Oroperu Resources Inc OROP
Shares issued 33,816,463 Jan 27 close $0.25
Thu 28 Jan 99 News Release
Mr. K. Wayne Livingstone reports
Oroperu Resources Inc. has reached an agreement in principle with Norbank,
a merchant bank in Lima, Peru for Norbank to act as agent for the wholly
owned subsidiary of the company, Nueva Condor S.A., to raise on a
best-efforts basis up to $10,000,000 (U.S.) of financing, consisting of up
to $5,000,000 (U.S.) in equity in Nueva Condor and up to $5,000,000 (U.S.)
in debt (50 per cent of which will be convertible into Nueva Condor
equity).
The intended use of these proceeds is to further equip the Nueva Condor
mine, and improve tramming and air supply. A 10-year tailings facility is
also being studied. Other areas of reserves near the existing mine are
being slated for development, to further increase production and revenues.
A two-stage plant expansion to 800 tonnes per day is being evaluated.
The $5,000,000 equity portion of the financing is being structured to be
through the issuance of Nueva Condor preferred shares which will yield 14
per cent annually and will be convertible into common shares of Nueva
Condor.
Under the proposed structure, preferred shareholders will have the right to
"put" their shares to Nueva Condor at a 25 per cent premium, and Nueva
Condor will have the right to buy back the preferred shares at a 25 per
cent premium, both subject to certain terms and conditions.
The second portion of the financing is being structured to consist of up to
a $5,000,000 (U.S.) loan to Nueva Condor by Norbank. The loan will bear
interest at 15 per cent per year and will be secured by certain assets of
Nueva Condor. Repayment will be made as to interest only in year one
(payable quarterly) and principal and accrued interest will be payable in
eight quarterly instalments commencing 90 days from the first anniversary
of closing.
Up to half of the initial loan principal will be convertible into common
shares of Nueva Condor at a price equal to the subscription price of the
common shares issued to holders of the preferred shares.
Nueva Condor will have a loan prepayment option after 15 months from the
date of closing, subject to the right of loan holders to convert
outstanding principal into Nuevo Condor common shares for a period of 30
days following the date Nueva Condor elects to prepay.
Norbank will be entitled to a commission of 7.5 per cent on the preferred
shares issued subject to a minimum commission of $300,000 (U.S.), and 5.8
per cent on the value of convertible debt. Additional commissions may be
paid to Norbank in shares of Nueva Condor.
The transaction is subject to appropriate final documentation being agreed
upon between Norbank and the company.
Fourth quarter production results were 23 per cent higher again this
quarter at 21,180 tonnes. Zinc concentrate production was 1,204 tonnes
(year to date 4,187 tonnes) and lead concentrate production was 1,047
tonnes (year to date 3,369 tonnes) with gold and silver content at 780
ounces Au and 37,085 ounces Ag.
The mine development is proceeding well with three dominant areas of the
mine currently producing ore. The program of development and exploration
continues to open up new stopes. Mine production in the fourth quarter
compared to the initial quarter is up over 80 per cent. The plant has
accommodated these increases without additional capital investments.
Additional ball mill capacity and flotation cells are on standby for
installation as higher production levels are attained. These can be
installed with minor investment and without production disruption.
During this period metal prices have declined, with Zn and Pb attaining new
five year lows. The price declines have offset the gains achieved in
production and productivity at the mine. The company believes however that
it will be well positioned to take advantage of any price recovery, while
continuing to lower operating costs. All ore processed during the past year
has been replaced by new exploration.
Tres Cruces property update
As of Dec. 1998, under its option agreement for the Tres Cruces project,
Battle Mountain Gold Company (BMG) has drilled 3,053 metres in 11 holes.
This program consisted mainly of diamond drilling in the known mineralized
area previously drilled by Oroperu. The drill core will be used for
additional metallurgical test work at BMG's Kori Kollo facility in Bolivia.
The 1999 drilling program is currently under way. This is a two-phased
program designed to further delineate the known gold resource and to
evaluate other exploration targets.
The discovery of additional gold on the property could generate additional
cash payments from BMG. Under the current agreement, co-owners Oroperu and
Pan American Silver Corp. would receive an extra $20 (U.S.) per heap
leachable ounce and $10 (U.S.) per non-heap leachable ounce, for all gold
discovered in excess of 1,500,000 ounces during BMG's three-year,
$7,500,000 (U.S.) exploration program on the property (eg. a total
discovery of 3.5 million heap leachable ounces would yield an extra
$20-million (U.S.) to Oroperu). If BMG exercises its three-year option,
payments to Oroperu for the initial 1,500,000 ounces will total
$15.8-million (U.S.).
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