Aurelio Announces Amended Agreement to Sell Hill Copper-Zinc Project & 3% NSR in Gavilanes Gold Project for $4 Millionadmin
Further to the proposed transaction announced on October 2, 2008, Aurelio Resource Corporation reports that it has executed amended agreements concerning the sale of its Bolsa Resources, Inc. subsidiary, which owns the Hill Copper-Zinc Project in Arizona , for $2.5 million in cash while retaining a 3% NSR (Net Smelter Return) to Telifonda (Cayman) Limited.
In addition, the Investment Company has agreed to purchase a 3% NSR for the Company’s Gavilanes gold project in Mexico in exchange for $50,000 in cash. The Investment Company has also agreed to loan (on a non-recourse basis) $1.45 million to a newly-created and wholly-owned Aurelio subsidiary that would fund future exploration and acquisition programs.
The total value of the proposed transaction remains unchanged at $4 million.
The amendments have been agreed to in order to better reflect the current market values of the assets being acquired by the Investment Company, and to facilitate closure of this transaction in the current difficult equity markets, among other factors.
Sale of Bolsa Resources, Inc. & Hill Copper-Zinc Project
The Company has executed an amended agreement to sell its wholly-owned Arizona subsidiary, Bolsa Resources, Inc., to the Investment Company in exchange for $2,500,000 cash (the prior agreement mandated a $2 million cash payment); Aurelio would still retain a 3% Net Smelter Returns Royalty (NSR) on all future precious and base metal production from the Project (the “Bolsa NSR”). Upon completion of the Bankable Feasibility Study, the Investment Company would have a right to purchase the Bolsa NSR at fair market value.
The proposed transaction requires the Investment Company to complete a Bankable Feasibility Study within the next four years; should the Investment Company fail to complete the Bankable Feasibility Study or otherwise maintain the 5,000+ acre land position, Aurelio would have the exclusive right to re-acquire the Project under certain conditions.
The proposed transaction also requires that the Investment Company fund Bolsa Resources shortly after Closing in the initial amount of $8 million to facilitate further development of Bolsa’s Hill Copper-Zinc Project.
Pursuant to Section 2(e) of the original Stock Purchase Agreement, adjustments will be made at Closing to reimburse the Company for all payments made by Aurelio to maintain Bolsa Resources’ assets from and after August 15, 2008 (as set forth in Exhibit C to the Stock Purchase Agreement).
Bridge Loan Agreement
As part of the overall transaction, the Investment Company has already advanced $2 million to the Company in the form of an interest free Bridge Loan that will be repaid upon the closing of the proposed transactions. The Bridge Loan is secured by all of the assets of the Company, including all shares of stock held by the Company in its two subsidiaries. If the sale of Bolsa Resources does not close, the Bridge Loan is payable in cash, with the date of payment dependent upon the reason the Sale fails to close.
Proceeds from the Bridge Loan were used to retire previous Company indebtedness, with the remaining used for working capital purposes.
Sale of 3% NSR in Gavilanes (Mexico) Project
The Investment Company has also agreed to purchase a 3% NSR interest in the Gavilanes gold project for $50,000 cash (“Gavilanes NSR”). The Company would retain the exclusive right to repurchase the Gavilanes NSR at fair market value. The Gavilanes NSR payment was reduced from the original $2 million amount to better reflect the value of the project in the current economic climate.
Loan to New Aurelio Subsidiary
The Investment Company has agreed to loan, upon shareholder approval of the overall transaction, $1.45 million to a newly-created Aurelio subsidiary (the NewCo Loan). The NewCo loan is an unsecured loan and would be non-recourse to the Company. Interest at LIBOR + 5% would accrue over the term of the loan.
The Company intends to use the proceeds of the NewCo Loan facility to fund further exploration of its assets, as well as for acquisitions and general working capital.
Completion of the transactions is expected in the fourth quarter of 2008 and is contingent on approval by Aurelio shareholders and other customary closing conditions set forth in the transaction documents. Aurelio has not yet announced a date for its shareholder meeting.
Complete copies of the amended transaction documents are available for review as exhibits to a Current Report on Form 8-K filed today with the U.S. Securities and Exchange Commission.
The Company also reports that Robby Gilmore continues to serve in a financial advisory capacity to the Company, but that he has not yet accepted the CFO position with the Company as announced on April 18, 2008; Dr. Fred Warnaars continues to serve as the Company’s Interim CFO.