Proposed Business Combination
Uruguay Mineral Exploration Inc
October 5, 2009
SYMBOLS: UME (TSXV), FVX (TSXV), UGY (AIM),
Proposed Business Combination of Uruguay Mineral Exploration with
Fortune Valley
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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.
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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.
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The proposed transaction would move the combined group towards both
companies’ strategic objective of creating a more significant Latin
American focused gold producer
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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
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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.
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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.
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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.
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A combined group with the financial and technical resources to develop
its business and capitalise on other gold growth opportunities in
Latin America.
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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 Inc
David Fowler, CEO: + 598 2
6016354; David Fowler, CEO: + 598 2
6016354; david.fowler@ume.com.uy
Tony
Shearer, Chairman: +44 20 7602 1570; Tony
Shearer, Chairman: +44 20 7602 1570; tonyshearer@btinternet.com
Matrix Corporate Capital LLP
Louis Castro +44 20 3206 7209Louis Castro +44 20 3206 7209
Tim
Graham +44 20 3206 7206; Tim
Graham +44 20 3206 7206; Tim.Graham@matrixgroup.co.uk
