43 285
4.0 226 699,377 509 2.97 341
5.0 283 527,283 594 3.5 396

Cut-off Cut-off
grade grade
Au Eq Ag Eq Au Ag
gpt gpt ounces ounces

2.0 113 88,406 10,839,754
3.0 170 75,905 8,893,033
4.0 226 66,783 7,674,416
5.0 283 59,335 6,713,310

Cut-off Cut-off
grade grade
Au Eq Ag Eq Ag Eq
gpt gpt ounces

2.0 113 15,834,693
3.0 170 13,181,666
4.0 226 11,447,656
5.0 283 10,065,738

The San Jose block-model mineralization is in the inferred class in accordance with National Instrument 43-101. The gold equivalent factor was based on the following assumptions:

price: gold $400 (U.S.) per ounce and silver $7.50 (U.S.) per ounce;
refining cost: gold $5 (U.S.) per ounce and silver 50 U.S cents per ounce;
recovery: gold 90 per cent and silver 90 per cent;
equivalent gold equals gold plus (silver multiplied by 0.0177); and
equivalent silver equals silver plus (gold multiplied by 56.5).

The data used for these calculations consisted of 13 diamond-drill holes totalling 2,124 metres with 844 gold and silver assays, coupled with chip-channel samples from level No. 5 and level No. 6 underground. The 13 drill holes (11 Continuum holes and two Pan American Silver holes) and 127 channel samples (all by Continuum) were composited to a length of two metres. Only assays having gold grades greater than 0.051 gram per tonne Au were included in the composite database used for the estimation procedures. Moderate dilution has been included into the vein model. A density value of 2.77 was assigned to the andesite host rock surrounding the veins, while the quartz veins have been assigned a density value of 2.64. An equivalent gold cut-off grade was used to tabulate the contained mineralization. This equivalent gold factor takes into account the refining cost and processing recovery as anticipated in any mining operations.

Preliminary metallurgical testwork

Preliminary metallurgical testwork was carried out on two composite samples of diamond-drill core from drill holes completed at San Jose by Continuum. The testwork was completed by metallurgical consultants Kappes, Cassiday & Associates from Reno, Nev. The two composite samples graded 4.56 and 8.26 grams per tonne gold, and 455 and 507 grams per tonne silver, respectively. The following tests were carried out:

gravity concentration;
flotation; and
flotation followed by cyanidation of the flotation-tailings fraction.

Gravity concentration testwork resulted in poor gold and silver concentrations of between 32 per cent and 39 per cent. Flotation testwork was conducted at two separate grind sizes, with the best results obtained at a grind size of 80 per cent passing 0.106 millimetres. The gold and silver flotation results were between 72 per cent and 74 per cent for both gold and silver in each sample. A high percentage of coarse gold, which tends not to float strongly, was considered as a possible reason for the modest flotation results. A further test, which will examine a gravity circuit ahead of flotation as a means of liberating free metal, was recommended by the consultant and will be carried out in the near future.

Very high recoveries were obtained by subjecting the tails from the flotation tests to cyanide leaching. Gold and silver extractions from the tails were greater than 90 per cent for gold and 64 per cent to 71 per cent for silver after 96 hours of leaching. The combined flotation with cyanide leaching tests resulted in an overall gold extraction of 97 per cent for gold and 97 per cent for silver.

Qualified person

The inferred resource estimate was calculated by Independent Mining Consultants under the supervision of John Marek, PE. Sample quality assurance and database management was supervised by Dr. Chris Osterman, PhD, registered geoscientist in Arizona. Dr. Lawrence Dick, PhD, PGeo, president of Continuum, is responsible for the accuracy of this news release. Geochemical samples were prepared by ALS Chemex in Guadalajuara, Mexico. Geochemical analyses were carried out by ALS Chemex of North Vancouver, B.C.

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