NEWSAbacus Mining and KGHM Agree to Form Strategic Joint Venture to Advance the Afton-Ajax Copper-Gold Project Into Production
Last Update: 5/4/2010 10:31:48 AM
VANCOUVER, BRITISH COLUMBIA, May 04, 2010 (MARKETWIRE via COMTEX) -- Abacus Mining & Exploration Corporation ("Abacus" or the "Company") (AME) is pleased to announce that it has signed an investment agreement (the "Investment Agreement") with KGHM Polska Miedz S.A. ("KGHM") to form a joint venture (the "Joint Venture") to advance Abacus' Afton-Ajax copper-gold project (the "Project") located near Kamloops, B.C. through bankable feasibility study ("BFS") and into production. KGHM is the world's ninth largest copper producer with annual production of over 500,000 tonnes, and the world's third largest silver producer with annual output approximating 1,100 tonnes.
A conference call and live audio webcast will be held on Tuesday, May 4, 2010 at 8:30a.m. pacific time (11:30a.m. eastern time). The live audio webcast and presentation can be accessed from Abacus' website at www.amemining.com .
Highlights of the Agreement:
-- Formation of a Joint Venture to fast track the development of a mine atthe Afton-Ajax camp by combining Abacus' interests in the camp with thefinancial backing and operational expertise of a leading global copperand precious metals producer-- Capital funding commitment by KGHM of US$37 million to fully fund theProject through BFS for a 51% interest in the Project-- Funding provisions for the entire Project capex-- Strategic partnership to jointly identify and develop other globaltargets leveraging Abacus' mineral exploration expertise and KGHM'sfinancial strength and operational expertise-- An immediate C$4.5 million private placement into Abacus by KGHM-- Option for KGHM to acquire a further 29% interest in the Project uponcompletion of BFS for an additional payment of up to US$35 million
The transaction is expected to close by the end of the second quarter of 2010 or shortly thereafter, but no later than Sept. 30, 2010, and is subject to approval by Abacus' shareholders and the customary regulatory approvals.
Under the terms of the Investment Agreement, following an immediate private placement in Abacus of C$4.5 million, KGHM will invest US$37 million to fund the Project through BFS and earn a 51% interest in the Project. Upon completion of the BFS, KGHM will have the option to acquire a further 29% in the Joint Venture (for a total 80% interest in the Joint Venture) for cash consideration of US
.025 per pound copper for 29% of the Proven and Probable copper equivalent reserve, to a maximum of US$35 million. At that time, KGHM will arrange the financing for its (80%) proportionate interest in the Project capex and will offer to arrange financing for Abacus' (20%) proportionate interest in the Project capex on commercially reasonable terms.
Commenting on the transaction, Tom McKeever, Executive Chairman of Abacus said: "The alignment of our interests with a major global copper producer such as KGHM has several distinct advantages for Abacus and its plans to advance the Afton-Ajax Project to production. It provides the capital funding for corporate operations during the bankable feasibility stage and development stage of the Joint Venture without the need for further financing. It also eliminates the uncertainty associated with financing the Project's capital requirements. The additional upside potential to collaborate with KGHM on future projects provides an exciting opportunity to create considerable shareholder value. I believe this transaction provides an exceptional opportunity to accelerate Abacus' transition into a world class copper and precious metals group."
Mr. Herbert Wirth, President of The Management Board of KGHM added: "We at KGHM are very pleased to have entered into this partnership with Abacus Mining to jointly advance the Afton-Ajax Project into an industry leading mining operation. We anticipate that from this collaborative relationship will flow a number of other prospective copper projects in Canada and elsewhere, to meet our growing production profile."
A. Details of the Initial Investmenti. C$4.5 million Private Placement into AbacusUpon signing the Investment Agreement, KGHM has agreed to immediatelyenter into a C$4.5 million private placement involving the purchase of15 million common shares (approximately 8.75% of the shares issued andoutstanding following the private placement) in the capital of Abacus ata price of C
.30 per share. The private placement is expected to closenot later than May 10, 2010 and is subject to regulatory approval.ii. Payment to the Joint Venture of US$37 million in cash to acquire 51%interestKGHM will acquire a 51% interest in the Project by investing US$37million in cash at closing of the transaction, to be allocated to: (A)completion of the BFS and certain other obligations, and (B) explorationof other targets in the Afton-Ajax Camp, in accordance with a jointlyapproved budget.B. Development OptionFollowing the completion of the BFS, KGHM will have the option toacquire an additional 29% interest, for a total 80% direct interest inthe Joint Venture, for cash consideration of US
.025 per pound for thecorresponding 29% of Proven & Probable copper equivalent reserves (asdefined in the BFS) up to a maximum of US$35 million. This payment willbe applied directly towards Abacus' proportionate share of the Project'scapital costs, estimated at US$535 million in Abacus' PreliminaryEconomic Assessment ("PEA") written by Wardrop Engineering Inc. anddated July 31, 2009.KGHM will arrange the financing for its proportionate share of 80% ofthe Project's capital costs and will offer to arrange the financing forthe balance of Abacus' proportionate share of 20% of the Project'scapital costs on commercially reasonable terms.
CIBC World Markets Inc. has acted as financial advisor and Davis LLP has acted as legal advisor to Abacus. Abacus has received an opinion from CIBC World Markets to the effect that, as of the date thereof, the proposed transaction is fair, from a financial viewpoint. TD Securities Inc. has acted as financial advisor and Stikeman Elliott LLP and Chadbourne & Park LLP have acted as legal advisors to KGHM.
The Investment Agreement has been unanimously approved by the board of directors of Abacus. The transaction is subject to approval by the shareholders of Abacus and Abacus will call a special meeting of its shareholders to approve the transaction, to be held on or about June 22, 2010. The directors and officers of Abacus will vote their shares in favour of the transaction and will recommend that other shareholders do likewise. The parties have also agreed to complete a definitive Joint Venture Agreement and ancillary agreements.
Conference Call and Webcast
Abacus will host a conference call and webcast on Tuesday, May 4, 2010 at 8:30a.m. pst (11:30a.m. est)
Dial-In Numbers:North American toll-free 1-866-226-1793Other 416-340-2218Playback will be available for 2 weeks:North American toll-free 1-800-408-3053 Pass Code 3553131Other 416-695-5800
On Behalf of the Board,
ABACUS MINING AND EXPLORATION CORPORATION
Doug Fulcher, President and Chief Executive Officer
Tom McKeever, Executive Chairman
About Abacus
Abacus is an exploration and development company with a 43-101 compliant positive preliminary economic assessment report (announced June 22, 2009) for its Ajax copper/gold project located 10 kilometres southwest of Kamloops, British Columbia. The report contemplates a 60,000 tonne per day operation producing an average of approximately 110 million pounds of copper (approx. 50,000 tonnes) and 100,000 ounces of gold in concentrate annually. Sensitivity analyses approximating metal prices (US$3.00 per pound copper and US$1,000 per ounce gold) in the assessment indicate a NPV of $1.46 billion discounted 8% over a 23 year mine life, with an IRR of 35.4%, cash costs of
.90 per pound copper, and payback of 2.0 years. The Ajax extension remains open along strike and at depth. Mineral resources that are not mineral reserves do not have demonstrated economic viability.
Eco Tech Laboratory Ltd. of Kamloops, B.C., completed all of Abacus' analytical work on the aforementioned drill project. A quality-control program, using specific standards and blank samples is in place. Robert G. Friesen, P.Geo., the Company's Senior Geologist, is the Qualified Person responsible for the design and conduct of the work performed.
About KGHM
KGHM Polska Miedz S.A. is the ninth largest producer of copper in the world, with annual production of over 500,000 tonnes (approx. 2.7% of global production) and the world's third-largest silver producer, with annual output of around 1,100 tonnes (approx. 7% of global production). A fully integrated producer of high quality copper in cathodes, wire rods, oxygen-free copper and silver-bearing copper rods and round billets, the KGHM Group comprises over 30 companies encompassing mines, copper smelters, ore enrichment plants and hydrotechnical facilities providing auxiliary support for the core production business and telecommunications. KGHM Group has been mining and processing copper for almost 50 years and employs over 27,000 people. KGHM's shares trade on the Warsaw Stock Exchange with a market capitalization of over US$7 billion.
Forward-Looking Information
This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address events or developments that Abacus Mining and Exploration Corp. (the "Company") expects to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words "expects", "plans", "anticipates", "believes", "intends", "estimates", "projects", "potential" and similar expressions, or that events or conditions "will", "would", "may", "could" or "should" occur. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward-looking statements. Factors that could cause the actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, and continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, should change.
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.
Contacts:Abacus Mining & Exploration CorporationDonna YoshimatsuDirector of Investor Relations604-682-0301604-682-0307 (FAX)dyoshimatsu@amemining.comAbacus Mining & Exploration CorporationTim MikulaInvestor Relations866-834-0301tmikula@amemining.comwww.amemining.com
SOURCE: Abacus Mining and Exploration Corp.
mailto:dyoshimatsu@amemining.commailto:tmikula@amemining.comhttps://www.amemining.com
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