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SOURCE: Colorado Goldfields Inc.

Mar 13, 2008 08:00 ET Colorado Goldfields Inc. Announces Letter of Intent to Acquire 75% Interest in Producing Mexican Silver Company

LAKEWOOD, CO--(Marketwire - March 13, 2008) - Colorado Goldfields Inc. (OTCBB: CGFI) (the "Company" today announced the signing of a Letter of Intent to acquire 75% of the shares of Besmer, S.A. de C.V. ("Besmer", of Durango, Mexico, from existing shareholders.

Besmer is currently operating the El Barreno, Remedios, and La Zacatecana mines in the states of Zacatecas and Durango, Mexico, and also operates the Bocas Hacienda flotation mill near Suchil, Mexico.

The El Barreno Mine is located in close proximity to Pan American Silver Corp.'s El Conjuro silver property in the Chalchihuites mining district in Zacatecas State. The Chalchihuites mining district has a very long history of high grade silver production dating from the Spanish conquest to the present time. The El Barreno property has multiple silver-lead veins and mantos. Colorado Goldfields intends to examine options to increase production at El Barreno as part of its due diligence.

The Remedios Mine is also located in the Chalchihuites mining district in Zacatecas State. The Remedios Mine has two known lead-silver bearing mantos, with reported ore grades up to 30% lead and varying silver content. Multiple silver-bearing veins are located on the property. Colorado Goldfields intends to examine locations for a potential new production portal as part of its due diligence.

The La Zacatecana Mine property is located at La Parilla, Durango State. The La Zacatecana property is adjacent to First Majestic Silver Corp.'s La Parilla property, which is reported to mine and mill approximately 800 tons per day. The mineralization at La Zacatecana is silver and base metal in vein.

Besmer's mill at Bocas Hacienda processes silver-bearing ores through differential flotation. The mill currently ships its concentrates to the Penoles smelters located at Torreon, Mexico. This mill is currently processing ore from Besmer's three mines and accepts ore from small local miners. Colorado Goldfields intends to examine the feasibility of expanding the mill's capacity to 500 metric ton per day capacity. The mill has associated laboratory, administrative and shop buildings.

The Letter of Intent contemplates a purchase price of $3 million, with $750,000 payable at closing and the balance of $2,250,000 payable over a four year period with 6% interest on the unpaid balance, in exchange for 75% of the shares of Besmer. In addition, if the acquisition is made, Colorado Goldfields will agree to provide up to $5 million to expand production at the mines and mill; on a loan basis to Besmer. A 2% Net Smelter Royalty to Besmer´s current shareholders on the existing Besmer owned concessions can be extinguished within a four year period for a payment of $350,000. Colorado Goldfields has also agreed to pay a business brokerage fee to two individuals who introduced the Besmer prospect to the company.

The Letter of Intent calls for a 60-day due diligence and exclusivity period and Goldfields personnel are currently conducting a geological and technical evaluation of the Besmer properties to ensure due diligence requirements are fulfilled. Under the terms of the agreement, either party may withdraw from the Letter of Intent during the 60-day due diligence period. In addition, the Letter of Intent will automatically terminate if definitive agreements are not entered into by May 25, 2008. However, in connection with the execution of the Letter of Intent, Colorado Goldfields paid the sellers a $50,000 earnest money deposit, and such deposit is non-refundable unless material discrepancies are discovered with respect to Besmer's financial, legal, property ownership or environmental matters or operating conditions. Colorado Goldfields intends to raise capital within the next few months to complete this potential acquisition, although no assurance can be made that Colorado Goldfields will be successful in raising the required funds.

Todd Hennis, President of Colorado Goldfields Inc., states, "The potential Besmer acquisition gives us the opportunity for immediate production with a profitable company, at a time of record precious and other metal prices. It gives us the further opportunity to greatly expand existing production as we simultaneously prepare for potential gold production at the Silverton, Colorado, properties which we have under option. We view the potential operations in Mexico as strongly complementary to our efforts in Colorado and consistent with our core strengths. We believe the economics of silver production in Mexico are compelling, and the Chalchihuites mining district has all the characteristics we are looking for."

Mr. Hennis went on to say, "We are extremely positive about these opportunities and for the continuation of our work on the Silverton properties. It's a very exciting time for Colorado Goldfields Inc. and we look forward to continued progress and building value for our shareholders."

 

On Behalf of the Board,
Colorado Goldfields Inc.
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Todd C. Hennis, President