Canabrava Diamond: Agreement Signed with Trans Hex International Ltd. - Alluvial Diamond Properties, Brazil

Business Wire,  Jan 16, 1998  

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VANCOUVER, BRITISH COLUMBIA--(BUSINESS WIRE)--Jan. 16, 1998-- Canabrava Diamond (VSE:CNB.) Canabrava Diamond Corporation (CNB-V) is pleased to announce that a Letter of Intent has been signed with Trans Hex International Ltd. (THI-T) to evaluate and develop the alluvial diamond resources currently held by the Canabrava/Teck Joint Venture in Brazil.

Trans Hex International Ltd. is an international diamond exploration, development and mining company with interests in exploration projects and joint ventures in Angola, Namibia, Brazil, Indonesia, Central African Republic and Zimbabwe. The Company is a subsidiary of the Trans Hex Group Limited which is the second largest diamond producer in South Africa. Trans Hex has a well established reputation as a world leader in alluvial diamond mining.

The alluvial properties are located approximately 400 kilometers southeast of Brasilia in the State of Minas Gerais, and include 779 concessions covering a total of 730,857 hectares. Teck Corporation is funding 100 percent of the costs of exploring the properties for primary diamond deposits (kimberlites and lamproites) on behalf of the Canabrava/Teck Joint Venture.

Subject to a preliminary field visit and the successful completion of a due diligence study before March 31, 1998, Trans Hex will design, implement and fund certain of the costs of an exploration program aimed at evaluating the highest potential alluvial deposits on the properties. The Letter of Intent provides for an option for Trans Hex to earn a 50 percent interest in the alluvial diamond resources by funding such exploration, feasibility studies and development work. Definitive terms will be subject to completion of the due diligence by March 31, 1998. Trans Hex will have the right to market the diamond production on behalf of the alluvial Joint Venture.

The Rio do Sono, Abaete and Sao Bento are three rivers that offer the best alluvial potential on the Properties. Diamonds of high quality have been recovered from these rivers for over 200 years by local miners and a few still work the alluvials today. However, large diamond bearing terraces and old river channels have been inaccessible to local miners due to a lack of any mechanized equipment.

Of the 50 large diamonds (greater than 100 carats) recovered from recent alluvial deposits in Western Minas Gerais State, 13 came from the Abaete and Sao Bento rivers. The Princesa do Carmo do Paranaiba Diamond (165 carats) was recovered from the Sao Bento near its headwaters within Block L of the Canabrava Concessions. Both of these rivers have in excess of 30 kilometres of river channel located within the Canabrava Joint Venture Concessions.

On the Rio do Sono near Paredao do Minas, an abrupt change in the direction of flow has resulted in the development of a large area of diamondiferous gravel deposits. Terrace gravels range between 2 and 12 metres thick while older river channels can be much thicker. Field mapping indicates a resource potential in excess of 60 million cubic metres of gravel in this area. The excellent quality and high gem percentage of the Rio do Sono diamonds is well known from historical small scale mining, and this holds true for diamonds being recovered at present. Average historical grades have been 0.15 to 0.20 carats per cubic metre, with localised higher-grade zones up to 3 carats per cubic metre. The average stone size is between 0.2 and 0.4 carats, with the largest reported stone being an 18 carat high quality gem. No large scale mining nor modern exploration has been conducted on any of these properties.

Canabrava Diamond Corporation is actively exploring for primary diamond deposits in Brazil and Canada and looking at other opportunities worldwide. The Company is 52 percent owned by Southwestern Gold Corporation (SWG-T).

Rory O. Moore, President & C.E.O.

Canabrava Diamond Corporation -0-

The Vancouver Stock Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

CONTACT: Canabrava Diamond Corporation

George H. Plewes, 604/ 669-2525

604/ 688-5175 (FAX)

http://www.swgold.com

or

Canabrava Diamond Corporation

Rory O. Moore, 604/ 669-2525

604/ 688-5175 (FAX)

http://www.swgold.com

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