Press Release Source: Zaruma Resources Inc.
Zaruma Resources: Establishes Financing of Luz del Cobre Copper Project and Exploration Financing at San Antonio (Sonora, Mexico)
Friday October 5, 9:24 am ET
TORONTO, Oct. 5 /CNW/ - Zaruma Resources Inc., (TSX-ZMR) is pleased to announce that it has established the senior secured debt financing of US$22 million for the development of the Luz del Cobre copper project at San Antonio, Sonora, Mexico. The funding will be from a subsidiary company in the Glencore International AG group of companies, ("Glencore"), and will be to Zaruma's wholly-owned subsidiary, Minerales Libertad, S.A. de C.V., ("ML"). ML expects to complete its first draw on the debt financing next week. As security for the financing, Zaruma has pledged its shares in ML until the loan is repaid, and has guaranteed the debt.
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Zaruma is committed to fund the remaining amount of the capital cost, which was estimated to be US$3 million in the November 2006 Technical Report, and any capital cost overruns.
Under the terms of the loan agreement, Glencore acquired the right to purchase all copper production from Luz del Cobre, based on London Metal Exchange market prices. Under certain circumstances the Company will be expected to enter into forward sales contracts for up to 80% of the projected production, until the 85% of the projected net cash flow from operations to be dedicated to debt repayment is projected to be sufficient to repay the borrowings. The cumulative repayments must not be less than US$4 million by July 31, 2009, US$11 million by January 31, 2010, US$18 million by July 31, 2010 and US$25 million by January 31, 2011.
The Technical Report on the project, in compliance with NI 43-101 standards, (news release November 10, 2006), estimated proven and probable reserves of 4.4 million tonnes of ore with an average grade of 1% Cu. Based on production of 15 million pounds of cathode copper per year, the pre-tax net operational cash flow was estimated to average US$19.4 million per year for at least five years, based on a copper price of US$2.23 per pound.
The Company also announced the signing of a financing agreement with Glencore for the exploration and development of the Trion area, a mineralized target zone 1,000 metres to the west of Luz del Cobre. Up to US$1.5 million may be spent on this programme, to be repaid out of the proceeds of copper sales. By providing the financing, Glencore will acquire the right to purchase any copper produced from this area on the same terms as for Luz del Cobre. Drilling commenced on October 1, 2007, with the first phase expected to take four months and to include 3,300 metres of drilling.
A joint venture agreement was also signed whereby Glencore will finance an exploration programme in a project area of approximately 1,000 hectares known as Sapo and Carrizo, located some 8 km to the southwest of Luz del Cobre along the western portion of ML's 11,546 hectares of mining titles. Ore grade copper intercepts in trenches and isolated drill holes indicate the potential for hosting significant leachable copper mineralization in the Sapo area. The adjacent Carrizo area lies on the favourable district trend, with Luz del Cobre to the northeast, and Sapo to the southwest. The programme will be done in phases, with Glencore having the right to earn a 51% interest in the project area by funding US$2.25 million on exploration and making a payment of US$2 million to ML. Should the project go into production, Glencore has the right to purchase the copper on an industry standard basis.
Engineering work has progressed in the last two months, with the current estimate to first production from Luz del Cobre being 14 months.
Zaruma Resources Inc. is listed on The Toronto and Frankfurt Stock Exchanges, (symbol: ZMR). Common shares outstanding: 109,506,393.
This News Release contains forward-looking statements which are typically preceded by, followed by or including the words "believes", "expects", "anticipates", "estimates", "intends", "plans" or similar expressions. Forward-looking statements are not guarantees of future performance as they involve risks, uncertainties and assumptions, including, but not limited to securing additional funding to continue its development programmes.
For further information
Zaruma Resources Inc., 20 Toronto Street, 12th Floor, Toronto ON, M5C 2B8, Canada, Fax: (416) 367-3638, info@zaruma.com, www.zaruma.com
Dr. Thomas Utter, President and CEO, Tel.: 52 1 6622220063, 52 1 6622105650, thomas.utter@zaruma.com
Frank van de Water, CFO and Secretary, Tel.: (416) 869-0772, fvandewater@on.aibn.com
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Source: Zaruma Resources Inc.
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