Last checked at 20 Sep 2010 07:00
Hochschild Mining and Minera Andes agree on settlement of lawsuit
·; Minera Andes signed formal loan agreement regarding $65 million project financing loan
·; Settlement signed with immediate discontinuation of pending litigation
Hochschild Mining plc ("Hochschild") today announces that it has signed an agreement with Minera Andes Inc ("MAI") and its subsidiary, Minera Andes SA ("MASA") regarding the $65 million project financing loan provided by Hochschild to the San José gold and silver mine in Argentina. The parties have also agreed to restructure the 2004 shareholder loan agreement pursuant to which Hochschild and MAI lent approximately $50 million to the co-venture entity, known as Minera Santa Cruz ("MSC").
Subject to final closing, which is expected to occur this week, the parties have agreed to a repayment schedule for the project finance loan and the shareholder loan over a maximum period of 8 years, with fixed interest rates of 7% per annum. Future payments on both the shareholder loan and project finance loan may be accelerated based on mine performance and metal prices thus maximizing cash flows for both MAI and Hochschild.
Hochschild has agreed to provide Minera Andes with the right to consent to certain extraordinary capital expenditures (not including regular sustaining CAPEX) in certain limited circumstances.
The San Jose mine, a co-venture between Hochschild and MAI, has been in operation since June 2007. Under the terms of letter agreements between the parties executed in October 2006, Hochschild alone provided the full amount of the project financing, totalling $65 million in instalments between October 2006 and July 2007. On 17 March 2010 Hochschild filed a lawsuit against Minera Andes alleging the undue delay in the execution of formal loan documents and repayment of the loan by MSC. Under the terms of the settlement, Hochschild will discontinue the litigation filed in the New York State Supreme Court.
The lawsuit had no impact on the running of the San José mine, which is operated by Hochschild. The mine has a throughput capacity of 530ktpa and in the first half of 2010, produced approximately 2 million ounces of silver and 36 thousand ounces of gold.
Ignacio Bustamante, CEO of Hochschild Mining said: "We are very pleased with the outcome of the negotiations and the ending of litigation. The properties and operation of MSC are located in a premium geological location in Argentina, neighbouring the Cerro Negro project which was recently sold by Andean to Goldcorp for US$3.6 billion. We are confident that Hochschild and Minera Andes will now be able to focus their full efforts towards building a meaningful and constructive partnership to create further value for their respective shareholders through production at San Jose and further exploration in this very prospective area."
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Enquiries:
Hochschild Mining plc
Isabel Lütgendorf +44 (0)20 7907 2934
Head of Investor Relations
Finsbury
Faeth Birch +44 (0)20 7251 3801
Public Relations
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About Hochschild Mining plc:
Hochschild Mining plc is a leading precious metals company listed on the London Stock Exchange (HOCM.L / HOC LN) with a primary focus on the exploration, mining, processing and sale of silver and gold. Hochschild has over forty years' experience in the mining of precious metal epithermal vein deposits and currently operates four underground epithermal vein mines, three located in southern Peru, one in southern Argentina and one open pit mine in northern Mexico. Hochschild also has numerous long-term prospects throughout the Americas.
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