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Tiger Int'l forms JV with ECR for Itogon project
2013-04-29 05:58 ET - News Release
Mr. Patric Barry reports
ECR SECURES RIGHT TO EARN 50% INTEREST IN ITOGON GOLD-SILVER PROJECT, PHILIPPINES
Tiger International Resources Inc. and ECR Minerals PLC have entered into an earn-in and joint venture agreement on Tiger International Resources' 100-per-cent-owned Itogon gold-silver project in the Philippines.
Highlights:
- The Itogon project is an advanced exploration project located in a gold and copper mining district on the island of Luzon in the north of the Philippines, and benefits from an extensive historical dataset.
- The agreement gives ECR the exclusive right and option to earn a 50-per-cent interest in Cordillera Tiger and thereby in the Itogon project by obtaining, for Cordillera Tiger, a mining licence in respect of the project within five years of the commencement of the earn-in and by making certain staged payments to Tiger.
- ECR will finance all expenditure required for Cordillera Tiger to obtain a mining licence, and through Cordillera Tiger, will be the operator of the project during the earn-in; after a mining licence is obtained ECR and Tiger would finance development of the Itogon project pro rata, or the non-financing partner would be diluted.
- The agreement and the commencement of the earn-in are subject, inter alia, to due diligence by ECR.
Stephen Clayson, chief executive officer of ECR, commented: "The Philippines has been the venue for a number of gold mining success stories in recent years, with Medusa Mining, CGA Mining and Oceana Gold springing to mind first and foremost. These cases indicate a very workable jurisdiction for international mineral development companies. Highly prospective geologically, the country is also a low-cost operating environment with skilled labour and professional mining services readily available.
"The Itogon project is located within an internationally renowned gold and copper mining district with easy access and a wealth of relevant and encouraging information from the project area itself and nearby deposits. We therefore feel optimistic that the project can in due course be shown to host an economic gold deposit, although this is of course subject to the results of the planned work program.
"Despite recent volatility in the gold price, it is the view of the ECR board that the gold sector continues to present attractive exploration, development and mining opportunities and is likely to do so for many years to come."
Patric Barry, chief executive officer of Tiger International, commented: "The value of this agreement, whereby ECR Minerals can earn up to 50-per-cent ownership of Tiger's Itogon gold and silver project, is that it gives Tiger shareholders the benefit of developing the property implementing ECR's capital and operatorship skills, with no share dilution other than the equity position earned by ECR. Tiger recognizes the difficulty of raising capital on reasonable terms in the present Canadian investment climate and compares the benefit of bringing in a reliable partner versus the existing shareholder dilution of raising capital for the project.
"This agreement gives total payments to Tiger of $1.4-million (U.S.) in cash payments, Tiger's issued capital remains the same, and shareholders benefit from the carried interest to that of issuance of a mining licence. We hope that the property may be self-funding through debt and presale of minerals after issuance of the mining licence so that the proportionate equities of ECR and Tiger remain the same, although this cannot be guaranteed."
About the Itogon project
The Itogon gold-silver project is located on the island of Luzon in the north of the Philippines, about 14 kilometres from the city of Baguio in the Central Cordillera. The Central Cordillera of Luzon is a gold and copper mining district of global significance, and hosts numerous sizable producing mines and former producers.
The Itogon project is an exploration project with an extensive database of previous work, including drilling, metallurgical testwork and surface sampling. This work enabled a number of historical resource estimates to be completed by former operators, as well as a scoping level study on a potential heap leach operation. All historical work was completed by reputable international companies, including BHP Engineering and Kvaerner Davy. However, as all significant work was completed in the late 1990s or earlier the historical resource estimates do not comply with any current standard, as that term is defined by the AIM Note for Mining, Oil and Gas Companies, and Canada's National Instrument 43-101, and have not been disclosed here.
The exploration target in the Itogon project area is a steeply dipping wide hydrothermal or epithermal gold-silver system. At least five gold and silver-bearing quartz veins have been mapped and are indicated to be continuous (especially the main vein) or semi-continuous and steeply dipping (near vertical). The five subparallel vein sets are recognized as occurring within a zone up to 250 metres wide and up to 600 metres long. Further exploration is planned to test for a copper porphyry system which may be present.
Tenure
The project is held by Cordillera Tiger Gold Resources Inc., a 100-per-cent beneficially owned subsidiary of Tiger incorporated in the Philippines, under EP006. The EP covers approximately 330 hectares and was granted on Feb. 15, 2011, for an initial period of two years. The permit is renewable for periods of two years up to a maximum of six years. After six years, the permit may be renewed for a further two years for the purpose of completing feasibility studies and making application for a mining licence. Tiger confirms that immediately prior to Feb. 15, 2013, Cordillera Tiger submitted in good order an application for a two-year extension to the EP and confirmation of the extension is pending.
Under Philippine law the holder of an exploration permit who determines the commercial viability of a mining project may, within the term of the permit, file with the relevant government authorities a declaration of mining project feasibility accompanied by a work program for development. The approval of such filing and compliance with other requirements under Philippine law and regulation entitle the holder to an exclusive right to a mineral production sharing agreement or other mineral agreements or financial or technical assistance agreement (in general terms, and for the purposes of this news release, a mining licence).
Summary terms of the agreement
The agreement is subject to due diligence by ECR and, if required, to approval by the TSX Venture Exchange. However even if TSX-V approval is required, Tiger may elect to proceed in its absence. ECR will complete its due diligence within 60 days of the date of the agreement.
The period during which ECR may exercise its right to earn a 50-per-cent interest in the Itogon project will run for five years commencing on the later of: the date on which Cordillera Tiger receives absolute confirmation that the EP has been extended for a further two years from Feb. 15, 2011; the date on which ECR notifies Tiger that ECR has completed due diligence to its satisfaction; and the date on which, if required, TSX-V approval of the agreement is received by Tiger or Tiger elects to proceed without such approval.
ECR's 50-per-cent interest in the Itogon project, once earned, will be satisfied by means of a 50-per-cent beneficial shareholding in Cordillera Tiger, although in some circumstances other mechanisms may be employed to vest fully in ECR its 50-per-cent interest.
Exercise of the earn-in option
ECR may exercise the earn-in option in the following manner:
- By ensuring the completion of such work and the making of such expenditures as may be necessary to obtain for Cordillera Tiger a mining licence in respect of the Itogon property on or before the fifth anniversary of the commencement date (subject to force majeure provisions);
- By making payments to Tiger as follows:
- On the commencement date ECR shall pay to Tiger $100,000 (U.S.) in cash;
- On completion by ECR, for Cordillera Tiger, of a mineral resource estimate or estimates in respect of the Itogon project exceeding 200,000 ounces contained gold equivalent and compliant with CIM (Canadian Institute of Mining, Metallurgy & Petroleum) standards, ECR shall pay to Tiger $300,000 (U.S.) in cash;
- On a mining licence being obtained by ECR, for Cordillera Tiger, in respect of the Itogon project, ECR shall pay to Tiger $500,000 (U.S.) in cash;
- On commencement of commercial production at the Itogon project, ECR shall pay to Tiger $500,000 (U.S.) in cash.
Operatorship
Through Cordillera Tiger, ECR will be the operator of the Itogon project during the earn-in period, and will make all decisions relating to operations, in consultation with and with the assistance of Tiger where appropriate. From the commencement date and during the currency of the earn-in option, ECR will be obligated to make the minimum expenditures and to take any other actions required under the EP or otherwise by law or regulation to maintain Cordillera Tiger's title to the Itogon project in good standing.
Termination of the earn-in option
The earn-in option will terminate if:
- ECR has not obtained, for Cordillera Tiger, a mining licence in respect of the Itogon project by the fifth anniversary of the commencement date;
- Or ECR has not completed, for Cordillera Tiger, an initial drilling program of a minimum 1,000 metres at the Itogon project by the end of calendar year 2013, or, if the commencement date is within four months of the end of calendar year 2013 or if all necessary government and regulatory permissions for the initial drilling program have not been received within four months of the end of calendar year 2013, by the date that is four months from the later of the commencement date or the date all necessary government and regulatory permissions for the initial drilling program are received;
- Or if ECR fails to contribute minimum expenditure in respect of the Itogon project of $200,000 (U.S.) during each year of the earn-in, or as required under the EP and otherwise by law or regulation to maintain Cordillera Tiger's title to the Itogon project in good standing, whichever is greater;
- ECR elects not to exercise the earn-in option.
If the earn-in option is terminated before it has been exercised and as at the date of termination ECR has contributed a minimum of $500,000 (U.S.) of expenditure to the Itogon project and completed a mineral resource estimate compliant with CIM standards, ECR shall have acquired a 25-per-cent interest in the project. ECR's 25-per-cent interest will be satisfied by means of a 25-per-cent beneficial shareholding in Cordillera Tiger, although in some circumstances other mechanisms may be employed to vest fully in ECR its 25-per-cent interest.
Following exercise of the earn-in option
Following the exercise of the earn-in option by ECR to earn a 50-per-cent interest in Cordillera Tiger and thereby the Itogon project; or in the event of termination of the agreement and the earn-in option leaving ECR with a 25-per-cent interest in Cordillera Tiger, expenditures in connection with Cordillera Tiger and the Itogon project will be contributed by ECR and Tiger pro rata to their respective interests. Either party may elect not to provide such financing, but after making such an election would see its interest in the project diluted according to a formula determined to be fair and reasonable by the statutory auditors of each party making such determination jointly.
Following exercise of the earn-in option ECR shall cease to be the operator of the Itogon project. The management and operation of the project will then revert to the board of directors of Cordillera Tiger, the composition of which shall reflect the respective interests of ECR and Tiger in Cordillera Tiger.
Area of interest
ECR and Tiger have declared an area of interest extending 50 kilometres in all directions from the boundaries of the Itogon project. If either ECR or Tiger wishes to acquire any additional mineral project within the area of interest, it is obligated to offer the other party the opportunity to participate in and finance on a 50-per-cent basis such acquisition and the subsequent development of the relevant project.
Notwithstanding these arrangements, ECR and Tiger have agreed to consider two specific projects identified by Tiger on the basis that ECR would finance 100 per cent of the acquisition costs of such projects and the costs of obtaining a mining licence in each case. However, ECR has no obligation to do so, and will consider each project on its merits in due course. No payments would be due to Tiger in connection with either project. If it is decided to proceed, an earn-in and joint venture agreement or agreements would be entered into separately from the agreement.
Disclosure
Stephen Clayson, director and chief executive officer of ECR, has been a director of Tiger's Philippine subsidiary Cordillera Tiger Gold Resources since May, 2007, but receives no remuneration for serving as such and holds no shares or other interest in Cordillera Tiger or Tiger. This relationship has not influenced the negotiation or outcome of this agreement.