War Eagle Mining Co Inc - News Release
War Eagle reaches agreement for $US 250,000 financing
War Eagle Mining Co Inc WEM
Shares issued 29,848,524 Feb 5 close $0.14
Tue 5 Feb 2002 News Release
Mr. Terence Schorn reports:
INITIAL FUNDING FOR DIRECT SHIPPING HIGH GRADE ZINC/GERMANIUM ORE
War Eagle Mining has reached an agreement with an investment fund and a
private company to finance the initial phase of $250,000 (U.S.) for direct
shipping high-grade zinc and germanium ore from the Tres Marias mine. The
agreement has the investment fund and the private company each financing
half of the total amount.
The Tres Marias mine, located in eastern Chihuahua, Mexico, consists of
nine concessions covering a total of 2,831 hectares. It was developed 50
years ago to exploit a limestone replacement deposit containing high-grade
zinc-germanium ore and has produced approximately 125,000 tonnes high-grade
ore to date. In 1983, a consultant to Zinc Nacional S.A., the mine
operator, estimated the remaining resources at the mine to be 150,000 to
250,000 tonnes of oxide ore, grading 30 to 40 per cent zinc, but Zinc
Nacional S.A. stopped production while in ore because the smelter failed to
meet environmental standards. Gregory F. Smith reports that, based on prior
exploration, the district has potential for up to 10 million tonnes of
sulphide/oxide ore grading 15 to 20 per cent zinc per tonne, and 200 to 300
grams per tonne germanium over an eight kilometre strike length. Further
exploration, however, is required to determine the actual mineral resource
on the property and there is no certainty that a mineral resource will be
defined.
Work will begin in February to upgrade access to the property; install a
new head frame, hoist and power plant; and to survey, map and sample the
underground workings. This program may take up to five months to complete.
Phase 2, at an estimated cost of $300,000 (U.S.), will complete the
rehabilitation of the mine to the sixth level and may take up to two months
to complete. Phase 3, at an estimated cost of $250,000 (U.S.), will be to
mine high-grade ore, upgrade at surface and deliver to the railhead at
Presidio, Tex.
The company is in discussion with a Texas-based company to ship the ore to
China for smelting to recover the zinc and germanium. War Eagle Mining has
the expertise and a proven track record in shipping and having zinc
material processed in China at the same smelter over the last several
years.
Using the past mining records of Zinc Nacional S.A. as a guide, the company
intends to ship 15,000 tonnes a year, grading 40 per cent zinc per tonne
and 600 parts per million germanium per tonne. Based on current prices,
each tonne of ore shipped should have a value of $628 (U.S.) per tonne,
with estimated total costs of $436 (U.S.) per tonne, leaving the company a
profit of $192 (U.S.) per tonne.
The initial investors also have the right to finance phases 2 and 3. The
direct shipping program is being financed by a convertible note with a term
of 18 months, secured by War Eagle Mining's interest in the property. The
note will bear an interest rate of 8 per cent and be convertible to common
shares at 16 cents per share with a warrant whereby for each two warrants
the investor may purchase an additional share for 20 cents for a period 30
months from the loan date. The loan may also be paid from 30 per cent of
net cash flow if the lender does not convert; on the basis of financing all
three phases, the investors will be granted a 4-per-cent gross royalty
effective after pay out of, or conversion of, the loan.
In March, 2001, War Eagle Mining acquired an option from Tombstone
Explorations Co. Ltd. to purchase 100 per cent of the Tres Marias mine. To
exercise the option, War Eagle may make cash payments of $335,000 (U.S.)
over six years and carry out work programs totalling $575,000 over a
four-year period. The commitment for the first year is a $25,000 (U.S.)
(already paid) cash payment. There is a 3-per-cent net smelter return on
sulfide ore and 1.5 per cent on the oxide ore as well as a 1-per-cent net
profit interest payable to Tombstone Aruba A.V.V. Two and a half percent of
the 3-per-cent NSR can be purchased for $500,000 (U.S.). The remaining
0.5-per-cent NSR and the 1-per-cent NPI are capped at $2-million (U.S.). In
addition, Tombstone will be issued 175,000 shares of War Eagle Mining. War
Eagle Mining has issued 200,000 company shares to High Tech Metals Corp. to
acquire the option from Tombstone Explorations. |
