TORONTO, June 8 /CNW/ - Medoro Resources Ltd. (TSX-V: MRS) is pleased to provide an update on its acquisition of the assets of Frontino Gold Mines Ltd. ("Frontino"), as announced on March 31, 2010. Medoro is pleased that its preliminary due diligence investigations have been positive and, based on this, the Company's Board of Directors have resolved to proceed with the acquisition.
Pursuant to the terms of the asset purchase agreement, the transaction is scheduled to close within 15 days after the expiration of the 4 months after the date of the signing of the acquisition agreement (the "Closing Date"). The Closing Date may be extended for a period of up to 60 days under certain conditions.
As announced on March 31, 2010, Medoro has entered into a formal letter agreement with a separate company, Gran Colombia Gold, S.A., controlled by Mr. Serafino Iacono and certain of his associates, whereby Gran Colombia and Medoro would establish a joint venture or other arrangement and Gran Colombia would acquire, prior to Closing, a 50% interest in the Frontino assets. (See Medoro's press release dated March 31, 2010). However, in light of current market conditions and what Medoro perceives as a significant undervaluation of its equity, Medoro has determined that it would not be appropriate to incur the significant dilution that would be associated with raising money at this time. As a result, Medoro and Gran Colombia have re-negotiated their proposed joint venture arrangement as follows:
- Medoro and Gran Colombia will proceed to close the acquisition,
subject to the existing conditions as previously outlined.
- Medoro will have a 5% full carried interest in the joint venture
company, which would own the Frontino assets.
- Gran Colombia will provide 100% of the acquisition costs and any
- Medoro will have an option for a period of one year from the Closing
Date to revert to its original 50% joint venture interest by paying
50% of all costs, including the purchase price, due diligence costs
and the success fee, paid by Gran Colombia up to the date of exercise
of the option (the "Costs"), plus a premium of 25% of such Costs.
- Pursuant to the terms of the existing letter agreement in respect of
the proposed joint venture to be formed between the parties,
Gran Colombia will be the operator of the Frontino joint venture
unless and until Medoro exercises its right to return to its
50% ownership position.
- Medoro will have one representative out of four on the joint venture
committee while it maintains its 5% carried interest, increasing to
two out of four if and when it resumes its 50% position.
- The parties will continue to have mutual rights of first refusal on
their respective interests.
"Medoro's due diligence investigations to date confirm its belief that the Frontino assets represent an excellent growth opportunity for the Company and, given the current volatility in the equity markets, the amended agreement with Gran Colombia is the best method of securing Medoro's interest in Frontino while minimizing the dilutive effects of financing this acquisition at the current time," said John Hick, President and CEO of Medoro.
Frontino's gold mining interests cover 2,907 hectares in the Segovia gold belt, approximately 220 km northeast of Medellin, and have produced over 4.5 million ounces of gold over the past 155 years. There are three underground mines currently in operation at Frontino, Providencia, El Silencio and Sandra K, providing a total of approximately 450 tonnes of ore per day to Frontino's mill, which produced approximately 55,000 ounces of gold in 2009, at an average grade of 10.75 g/t Au. There has been no exploration drilling for new resources or reserves since 1989 and little sustaining capital spent on the mines since September 2004 when Frontino went into mandatory liquidation. With 29 already identified veins and no exploration for the last 12 years, there is excellent potential to significantly increase the resources and reserves at Frontino.
About Medoro Resources Ltd.
Medoro Resources Ltd. is a gold exploration, development and mining company with a primary emphasis on Colombia. The Company operates the producing Mineros Nacionales gold mine located in Zona Baja at Marmato and is conducting an exploration and infill drilling program at its Marmato Project to upgrade and expand its gold resources there in anticipation of developing a large tonnage open pit gold mine there.
On March 31, 2010, Medoro signed an asset purchase agreement to acquire all the assets of Frontino Gold Mines Limited. This acquisition is scheduled to close within 15 days after the expiration of the 4 months after the date of the signing of the acquisition agreement, subject to certain conditions including legal and technical due diligence and requisite regulatory approvals (see the Company's press release dated March 31, 2010). If acquired, Medoro will have a 5% carried interest in Frontino and a right for one year from the Closing of the acquisition to increase its interest to 50% as described above.
Medoro also holds a 100% interest in the Lo Increible 4A and 4B concessions in Venezuela where it is continuing its efforts to obtain an exploitation permit to allow development of these gold properties when circumstances in Venezuela allow. Medoro owns interests in gold exploration properties in Mali in respect of which it is seeking possible joint venture partners to further explore these properties.
Additional information on Medoro Resources Ltd. can be found on the Company's website at www.medororesources.com and by reviewing the Company's profile on SEDAR at www.sedar.com.
This news release contains "forward-looking information", which may include, but is not limited to, statements with respect to the future financial or operating performance of Medoro and its projects. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Medoro to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements contained herein are made as of the date of this press release and Medoro disclaims, other than as required by law, any obligation to update any forward-looking statements whether as a result of new information, results, future events, circumstances, or if management's estimates or opinions should change, or otherwise. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, the reader is cautioned not to place undue reliance on forward-looking statements.
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.
SOURCE MEDORO RESOURCES LIMITED
For further information: For further information: John Hick, President & CEO, (416) 603-4653; Linda Dorrington, Director, Investor Relations, (416) 603-4653