PERU - Toronto-based junior CANADIAN SHIELD RESOURCES has signed an agreement to buy 44.7% of the company that operates the Poderosa gold mine in northern Peru's La Libertad department. The deal, expected to close by Nov. 15 this year, involves buying the shares held by two of the five Arias sisters who currently own the mine, said Canadian Shield CEO Ed Baer. He also said that the acquisition price will be determined between the parties and satisfied by issuing of no more than 60% of Canadian Shield's fully diluted shares at time of closing, Baer said.
Canada's CAMBIOR announced last week it was acquiring a 55.3% stake in Poderosa for US$25 million in cash and approximately 2.2 million Cambior shares to satisfy shareholder advances of US$8 million. Cambior's stake comes from the three other sisters.
Baer said he believed Cambior, which last week mentioned the possibility of acquiring the balance of the mine, was unaware of Canadian Shield's intentions prior to the latter company's own announcement. No talks on the operation's future have yet been held with Cambior, he said.
Poderosa has produced 1.25 million oz of gold since starting operations in 1982. Targeted gold production for 2004 is 110,000 oz at total cash costs of US$233/oz, not including the higher costs of processing outsourced ore, said Canadian Shield.
"I think it's fair to say that neither Cambior nor we believe this is [only] a 100,000-oz-plus operation, given the extensive land package that comes with the operation," said Baer. "It could be significantly more than that." Poderosa's operating company owns approximately 80,000 ha in the Pataz province of La Libertad department, a "highly prospective region" with production of 400,000 oz/y gold by private Peruvian companies.
The transaction is subject to a number of conditions, including Canadian Shield arranging financing of not less than US$20 million to acquire the two sisters' advances to Poderosa worth US$5.9 million, other third party debt and for working capital. A break-up fee of US$7.5 million is payable if the Poderosa shareholders sell their stake to a third party or if Canadian Shield breaches the letter of intent or definitive agreement.
Baer, who was born and raised in Peru, was appointed as chairman and CEO of Canadian Shield in early August. Canadian Shield is also in the process of acquiring up to 90% of Gallant Minerals Peru, which owns four mineral exploration properties in the south of the country.
More information about the company's activities is available at www.CanadianShieldResources.com.
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