Funding and Co-Operation Agre

RNS Number : 4014N

Red Rock Resources plc

10 June 2010

 



RED ROCK RESOURCES PLC

Funding and Co-Operation Agreement, Colombia

Dated:  10 June 2010

Red Rock Resources plc ("Red Rock" or the "Company") the mining exploration and mineral investment company with interests in steel feed, uranium and gold, announces that it has entered into a Funding and Co-operation Agreement (the "Agreement") with Mineras Four Points SA ("MFP"), a company incorporated in the Republic of Colombia, and with Juan Camilo Florez Ramirez ("JCF"), a Colombian citizen and the General Director of MFP.

Loan

Under the terms of the Agreement, Red Rock will procure that a funding institution lends MFP a loan of two million U.S. dollars, of which one million dollars is to be lent immediately and one million dollars is to be lent in two equal instalments, with each additional drawdown to be made at the request of an Operating Committee which is to be established under the Agreement (the "Loan"). It is expected that these further instalments will be drawn down within three months.  

The Loan will carry interest at 5% per annum on the average outstanding amount and will be repayable on 30 June 2013. The purpose of the Loan is to enable MFP to invest in production and mining equipment at two gold mines over which it has exploration and mining rights in the province of Antioquia, Colombia.

The Loan and interest payments are to be guaranteed by RRR by way of a back to back loan which is expected to be formalised shortly.  In consideration of the obligations assumed by Red Rock under the Loan guarantee, Red Rock has been granted charges over the gold production of MFP and over the existing issued share capital of MFP. 

Consultancy and Technical Advice

Under the Agreement Red Rock will also provide a minimum of 20 days per month of consultancy and technical support to MFP and provide a qualified representative for the Operating Committee. For this it will charge fees totalling U.S.$ 2.96 million over the period from 1 September 2010 until 30 June 2013 payable quarterly in arrears in increments rising from an initial U.S.$200,000 per quarter to U.S.$350,000 per quarter.

 Other Terms of the Agreement

Red Rock will also have options (a) exercisable for two years to acquire 50% of the issued share capital of MFP for U.S.$6,500,000 ("Option 1"), and (b) exercisable for three years to acquire 1% of the issued capital of MFP for U.S.$1,000,000 ("Option 2") (together the "Options"). 

Where 15% of earnings of MFP before interest, tax, depreciation and amortisation (EBITDA) in any accounting period up to 30 June 2013 exceeds the total payments made by MFP in Loan interest and Fees, Red Rock will be entitled at its election to be paid the difference or to reduce by an equivalent amount the exercise price of Option 1.

Information about MFP

MFP is a Colombian company owned as to 80% by JCF and controlled as to 20% by JCF under powers of attorney. MFP has exploration and mining rights over the El Limón gold mine 6 km south of Zaragoza in the province of Antioquia, Colombia, and over the La Aurora gold mine 36 km south of Zaragoza, Antioquia.

The El Limón mine has been in production over a period of 60 years, and is currently producing ore from levels 6 and 7, with level 8 at 420m below surface undergoing development, and a new level between levels 6 and 7 under consideration. Surface plant was in disuse when the current operator took over, and current production is of limited quantities of high grade ore selectively mined and treated by cyanidation. In the January-May 2010 period average monthly production of ore was 108 tons per month, and average gold production was 15.3 kg per month.

MFP have installed new safety equipment and the Loan will enable an upgrade of the surface plant, after which production capacity of the El Limón plant is expected to be 150 tons per day. A further plant expansion, if required, might later raise capacity to 250 tons per day.

The La Aurora mine has a shaft which has been sunk to 180m, and a transformer and pump have been acquired, which will enable pumping of the shaft and mine development to proceed shortly. Production will initially be transported 30km by a well-maintained road for treatment at El Limón.

Reason for Red Rock entering into the Agreement 

The Company considers the assets of MFP to be attractive mining projects with potential for high grade mining and for resource expansion. The ability of Red Rock to provide funding and technical input to MFP will be of significant value to a capable management team. The provision of the Loan represents a low-risk entry to an established mining country with other likely opportunities. 

For further information contact:

Andrew Bell	0207 402 4580 or 07766 474849	Red Rock Resources plc	Chairman
Peter Trevelyan-Clark/ Ben Jeynes	020 7444 0800	Religare Capital Markets	Nominated Adviser
Nick Emerson	01483 413500	Simple Investments Ltd	Broker
Ron Marshman	020 7011 9411	City of London PR	Public Relations

Updates on the Company's activities are regularly posted on its website, www.rrrplc.com.

 

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