Merging PNG and Sardinian gold

Buffalo Gold and Sargold Resource have signed a letter of intent (LOI) to enter into a friendly merger. Under the LOI, all outstanding securities of Sargold will be exchanged for common shares and common share purchase warrants and options of Buffalo.

Buffalo is aggressively exploring at the Mt. Kare project in Papua New Guinea where it has defined a NI43-101 compliant indicated resource of 1.4 Moz of gold at a 1.0 g/t Au equivalent cut-off. Buffalo also has a portfolio of gold exploration projects in producing and past-producing regions of Australia. Recently, Buffalo acquired a 25% interest in near-term gold producer Kinbauri Gold and vended the company’s Australian uranium properties into Australian uranium explorer Bondi Mining for a 44% interest in that company.

Sargold controls the largest precious metals exploration land area in Sardinia, Italy. The company now holds a 90% interest in the assets, which range from the mine and full processing plant at Furtei, to a host of exploration prospects at Monte Ollasteddu and the advanced exploration properties at Osilo. Sardinia has a long history of mining including the production of tin, alumina, industrial minerals, coal, base and precious metals. The island lies some 150 km west of Rome and has excellent transport, communication, business and political infrastructure.

The Furtei mine includes a number of potential open pit and underground mines, a processing plant (1,000 t/d) which was constructed at a cost of €15 million, multiple exploration targets and a fully permitted mining concession including future tailings disposal. The Furtei processing plant was built in 1995-1996, and has a maximum annual capacity of 400,000 t of ore. The Furtei mine produced 135,000 oz of gold between 1996 and 2002 from oxide resource, after which the processing plant was converted from an oxide heap leach to a sulphide flotation plant.

Sargold successfully re-commissioned the Furtei plant for a marginal cost in the fourth quarter of 2006. Sargold poured its first gold bar at Furtei in March 2007 to launch a near-term production plan based on processing the upgraded ore from the residual heap leach pad at the site. While the current production is relatively small-scale, based on metallurgical testwork, internal studies and results to date Sargold is now targeting to commence annual production of 15,000 – 20,000 oz of gold from the Sa Perrima gold zone within the next six months. The Company then plans to ramp up production by producing from the Su Coru underground zone, which is a gold-copper hosted mineralization, to produce between 60,000 and 70,000 oz of gold equivalent in its second year, before levelling off to some 50,000 oz/y of gold equivalent for a minimum of five years.

In addition to the known mineralized zones at Furtei, Sargold has defined a series of high priority gold exploration targets within the mine area, as well as at the Monte Ollasteddu and Osilo properties.

Since its re-activation in late 2005, Buffalo has been pursuing an aggressive strategy of building value through the acquisition of properties and companies with significant growth potential, with a focus on assets that will provide gold production. This strategy has resulted in its current 60% interest in Mt. Kare and a 25% interest in near-term gold producer Kinbauri Gold. The acquisition of Sargold represents the next step in the continuing growth of the company, moving Buffalo from pure explorer to gold producer. “We are pleased with this development in the evolution of Buffalo,” remarked Chairman and CEO Damien Reynolds. “Sargold’s assets add nicely to our stable of gold projects and allow us to move quickly to a production stage, greatly enhancing our overall value.”