Volcanic Gold Mines Signs Option Agreement to Acquire Second Gold Property in Guinea

VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 18, 2017) - Volcanic Gold Mines Inc. ("Volcanic") (TSX VENTURE:VG) is pleased to report that it has entered into a binding letter agreement (the "Agreement") to acquire 80% of West African Mining Associates SARL ("WAMA"), a private Guinean company. The assets of WAMA comprise two exploration permits and three mining permits (the "WAMA Project"), which together adjoin the entire length of the southern boundary of, and lie within the same mineralized trends as Volcanic's existing Mandiana Project ("Mandiana"). This acquisition will expand Volcanic's holding in the Mandiana district to almost 500 square kilometers.

The WAMA Project

One of the most notable mineralized occurrences within the WAMA Project is the Farabakoura Prospect. During 2014 and 2015 WAMA drilled 89 inclined RC holes beneath lateritic artisanal workings at Farabakoura, results of which include:

The reader is advised that the above results are historic in nature and are yet to be verified by Volcanic.

As seen at Mandiana, artisanal workings at Farabakoura follow a semi-continuous north-south trend for approximately two kilometers, only a minor portion of which has been drill-tested. This trend is consistent with the orientation of dominant north-south mineralized structures seen elsewhere in the Siguiri Basin; east-west displacements to this structure appear to give rise to higher grade zones of auriferous quartz-vein stockworks.

QA/QC

Drilling was performed using a track-mounted UDR650 RC rig. Samples were then sent to ALS Minerals laboratory in Bamako, Mali where they were analyzed by 50 gram fire assay with an AAS finish. RC drill chips are preserved in chip trays, which have been inspected; quartz vein material similar to that observed in the overlying artisanal workings coincides with elevated gold values. Coarse, visible gold was observed in quartz veins from several holes. PVC drill collars are cemented and clearly labelled by WAMA, and are still in good condition. Based on verification of selected collars and their orientations against WAMA's drilling database, no discrepancies were observed.

The Agreement

Volcanic has the right to acquire 100% of the issued shares of a British Virgin Islands corporation ("BVI"), which will hold 80% of the issued shares of WAMA, on the following terms:

1. over a period of 34 months, Volcanic must issue in stages a total of 12 million shares pro-rata to the shareholders of BVI, and incur exploration expenditures on the WAMA Project in stages totalling at least CDN$11.5 million. Of these expenditures, Volcanic must spend during an initial 120 day period ("Initial Phase") a minimum of CDN$500,000 on evaluation exploration work, including drill-testing, after which Volcanic will decide if it wishes to continue making the prescribed share issuances and exploration expenditures to complete the acquisition of BVI and the WAMA Project.
2. Volcanic will assume, subject to certain conditions, US$9.1 million of debt (the "Debt") currently owing by WAMA to its principal shareholder (the "Debt Holder"). The Debt will become payable by Volcanic only upon the definition by Volcanic of a minimum Mineral Resource prepared in a manner consistent with current definitions and requirements as set out by CIM and Canadian National Instrument 43-101 ("Minimum Resource") of 1.5 million ounces of gold at a minimum grade of 2.0 g/t gold on the WAMA Project. The Debt would be repaid partly in cash and partly in Volcanic shares. Volcanic will initially make a secured cash loan of US$500,000 to the Debt Holder, toward payment of the Debt, but this loan will be reimbursed should Volcanic not opt to proceed beyond the Initial Phase.
3. Volcanic will issue warrants (the "Warrants") entitling the Debt Holder to purchase up to 6.0 million shares of Volcanic exercisable for a period of five years at a price of CDN$1.00 per share, to be exercisable (i) as to 50% at such time as Volcanic has completed its acquisition of 100% of BVI and has established the Minimum Resource, and (ii) as to 100% at such time as Volcanic has completed its acquisition of BVI and has established a Mineral Resource prepared in a manner consistent with current definitions and requirements as set out by CIM and Canadian National Instrument 43-101of at least 2.0 million ounces of gold at a minimum grade of 2.0 g/t gold.

The Agreement is subject to approval by the TSX Venture Exchange.

About Volcanic

Volcanic brings together a deeply experienced and successful mining, exploration and capital markets team focused on building a multi-million ounce gold resource in the underexplored West African country of Guinea and its neighbouring countries. Through the strategic acquisition of mineral properties with demonstrated potential for hosting gold resources, and by undertaking effective exploration and drill programs, Volcanic looks to become a leading junior gold resource company.

Qualified Person

Mr. Simon Meadows-Smith is a Qualified Person as defined by "National Instrument 43-101 - Standards of Disclosure for Mineral Projects" and has approved the disclosure of the scientific and technical information contained in this news release. Mr. Meadows-Smith holds a BSc degree in geology from Nottingham University, England, and has been involved in mineral exploration since 1988, including 20 years of experience working in West Africa. He is a Fellow in good standing of the Institute of Materials, Minerals & Mining in London.