Last checked at 5 Oct 2009 14:40
October 5, 2009
SYMBOLS: UME (TSXV), FVX (TSXV), UGY (AIM),
Proposed Business Combination of Uruguay Mineral Exploration with
Fortune Valley
UME has a production profile of at least 190,000 ounces of gold over the next four years in Uruguay with the potential to significantly improve this production profile and reduce cash costs with the development of the Arenal Deeps underground deposit. Fortune Valley Resources Inc. ("Fortune Valley" a Canadian company listed on Toronto's TSX Venture Exchange) has optioned the Pantanillo property in the Maricunga Belt in Chile from a subsidiary of Anglo American Plc. Historical drilling has identified a significant potential mineral deposit on this property. The proposed transaction would move the combined group towards both companies' strategic objective of creating a more significant Latin American focused gold producer The combined group would have no debt and no hedging, with approximately $US 8 million of cash. While all immediate financing needs of the group could be funded from existing operations, consideration will be given to raising additional equity in due course to accelerate exploration and development on the Fortune Valley properties and UME's Arenal Deeps underground development.Uruguay Mineral Exploration Inc. ("UME" a Canadian company listed on Toronto's TSX Venture Exchange and London's AIM) is pleased to announce that it has entered into a letter of intent with Fortune Valley pursuant to which UME proposes to acquire all of the issued and outstanding common shares of Fortune Valley. The acquisition would be satisfied through the issue of common shares in UME at a proposed exchange ratio of 0.456 UME share for every one Fortune Valley share, representing a purchase price of approximately $C 0.23 per Fortune Valley share valuing Fortune Valley at approximately $C 8.2 million ("the Transaction").
In addition UME has provided interim financing in the form of a convertible debenture of $C 250,000 to Fortune Valley to allow it to complete the acquisition of the option on the Pantanillo property and the completion of the proposed business combination. UME has been advised that the Fortune Valley Board of Directors unanimously supports the proposed Transaction and the letter of intent contemplates that certain directors of Fortune Valley holding approximately 30% of the common shares of Fortune Valley will enter into support agreements under which they will vote in favour of the transaction.
David Fowler, Chief Executive Office of UME stated, "This proposed combination of UME and Fortune Valley would move UME towards its strategic objective of developing a more significant Latin American focused gold production profile. We are pleased that this proposed acquisition would improve our growth profile in an established mining country such as Chile with two quality projects, Pantanillo and Anillo in significant mining districts. The expanded group would be renamed to reflect its expended focus on gold in Latin America and would have the exploration and development resources to pursue further growth"
Michael Gingles, Chief Executive Officer of Fortune Valley commented: "This exciting proposed business combination would provide our shareholders with the opportunity to participate in an investment vehicle with strong cash flow and the resources to grow the Chilean portfolio. The UME team has a proven track record and excellent capabilities to develop these important projects. Further, we have a shared commitment to support continued growth in the Chilean gold industry".
The proposed business combination would result in
Gold production profile of at least 190,000 ounces over the four years to May 31, 2013 from open pit operations at the San Gregorio mine in Uruguay with the potential to significantly improve this production profile and reduce cash costs with the development of the Arenal Deeps underground deposit. A development project at Pantanillo in the Maricunga Belt in Chile. As reported by Fortune Valley in their press release dated October 5, 2009 historical geological work on the Pantanillo property by Anglo American (1992-2005) and Kinross Gold (2005-2008) has defined a potential mineral deposit estimated to be in the range of 82 to 125 million tonnes grading 0.83 to 0.73 g/t gold, using a 0.6 to 0.5 g/t gold cut-off for the lower and higher tonnage estimates respectively, which is equivalent to 2.18 to 2.95 million ounces of contained gold. This preliminary assessment was made by Kinross Gold in 2007 and was estimated based on a total of 8,398 meters of reverse circulation drilling and diamond drilling. The potential quantity and grade of the potential mineral deposit is conceptual in nature as there has been insufficient exploration to define a mineral resource in accordance with disclosure guidelines in National Instrument 43-101 Standards of Disclosure for Mineral Projects and it is uncertain if further exploration will result in the target being delineated as a mineral resource. A planned exploration and development program targeting the definition of a NI43-101 compliant mineral resource would commence within 3 months with the objective of creating a second production asset for the group within 3 to 4 years. Further growth potential from the combined group's exploration portfolio in Chile and Uruguay including the Anillo project in Northern Chile which is along strike from the El Peñón mine operated by Yamana Gold Inc. A combined group with the financial and technical resources to develop its business and capitalise on other gold growth opportunities in Latin America. Cash on hand of approximately $US 8 million with no debt or hedging.Upon completion of the proposed Transaction UME would have approximately 64,889,424 million common shares issued and outstanding, with former Fortune Valley shareholders holding UME common shares representing approximately 25% of the issued and outstanding common shares of UME and Fortune Valley would be a wholly owned subsidiary of UME.
To reflect the expanded Latin American gold production and development focus of the combined group UME will put a resolution to its shareholders at its Annual General Meeting to be held on October 13, 2009 for approval to change its name to Orosur Mining Inc., or such other name as the Directors of UME decide.
While all immediate financing needs of the group could be funded from existing operations consideration would be given to raising additional equity in due course to accelerate exploration and development of the Fortune Valley properties and UME's Arenal Deeps underground development.
The Transaction
The proposed transaction is expected to be structured as a plan of arrangement between UME and Fortune Valley. Under the terms of the Transaction, it is proposed that Fortune Valley shareholders receive approximately 0.456 UME common shares for each common share of Fortune Valley held.
UME has advanced $C 250,000 to Fortune Valley in the form of a convertible debenture ("the Debenture") to allow it to complete the acquisition of the option on the Pantanillo property and the plan of arrangement. The Debenture is convertible into shares of Fortune Valley at a price of $C 0.06 per share.
The Transaction will be subject to the approval of the shareholders of Fortune Valley.
The letter of intent setting out the Transaction includes a commitment that Fortune Valley will not solicit alternative transactions to the proposed UME Transaction and a commitment, subject to due diligence by both parties, to sign a definitive agreement by October 13, 2009. The letter of intent also contemplates that certain directors of Fortune Valley will enter into support agreements where by they will vote in favour of the transaction. These Directors hold approximately 30% of the outstanding common shares of Fortune Valley.
The Transaction is subject to, amongst other things the completion of mutual due diligence, the parties entering into a definitive agreement by October 13, 2009, the receipt of regulatory and court approvals and obtaining shareholder approval to the Transaction by Fortune Valley shareholders.
Further terms of the proposed transaction, including Board representation and the timing of closing and shareholder meetings, will be provided once a definitive agreement is signed.
There can be no assurance that any definitive transaction agreement will be entered into, that any proposed transaction will be approved by shareholders or that any transaction will be completed as a result of the executive of the letter of intent.
ENDS
Qualified Persons Statements
The information presented in this press release on UME assets has been reviewed and verified for compliance with NI 43-101 by Mr George Schroer, Vice President Exploration and a Certified Professional Geologist (CPG 10891). Information on the potential mineral deposit quoted by Fortune Valley have not been reviewed sufficiently by Mr. Schroer to qualify as a mineral resource for UME and the information should not be treated as reliable until further qualifying work has been completed. Mr Schroer is the Qualified Person for the purposes of the AIM Guidance Note on Mining Companies dated March 2006. Mr Schroer has a Masters of Science in Geology from Colorado State University and is a member of SEG and AIPG. He has over 20 years of international experience in exploration.
Forward-Looking Information
Cautionary Note: This news release contains "forward looking information" within the meaning of the Canadian Securities legislation. Forward looking information, includes but is not limited to, information concerning the proposed business combination between UME and Fortune Valley and matters relating there to, raising additional equity, remaining production profile at San Gregorio, commencement of underground development on the Arenal Deeps, production rates and San Gregorio, 43-101 resource calculations at Pantanillo, and start date for production at Pantanillo. Generally forward looking information can be identified by the use of forward looking terminology such as "plans", "expects", "or does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "targets", "intends", "anticipates", "does not anticipate" or variations of such words or phrases or statements that certain actions, events and results "may", "could", "would", "might", "will be taken", "occur" or will be achieved. Forward looking information is based on the opinions of management at the dates that the information are made, and is based on a number of assumptions and is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward looking information. Assumptions upon which such forward-looking information is based include, without limitation, that the shareholders of Fortune Valley will approve the transaction, that all required third party regulatory and governmental approvals to the transaction will be obtained and all other conditions to completion of the transaction will be satisfied or waived. Many of these assumptions are based on factors and events that are not within the control of UME or Fortune Valley and there is no assurance they will prove to be correct. Factors that could cause actual results to vary materially from results anticipated by such forward-looking information include changes in market conditions, variations in ore grade or recovery rates, risks relating to international operations, fluctuating metal prices and currency exchange rates, changes in project parameters, the possibility of project cost overruns or unanticipated costs and expenses, labour disputes and other risks of the mining industry, failure of plant, equipment or processes to operate as anticipated, permitting and land access time lines, development plans being more time consuming or costly than expected as well as those risk factors discussed in the Management Discussion and Analysis for the year ended May 31 2009 for UME and 31 December 2008 for Fortune Valley available at www.sedar.com. Although UME and Fortune Valley have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information, there may be other factors that cause actions, events or results not to be anticipated, estimated or intended. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. UME and Fortune Valley undertake no obligation to update forward-looking information if circumstances or management's estimates or opinions should change except as required by applicable securities laws. The reader is cautioned not to place undue reliance on forward-looking information.
About UME
UME operates the San Gregorio gold mine in Uruguay which produced 70,000 ounces of gold in the year to May 31, 2009.
UME's medium term business plan in San Gregorio in Uruguay focuses on combining lower grade open pit resources with higher grade underground resources. Based on known resources UME is targeting a 5 plus year mine plan averaging 60,000 ounces per annum.
A prefeasibility study on the Arenal Deeps project was released on August 4, 2009. This study was based on NI43-101measured and indicated resources of 3,164,000 tonnes at 2.21 g/t Au for 224,000 ounces of gold at a 1.5 g/t Au cut off. Since the completion of this resource estimate an on-going infill drill program (refer press releases dated September 9, 2009, August 4, 2009 and July 8, 2009) has delivered better grades and thicknesses than reflected in the resource model and is expected to increase the grade of the resource. Definition drilling is expected to be completed by January 2010 with a revised resource estimate expected to be released in February 2010. Underground development is targeted to commence in mid 2010.
UME has been actively pursuing acquisition opportunities in Latin America with a view to acquiring assets with near term production and a minimum resource of 500,000 oz. To date a number of opportunities have been identified, including Fortune Valley, that UME expects will generate growth.
As at August 31 2009 UME had a cash of $US 8.1 million and net current assets of $US 19.2 m. UME has no debt and hedging.
Additional information about UME is available at www.uruguayminerals.com.uy
About Fortune Valley
Fortune Valley is a exploration company focused on creating shareholder wealth through the development of high quality gold assets in Chile and Argentina. Fortune Valley's principal properties are the Pantanillo project and the Anillo project. Fortune Valley shares are listed on the TSX Venture Exchange.
The Pantanillo property is located in the prolific Maricunga Gold Belt in Region III of Chile, which currently has two operating gold mines, La Coipa and Maricunga, and several major gold projects in development stage, including Lobo-Marte, Pantanillo, Cerro Casale, La Pepa, Volcan and Caspiche. Combined geological resources in the belt are more than 45 million ounces of gold.
Historical geological work on the Pantanillo property by Anglo American (1992-2005) and Kinross Gold (2005-2008) has defined a potential mineral deposit estimated to be in the range of 82 to 125 million tonnes grading 0.83 to 0.73 g/t gold using a 0.6 to 0.5 g/t cut-off for the lower and higher tonnage estimates respectively, which is equivalent to 2.18 to 2.95 million ounces of contained gold. This preliminary assessment was made by Kinross Gold and was estimated based on a total of 8,398 meters of reverse circulation drilling and diamond drilling. In accordance with disclosure guidelines in "National Instrument 43-101 Standards of Disclosure for Mineral Projects" the potential quantity and grade is conceptual in nature with insufficient exploration to define a mineral resource and it is uncertain if further exploration will result in the target being delineated as a mineral resource. Fortune Valley must spend US$4,000,000 on development work and make cash payments of US$850,000 over a period of three years to earn a 100% interest in the property. An initial cash payment of US$100,000 has been made. Fortune Valley are required to pay a 3.5% net smelter returns royalty on future production from the property. An annual minimum royalty of US$300,000 is payable in years four and five, increasing to US$1 million from year six.
The Anillo property comprises 30,600 hectares exploration concessions located directly north of Yamana's world class El Peñon gold-silver mine in Region II, Northern Chile. The El Peñon mine has combined measured and indicated resource and reserves of 3 million ounces of Au and 99 million ounces of Ag, as reported in December 2008. The mine exploits a number of principle veins which trend approximately North-South, with the Angosta discovery only 3 kilometres south of the Anillio property. The Anillo property is part of a farm-in agreement with copper giant Corporación Nacional del Cobre de Chile (Codelco). Fortune Valley is obligated to spend $US 3 million on exploration over 4 years and deliver a bankable feasibility study in the following 2 years to earn 65% in the project.
As at June 30, 2009, Fortune Valley had cash of $C 4,000 and a working capital deficiency of $C 583,227. Subsequent to this date $C 251,912 of current liabilities to related parties have been settled with the issue of 4,984,400 common shares. As at June 30, 2009 Fortune Valley had property plant and equipment of $C 574,198.
Additional information on Fortune Valley is available at www.fortunevalleyresources.com
Neither 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.
For further information, please contact:
Uruguay Mineral Exploration IncDavid Fowler, CEO: + 598 2 6016354; david.fowler@ume.com.uyTony Shearer, Chairman: +44 20 7602 1570; tonyshearer@btinternet.com
Matrix Corporate Capital LLPLouis Castro +44 20 3206 7209Tim Graham +44 20 3206 7206; Tim.Graham@matrixgroup.co.uk
Copyright Business Wire 2009