TORONTO, July 31, 2013 /CNW/ - Compania Minera Chanar Blanco S.A. ("Chanar Blanco") announces that on July 30, 2013, Chanar Blanco, a company controlled
by Mario Hernandez, a director and officer of Cerro Grande Mining
Corporation (the "Company"), was issued a convertible debenture (the "Debenture") in the principal amount of US$505,105.70 (or CDN$505,105.70 converted
using an exchange ratio of US$1.00 to CDN$1.00). The outstanding amount
of principal under the Debenture is convertible at any time at the
option of Chanar Blanco (the "Conversion Right") into common shares of the Company ("Common Shares") at a rate of CDN$0.10 per Common Share (the "Conversion Price"). On this basis, Chanar Blanco may convert the Debenture on the basis
of 1,000 Common Shares for each US$100 of outstanding principal up to
an aggregate of 5,051,057 Common Shares. The Debenture also provides
that the Company may, at its option, require the conversion (the "Acceleration Right") of all of the outstanding principal under the Debenture at the
Conversion Price, if the closing price of the Common Shares on the
Toronto Stock Exchange equals or exceeds CDN$0.15 per Common Share for
a period of 20 consecutive trading days (the "Acceleration Period") and provided further that such Acceleration Right is exercised within
20 business days after the end of the Acceleration Period. However,
under the terms of the Debenture, the maximum amount of Common Shares
into which Chanar Blanco can convert the Debenture at any time is
limited to that number which, when added to Mr. Hernandez' beneficial
holdings at such time, does not exceed 19.99% of the issued and
outstanding Common Shares as at the date of conversion.
For purposes of applicable Canadian securities laws, Mr. Hernandez
currently beneficially owns 17,266,761 Common Shares, representing
17.01% of the issued and outstanding Common Shares. Assuming the
conversion of the Debenture in full, and assuming that the 19.99%
ownership threshold is not triggered, Mr. Hernandez would beneficially
hold an additional 5,051,057 Common Shares. The 5,051,057 Common
Shares represent approximately 4.74% of the issued and current
outstanding Common Shares. However, as noted above, the maximum amount
of Common Shares into which Chanar Blanco can convert the Debenture at
any time is limited to that number which, when added to Mr. Hernandez'
beneficial holdings at such time, does not exceed 19.99% of the issued
and outstanding Common Shares as at the date of conversion. Beneficial
ownership and control of the Common Shares will be acquired by Mr.
Hernandez upon conversion of the Debenture.
The Debenture was issued to Chanar Blanco to evidence a cash advance
made by Chanar Blanco to the Company totalling US$505,105.70, to be
used for working capital and to fund capital expenditures on the
Company's Pimenton Mine. Chanar Blanco may in the future increase or
decrease its ownership of securities of the Company from time to time
depending upon the business and prospects of the Company and future
Concurrent with the issuance of the Debenture, a wholly owned subsidiary
of the Company, Compañia Minera Pimenton ("Pimenton"), has today entered into an agreement (the "Loan Agreement") with Chanar Blanco pursuant to which Pimenton may draw down up to
US$1,500,000 to cover operating expenses at the Pimenton Mine. Amounts
drawn down under the Loan Agreement bear interest at a rate of 5% per
annum, payable quarterly following an initial grace period of 15
months. In order to guarantee the payment obligations of Pimenton under
the Loan Agreement, Pimenton has granted a first security interest in
the mining concessions it holds in favour of Chanar Blanco. All amounts
outstanding under the Loan Agreement are to be repaid by Pimenton to
Chanar Blanco on or before July 30, 2016.
Chanar Blanco's address and other contact information is set forth
below. For further information, including to obtain a copy, once
filed, of the report required to be filed by Mr. Hernandez and Chanar
Blanco in accordance with applicable Canadian securities laws, contact
Chanar Blanco at the address specified below.
The issuance of this news release is not an admission that an entity
named in this news release owns or controls any described securities or
is a joint actor with another named entity.
SOURCE: Compania Minera Chanar Blanco S.A.
For further information:
Compania Minera Chanar Blanco S.A.
380 Los Carreras, Of, 425
La Serena, Chile
Attn: Mario Hernandez
Tel: +56 51 222 6920