New Guinea completes corporate restructuring

2009-10-07 10:20 ET - News Release

Mr. Bob McNeil reports

NEW GUINEA GOLD STRATEGY AND OPERATIONS UPDATE

New Guinea Gold Corp. has provided an update for investors.

Corporate strategy

As part of its business and development strategy, in 2008 NGG announced a corporate restructuring designed to spread development risk, while retaining project upside. NGG has now successfully executed this restructuring, and is moving to a new, more focused development strategy.

"From early in 2010, we expect our partners will resume an aggressive exploration program on projects in which we hold an interest," said chairman and chief executive officer Bob McNeil. "NGG's plan is to focus on expanding resources at Sinivit and Weioko, and improvement in processing and mining operations at Sinivit. At the same time, investors will benefit from rapid development progress and any new discoveries made with our partners at Imwauna, Pacific Kanon and Coppermoly."

Results to date:

• In early 2008, the first part of the restructure was completed with the successful listing of Coppermoly on the Australian Securities Exchange. Coppermoly has just raised $2.2-million (Australian) to continue its exploration/development activities;

• In August, 2009, NGG signed a letter of intent with Vangold Resources Ltd. regarding the sale to Vangold of its shares in Pacific Kanon Gold (three projects), and its equity in Mt. Penck and Feni properties. The purchase price agreed to in the LOI is for $3-million plus a 5-per-cent carried interest in the PKG properties, and a 10-per-cent carried interest in the Feni property. The company has received $500,000 in cash, and will ultimately have a 19.9-per-cent interest in Vangold after its announced reconstruction;

• In September, 2009, NGG entered into an option agreement with a private company which provides the private company the right to acquire a 50-per-cent legal and beneficial interest in the Normanby's (EL 1091) Imwauna property for a series of cash payments totalling $1-million, plus the purchase by way of private placement of $1-million worth of New Guinea Gold common shares. In addition, the private company must complete exploration expenditures totalling a minimum of $5-million over two years.

"These transactions are designed to significantly increase the rate of exploration and development on a group of high potential properties, while retaining upside potential and providing cash or securities convertible to cash to NGG for use in its existing key projects," said Mr. McNeil.

"In the Vangold transaction, NGG has secured $500,000 cash, the company has no additional exploration and development funding for the PKG and Feni properties, and NGG retains significant upside through an effective 25-per-cent interest (includes equity in Vangold), in the PKG properties, and a 30-per-cent interest in the Feni property.

"The Imwauna option transaction provides for the expeditious development of this important high-grade gold property, without further immediate spending by NGG, while also providing NGG with significant upside through a retained 50-per-cent interest in the property."

Financial condition

As at Sept. 30, 2009, New Guinea Gold had cash of $1,023,000 (Australian). This figure does not include the result of sale of gold from September production.

In addition, the Bank of South Pacific has agreed to postpone further loan repayments until Feb. 28, 2010. The amount owing to the Bank of South Pacific is approximately $800,000.

Sinivit operations

Production in the third quarter is not yet finalized -- although September production has been delivered to the buyer/refiner, the company has not yet received the figure for contained gold. The company will not receive the final gold number until after Oct. 20, as assays will not be completed until that date. Duplicate samples have been forwarded to ALS-Chemex in Townsville Australia, but these assays will also take several weeks to complete.

Management anticipates improved production in the fourth quarter, as additional mining equipment arrives on site in mid-October. These comprise two CAT 730 six-by-six articulated dump trucks; one Hitachi two-by-450-horsepower 45-tonne excavator and one CAT D5G dulldozer. This equipment will allow better flexibility in wet weather, and bring the equipment on site back to the status prior to the dispute with former contractor, HBS Machinery.

The total purchase price for this equipment is $860,000 (Australian). A deposit of $200,000 (Australian) has been paid, and until the sale is finalized, NGG will rent the equipment. The company intends to seek leasing finance to cover the cost of this equipment at a later date.

This equipment will supplement the leased equipment on site which includes several 30-tonne and 20-tonne excavators, and up to four conventional road trucks.

Ore from the high-grade discovery announced Sept. 14, 2009, outside the Northern oxide zone is presently being mined and will be processed in October/November. The company has also initiated a study designed to determine the feasibility of installing a CIL or CIP process plant to enhance recovery.

The information in this release was prepared under the direction of Mr. McNeil, a fellow of the Australia Institute of Mines and Metallurgy and a qualified person as defined by National Instrument 43-101. Mr. McNeil has read and approves the information contained herein.

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