Aquila Resources and HudBay Minerals Sign Agreement on Back Forty Project
August 06 2009 - 11:09AM
Marketwired Canada
AQUILA RESOURCES INC. (TSX:AQA)(FRANKFURT:JM4A) ("Aquila" or the "Company")
today announced it has entered into a Subscription, Option, and Joint Venture
Agreement (the "Agreement") with HudBay Minerals Inc. ("HudBay") (TSX: HBM) The
Agreement grants HudBay the right to acquire a majority interest in Aquila's
Back Forty Project (the "Project"), located in Menominee County, Michigan.
Under the agreement, HudBay has agreed to subscribe for 12,141,051 common shares
of Aquila, a 14.9% undiluted ownership interest, at a price of CDN$0.1827 per
share for an investment of CDN$2.2 million. Completion of the subscription is
subject to receipt of approval from the Toronto Stock Exchange. Upon completion
of the subscription, HudBay will obtain an option to acquire a 51% ownership
interest in the Project through the expenditure of US$10 million within three
years and the right to further increase its ownership to 65% by completing a
feasibility study, submitting an application for permitting the Project and
making certain option payments. Upon HudBay acquiring a 51% interest in the
Project, a joint venture will be formed between the parties. HudBay will act as
operator for the joint venture and will have marketing rights to the metal
production from the Project.
Thomas O. Quigley, President and CEO of Aquila commented, "HudBay brings to the
project extensive development and operating expertise, as well as financial
resources and marketing expertise for the metals to be produced at Back Forty.
The transaction announced today will allow us to maintain our timeline for
development of the Project, and is a strong fit with the Aquila strategy of
working to create shareholder value by participating in building and maintaining
economically sound, environmentally responsible operations with a focus on
safety and social responsibility."
"This is an excellent opportunity for HudBay to advance the Project towards
production, and is a close fit with our strategic plan," said Peter R. Jones,
HudBay's chief executive officer. "HudBay brings experience in mining 27 VMS
deposits in northern Manitoba, together with local operating knowledge in
Michigan at its White Pine copper refinery. As a significant potential open pit
zinc mine the Project may also supply concentrate to our Flin Flon metallurgical
plant."
"Aquila's strong relationship with the local community mirrors HudBay's
commitment to positive stakeholder engagement and will help support Project
permitting," added Mr. Jones. "This agreement presents a win-win for both HudBay
and Aquila, and we look forward to advancing the Project toward production."
The Back Forty Project is an advanced exploration-stage volcanogenic massive
sulfide ("VMS") deposit containing zinc, gold, copper and silver. The January
2009 NI 43-101 compliant resource statement released by Aquila, and available at
www.sedar.com, is summarized in the table below.
Mineral Resource Statement1 for the Back Forty Deposit, Michigan, U.S.A., SRK
Consulting, January 12, 2009.
Mineral Resource Statement(1) for the Back Forty Deposit, Michigan, U.S.A.,
SRK Consulting, January 12, 2009.
----------------------------------------------------------------------------
Grade
----------------------------------------------------------------------------
Resource
Category Tonnes Gold (g/t) Zinc (%) Silver (g/t) Copper (%) Lead (%)
----------------------------------------------------------------------------
Open Pit
Resources(2)
----------------------------------------------------------------------------
Measured 4,660,000 2.04 3.64 29.2 0.68 0.08
----------------------------------------------------------------------------
Indicated 1,260,000 4.03 5.63 47.3 0.37 0.30
----------------------------------------------------------------------------
Measured &
Indicated 5,920,000 2.46 4.06 33.1 0.61 0.13
----------------------------------------------------------------------------
Inferred 620,000 3.68 2.46 46.5 0.15 0.44
----------------------------------------------------------------------------
Underground
Resources(3)
----------------------------------------------------------------------------
Measured 1,060,000 1.21 9.23 26.5 0.39 0.86
----------------------------------------------------------------------------
Indicated 1,510,000 1.51 9.11 24.0 0.19 0.47
----------------------------------------------------------------------------
Measured &
Indicated 2,580,000 1.39 9.16 25.0 0.28 0.63
----------------------------------------------------------------------------
Inferred 550,000 2.03 6.62 36.4 0.28 0.67
----------------------------------------------------------------------------
Combined
Open Pit &
Underground
----------------------------------------------------------------------------
Measured &
Indicated 8,500,000 2.13 5.61 30.6 0.51 0.28
----------------------------------------------------------------------------
Inferred 1,170,000 2.90 4.42 41.7 0.21 0.55
----------------------------------------------------------------------------
(1) Mineral resources are not mineral reserves and do not have demonstrated
economic viability. All figures have been rounded to reflect the
relative accuracy of the estimates. The cut-off grades are based on
metal price assumptions of US$0.79 per pound zinc, US$1.89 per pound
copper, US$0.55 per pound lead, US$678 per troy ounce gold and US$10
per troy ounce silver. Metallurgical recoveries were determined and
used for each of eight metallurgical domains determined for the deposit.
(2) Cut off grades for each of eight metallurgical domains based on NSR
values, average cut-off grade for open pit resource contained within an
optimized pit shell US$20.
(3) Cut off grades were determined for each of eight metallurgical domains
based on NSR values, average cut-off grade for underground resources
outside of an optimized pit shell is US$62.
Much of the deposit can be mined using open pit methods, which could allow for
faster, low cost mine development. The Project also includes an exploration land
package of approximately 9,600 acres with excellent potential for additional
discoveries.
Key terms of the Agreement with HudBay are as follows:
- HudBay will subscribe for 12,141,051 million common shares of Aquila, a 14.9%
undiluted ownership interest, at a price of CDN $0.1827 per share for an
investment of CDN $2.2 million, subject to regulatory approval. The common
shares issued to Hudbay will be subject to a four month hold period.
- While HudBay maintains at least a 10% ownership interest, HudBay will have the
right to nominate a director to Aquila's Board of Directors and will have
pre-emptive rights to maintain its ownership interest. HudBay has also agreed to
provisions related to the orderly disposition of its interest in Aquila, should
HudBay choose to make such a disposition.
- To acquire a 51% ownership interest in the Project, HudBay must complete
expenditures of US$10 million on the Project prior to the third anniversary of
the Agreement, made up of US$3 million by the first anniversary, US$3 million by
the second anniversary, and the final US$4 million by the third anniversary.
HudBay is not obliged to make those expenditures if it chooses not to exercise
its option, and HudBay may accelerate the expenditures if it chooses.
- HudBay may increase its interest in the Project from 51% to 65% by (i) funding
and completing a feasibility study; (ii) funding and submitting a permitting
application; and (iii) making outstanding specified option payments, if any.
Expenditures on these activities can also contribute towards HudBay's
requirement to spend US$10 million to acquire a 51% interest.
- Once a feasibility study is complete and permitting applications are
submitted, if HudBay elects to put the Project into production, and following
issuance of a development notice Aquila will have 90 days to arrange financing
for its share of project costs. If Aquila is unable or elects not to obtain such
financing, HudBay, by assuming the obligation to finance 100% of the development
costs, will increase its ownership in the Project by a further 10% to 75%.
Aquila's 25% share of the development costs would then be deducted from Aquila's
share of distributable cash flow from the Project.
- While HudBay retains the largest ownership interest in the Project, HudBay
will be the operator. HudBay will also have exclusive marketing rights to sell
production to HudBay or third parties on commercial terms.
- If the feasibility study is not completed and all applications for permitting
are not submitted on or before the fourth anniversary of the Agreement, Aquila
has the right to re-acquire HudBay's 51% JV interest by reimbursing HudBay 50%
of its total expenditures in respect of the Project incurred from the execution
of the Agreement. If the Project is not brought into commercial production
within four years from the grant of mining permits, Aquila may re-acquire HMI's
65% JV interest by reimbursing HudBay 50% of its total Project expenditures
incurred after execution of the Agreement.
In addition to continued exploration and expansion of the Back Forty resource,
Aquila will work closely with HudBay to facilitate the timely completion of
feasibility and permitting activities to maintain timelines and schedules
leading to commercial production.
Management is developing a business plan and growth strategy with a focus on
acquisition and development of additional quality mineral assets in the Upper
Peninsula of Michigan and elsewhere.
Aquila is an exploration and development stage company focusing on the Back
Forty Project in Menominee County, Michigan. More information about Aquila and
the Back Forty Project can be found on the Company's website at
www.aquilaresources.com.
This press release contains certain forward-looking statements. In certain
cases, forward-looking statements can be identified by the use of words such as
"plans", "expects" or "does not anticipate", or "believes", or variations of
such words and phrases or statements that certain actions, events or results
"may", "could", "would", "might" or "will be taken", "occur" or "be achieved".
Forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Such
factors include, among others, risks related to international operations; risks
related to joint venture operations; actual results of current exploration
activities; changes in project parameters as plans continue to be refined,
future prices of resources; possible variations in reserves, grade or recovery
rates, accidents, labour disputes and other risks of the mining industry; and
delays in obtaining governmental approvals or financing or in the completion of
development or construction activities. Although the Company has attempted to
identify important factors that could cause actual actions, events or results to
differ materially from those described in forward-looking statements, there may
be other factors that cause actions, events or results to differ from those
anticipated, estimated or intended. There can be no assurance that
forward-looking statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements.
Shares Outstanding: 69,609,478
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