International Minerals Signs Binding Framework Agreement with Hochschild to Fast-Track Production at Inmaculada Gold-Silver Property, Peru
International Minerals Corporation (Toronto stock exchange: IMZ) (Swiss
stock exchange: IMZ) (or 'the Company?) is pleased to announce that the
Company has signed a binding Framework Agreement (the 'Agreement?) with
Hochschild Mining plc ('Hochschild?) to fast-track development,
permitting and commencement of production at the IMZ/Hochschild
jointly-owned Inmaculada property ('Inmaculada?) in southeastern Peru.
Inmaculada is located 25km south of the Pallancata silver mine, which is
jointly owned by IMZ (40%) and Hochschild (60%).
IMZ currently controls a 70% interest in Inmaculada through its 51%
direct ownership and its right to earn an additional 19% interest by
completing a feasibility study before September 2013 and by issuing
200,000 IMZ shares to Hochschild.
Based on the terms of the Agreement, IMZ would own a 40% interest in
Inmaculada and Hochschild would hold the balance of 60%. The transaction
remains subject to regulatory approvals and definitive documentation
which will be prepared on an expedited basis.
IMZ′s President and CEO, Stephen Kay stated: 'We are pleased to sign
this agreement with Hochschild to fast-track production at Inmaculada.
It will now allow IMZ to focus its own efforts on expediting production
at the 100%-owned Goldfield project in Nevada, where we are aggressively
drilling and plan to complete a feasibility study by the end of next
year with a targeted production date in 2014. The Inmaculada deal is
structured in a similar way to the very successful Pallancata mine deal
in 2006, where production was significantly accelerated and IMZ has
already received about $24 million of free cash flow on an original
investment by IMZ of only $5.5 million. It is worth noting that
Pallancata will become the world′s fifth largest primary silver mine in
2010 after only three years of production. Hochschild has proven that it
has an unparalleled track record of building and operating low-cost
underground precious metal mines in difficult terrains in the high
Andes. It also has a long history of permitting expertise, strong
community relations programs and environmental management policies at
its mining operations. We look forward to working with them again and to
participating in another successful mine at Inmaculada.?
Principal Terms of Agreement:
Hochschild will pay to IMZ US$15 million in cash on closing of the
overall transaction.
Hochschild will undertake an equity investment in IMZ of US$20 million
in the form of a private placement at a price of C$5.525 per share.
Subject to regulatory approval, the placement is expected to be closed
in the next 10 days.
Hochschild will provide 100% of the initial US$100 million of funding
required for the planning, development and construction of a mining
operation at the Angela Vein deposit at Inmaculada. Any subsequent
expenditures will be funded 60% by Hochschild and 40% by IMZ.
IMZ is no longer required to complete a feasibility study at
Inmaculada, nor to issue 200,000 common shares to Hochschild.
Hochschild will commit to building a mining operation at the Angela
Vein deposit with a process capacity of 3,000 tonnes per day (unless
the parties agree that such capacity is not optimal) within three
years of closing of the transaction, subject to any unforeseen delays
out of the control of Hochschild.
If Hochschild fails to achieve the process capacity within the
three-year period, then Hochschild must make quarterly pre-payments to
IMZ during the period of any delay based on the parties′ joint
estimate of IMC′s 40% share of income/cash flows that would have been
generated if production had started on schedule.
Hochschild will be operator of the project. Upon commencement of
commercial production, Hochschild will charge the joint venture
company a 7.0% management services fee based on the aggregate
operating costs incurred by the joint venture during such mining
operation.
The management fee currently charged by Hochschild for the Pallancata
Mine will be reduced from 10.0% to 7.0% from the date of closing of
the transaction.
IMZ and Hochschild will contribute to the Inmaculada joint venture
their respective ownerships in the Pacapausa property (80%
Hochschild/20% IMZ), located adjacent to the Pallancata Mine and the
Puquiopata property (100% IMZ), situated on the northern edge of the
Inmaculada property. These contributions will result in both
properties being owned 60% by Hochschild and 40% by IMZ.
A minimum of 20,000 meters of drilling per year for the first three
years following the closing of the transaction (the 'Exploration
Drilling Program?) must be carried out for evaluation of exploration
targets outside of the main Angela Vein deposit. The Exploration
Drilling Program will be funded 60% by Hochschild and 40% by IMC.
Based on corporate and taxation considerations for Inmaculada, IMZ and
Hochschild will either (a) use the existing Inmaculada joint venture
company, Minera Quellopata S.A.C.; or (b) use the existing Pallancata
Mine joint venture company, Minera Suyamarca S.A.C.; or (c) may form a
new Peruvian joint venture company, whose shares will be held 60% by
Hochschild and 40% by IMC.
Closing of the overall transaction, including transfer of property
interests and definitive documentation is expected by December 2010.
Inmaculada Resource Estimate and Scoping Study
On September 9, 2010, IMZ announced the results of an updated, increased
mineral resource estimate and an independent Preliminary Economic
Assessment (or Scoping Study) for the Angela Vein deposit at Inmaculada.
IMZ reported measured and indicated resources of 3.8 million tonnes at
an average grade of 4.3 grams/tonne ('g/t?) gold and 129 g/t silver
respectively (containing approximately 532,000 ounces of gold and 15.8
million ounces of silver or 796,000 ounces of gold equivalent) and
inferred resources of 4.4 million tonnes at an average grade of 4.6 g/t
gold and 200 g/t silver respectively (containing approximately 645,000
ounces of gold and 28.3 million ounces of silver. or 1,116,000 ounces
gold equivalent). Both resource estimates were calculated using a 3 g/t
gold equivalent cut-off grade and used a 60-to-1 silver-to-gold ratio.
Highlights of the Scoping Study using $1,000 per ounce ('/oz?) gold and
$17/oz silver included:
Conceptual mine production (after 5% mining loss and 20% mining
dilution): 8.0 million tonnes ('Mt?) at an average grade of 3.8 g/t
gold and 137 g/t silver or 6.1 g/t gold equivalent.
Recovered ounces ('ozs?): 858,000 ozs gold and 29.3 million ozs silver
or approximately 1.35 million ounces of gold equivalent (based on
metallurgical recoveries of 88% for gold and 83% for silver).
Pre-tax cash flows: $660 million non-discounted, $434 million at a 5%
discount rate and $286 million at a 10% discount rate.
Pre-tax Internal Rate of Return (?IRR?): 41%.
Total cash operating cost per tonne: $52.
Total cash operating cost/oz:
Basis gold with silver credited as a by-product: negative $94 per
oz of gold.
Basis gold equivalent: $31/oz of gold equivalent.
Initial Capital: $168 million (including $32.9 million in contingency).
Total cash operating cost per oz, including capital:
Basis gold with silver credited as a by-product: $231/oz.
Basis gold equivalent: $517/oz
3,000 tonnes per day underground mine using a long hole stoping mining
method and conventional recovery process by flotation to produce a
saleable gold-silver concentrate.
General
The technical information reported in this news release was reviewed and
approved by IMZ′s Qualified Person, VP of Corporate Development, Nick
Appleyard.
An updated NI 43-101 Technical Report for the Inmaculada project will be
filed on SEDAR on or before October 22, 2010.
Hochschild Mining does not accept any responsibility for the adequacy
or inadequacy of the disclosure made in this news release and any
responsibility is hereby disclaimed in all respects.
About International Minerals
International Minerals is a silver-gold producer and developer with
silver and gold production from its 40%-owned Pallancata Mine in Peru,
one of the top-10 primary silver mines in the world. Production of
approximately 10 million ounces of silver and 33,000 ounces of gold (on
a 100% project basis) is estimated by IMZ in calendar year 2010.
In addition to the Pallancata Mine, IMZ also owns a 51% interest in the
Inmaculada gold-silver project in Peru and majority or 100% ownership
interests in development stage gold projects in Nevada (Goldfield and
Converse) and Ecuador (Rio Blanco and Gaby). IMZ also owns a 3% net
smelter return (NSR) royalty from Barrick′s Ruby Hill gold mine in
Nevada, which produced approximately 100,000 gold ounces in 2009.
IMZ is listed on the Toronto Stock Exchange (since 1994) and the Swiss
Stock Exchange (since 2002).
Cautionary Statement:
Some of the statements contained in this release are 'forward-looking
statements? within the meaning of Canadian securities law requirements.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results,
performance or achievements to differ materially from the anticipated
results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements in this release
include statements regardingestimates of capital and operating
costs; economic returns; timing and significance of future cash flows
and revenue from the project; timing and outcome of the announced
transaction; and timing and scale of production and processing; and
resource estimates. Factors that could cause actual results to differ
materially from anticipated results include risks and uncertainties such
as: risks relating to estimates of production and processing rates;
risks relating to estimates of mineral resources; risks relating to
capital and operating costs; risks relating to obtaining mining and
environmentalpermits; mining and development risks; risk of
commodity price fluctuations; political and regulatory risks; risks of
timing and completion of complex restructuring transactions; and other
risks and uncertainties detailed in the Company′s Renewal Annual
Information Form for the year ended June 30, 2010, which is available at www.sedar.com
under the Company′s name. The Company disclaims any intention or
obligation to update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
International Minerals Corporation
In North America
Paul
Durham, +1-203-940-2538
VP Corporate Relations
or
In
Europe
Oliver Holzer, +41 44 853 00 47
Marketing Consultant
IR@intlminerals.com
http://www.intlminerals.com