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.
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:
For further information: Zaruma Resources Inc., 20 Toronto Street, 12th
Floor, Toronto ON, M5C 2B8, Canada, Fax: (416) 367-3638, firstname.lastname@example.org,
www.zaruma.com; Dr. Thomas Utter, President and CEO, Tel.: 52 1 6622220063, 52
1 6622105650, email@example.com; Frank van de Water, CFO and Secretary,
Tel.: (416) 869-0772, firstname.lastname@example.org