SIERRA MADRE AND PARTNER RIVERSIDE RESOURCES PROVIDE UPDATE ON DEVELOPMENTS AT THE PEÑOLES PROJECT IN DURANGO, MEXICO

September 06, 2012, Vancouver, BC – Sierra Madre Developments Inc. (“Sierra Madre”) (TSX-V: SMG) or the (“Company”) and Riverside Resources Inc. (“Riverside”) (TSX-V: RRI) provide an update to shareholders regarding the Penoles property in Durango State, Mexico, and the Option Agreement with Riverside Resources Inc.

 

The Penoles project hosts a partially defined oxide gold prospect (referred to as El Capitan), two historic silver mines that have never been systematically drill tested (Jesus Maria and San Rafael) and multiple early stage targets within a district scale land package (35,000 ha.) that covers more than half of the historic Penoles Mining District.  Sierra Madre has the option to earn up to a 65% interest in the Penoles project by making payments to Riverside and the underlying owners, incurring staged exploration expenditures and issuing shares in stages to Riverside.

To date the Company has focused exploration efforts primarily on the oxide gold prospect referred to as El Capitan.  Results of the 2011 and 2012 drilling programs were encouraging in that the grade and thickness of mineralization encountered in the “Main Zone” showed considerable improvement over preliminary drilling results reported by Riverside in 2008.  Drilling in 2011 (18 holes) indicated potentially economic grade mineralization over significant widths (30 to 110 meters) and good continuity of the mineralized zone over a strike length of approximately 700 meters.  Drilling so far in 2012 (13 holes reported) has traced mineralization 250 meters down dip from surface and has identified a previously unrecognized “upper mineralized zone” in the rocks overlying the Main Zone (please refer to the Company’s press releases dated June 03, June 27 and July 12, 2012).  The eastern part of the Main Zone has returned the widest mineralized intervals encountered so far at El Capitan and mineralization appears to be open for expansion down dip of CDDH 12-13 and CDDH 12-11.  CDDH 12-13 is a vertical hole drilled from a station approximately 50 meters east of CDDH 11-07 and intersected mineralization from surface to a depth of 131.15 meters.  The entire hole returned an average grade of 0.555 g/t gold (including a 61.15 meter section that averaged 0.919 g/t gold) and was stopped in mineralization. (please refer to the Company’s press release dated July 19, 2012).

During 2011, the Company submitted a suite of twenty five, four meter composite core samples, from three widely spaced historic drill holes (CDDH 08-01, CDDH 08-02 and CDDH 08-03) to Inspectorate Exploration and Mining Services of Richmond BC (“Inspectorate”) to complete preliminary bottle roll testwork to evaluate the potential for the mineralization at El Capitan to be  amenable to cyanide leaching.  According to Inspectorate, 96 hour bottle roll leach tests were completed on each of the composite samples.  Gold leach recoveries after 96 hours were estimated at 60%, with recoveries of 70% to 80% on some of the higher grade samples.  Gold extraction kinetics for ½” crush size (test C2) indicated that with longer leaching time, gold extraction may improve.  Inspectorate recommended that the Company complete additional test work to determine optimal leaching procedures.

 

In June 2012 the Company retained Beacon Hill Consultants (1988) Ltd. “Beacon Hill” to advise the Company regarding project development.  Beacon Hill retained Frank Wright, a certified metallurgist, to assist with design and supervision of the metallurgical test work.

 

As announced June 03, 2012 three distinct, mineralized rock units have now been defined at El Capitan. The upper part of the mineralized zone consists of a porous, volcanic agglomerate and a tuffaceous unit cut by narrow quartz veinlets and hydrothermal breccias (averaging 0.2-0.5 g/t Au). At the base of the volcanic unit there is a shallow dipping, 10.0 to 35.0 meter wide silicified zone (also referred to as the El Capitan Vein) (averaging 0.7 to 1.5 g/t gold) and below this zone there is a sequence of oxidized shales and sandstones that is also cut by quartz veinlets and hydrothermal breccias (averaging 0.2-0.6 g/t Au).

 

As announced June 27, 2012 the Company submitted approximately 1,200 kilograms of drill core from the 2011 drill program to Inspectorate to complete systematic column leach testing.  The Company has received a preliminary report from Beacon Hill documenting results of additional bottle roll tests which were specifically designed to assess the leaching characteristics (at various crush sizes and grades) of the three distinct mineralized rock units present at El Capitan.

 

According to the preliminary report from Beacon Hill grinding to simulate a tank leach scenario significantly improves gold recovery as compared to crushed samples.  Even at lower grades and with coarse grinds (80% particle size passing (P80) >125 microns) the soluble gold recovery is generally greater than 90%.  Depending on the domain and head grade recoveries can approach 99% indicating an excellent response for higher grade ore that is more finely ground.

 

Crushing (compared to grinding) results in a significant drop in bottle roll recovery despite using longer bottle roll retention times.  The volcanics showed the best bottle roll leach response with gold recoveries of 25% to 65%, generally increasing with higher head grades and finer crush sizes. The response of sediments are much more variable but can approach 50% extraction. The material that was classified as the silicified zone (El Capitan Vein) has the poorest response with negligible soluble gold evident in some testing.

 

The preliminary column leach testing program at Inspectorate has now been completed. Final assay results from 11 column leach tests representing the three mineralized rock units at various crush sizes (1”, 5/8” and ½”) and grades will be reported as soon as they are available.

 

In regards to the historic silver mines no additional exploration work has been undertaken in 2012 however, initial trenching and results of a single drill hole completed during 2011 at one of the historic silver mines (Jesus Maria) were encouraging and confirmed that the mineralized zone ranges from 7.5 to 22.0 meters in thickness and is open at depth below the historic mine workings.  The Company’s press release dated November 16, 2011 summarizes results of the exploration work completed in 2011.

 

The scientific and technical data contained in this news release pertaining to the Peñoles Project was prepared under the supervision of Carl von Einsiedel, PGeo., a qualified person for Sierra Madre and reviewed by David S. Smith, MS, MBA, CPG, a qualified person to Riverside Resources, who are responsible for ensuring that the geologic information provided in this news release is accurate and complies with National Instrument 43-101 Standards of Disclosure for Mineral Projects.

 

In order to vest a 51% interest in the Penoles Property the Company must make a cash payment of $250,000US to Riverside on September 30, 2012, a cash payment of $1,650,000US to Riverside on or before December 30, 2012, complete approximately 1,000 meters of additional drill testing before May 30, 2013  and make a $1,500,000 payment on or before May 30, 2013 (provided that the trading price of the Company’s shares is $0.15 or greater the Company may issue shares for the full amount of the payment).

 

Presently the Company does not have the financial resources to make the $250,000 US payment due under its option agreement with Riverside on September 30, 2012.  Management is currently reviewing the Company’s options with respect to the Penoles Project.  Unless the Company arranges financing for the required payments the Company may lose all of its interest in the Penoles property.

 

Regarding the Temporary Cease Trade Order resulting from the Company’s failure to file its annual financial statements, corresponding MDA and certifications for the year ended March 31, 2012 (please refer to the Company’s press release dated August 13, 2012) management is continuing to work diligently with the Company’s auditors and expects to file the required documentation soon.

 

 

 

ON BEHALF OF THE BOARD

 

“Carl von Einsiedel”

 

CEO and Director

 

 

For additional information contact: 604-685-3357

 

Certain statements in this press release may be considered forward-looking information. These statements can be identified by the use of forward looking terminology (e.g., “expect”,” estimates”, “intends”, “anticipates”, “believes”, “plans”). Such information involves known and unknown risks — including the availability of funds, the results of financing and exploration activities, the interpretation of exploration results and other geological data, or unanticipated costs and expenses and other risks identified by Sierra Madre in its public securities filings that may cause actual events to differ materially from current expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.

 

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.