NEWS RELEASE
ECUADORIAN MINERALS CORPORATION
July 6, 1999
Trading: TSE.EMC
TO SOUTHERN METALS
Ecuadorian Minerals Corporation (“EMC”) announces that it has signed a Letter Agreement with Southern Metals Corporation (“Southern Metals”) whereby Southern Metals can acquire up to a 70% interest in the Paccha gold property in southern Ecuador. EMC presently holds a 100% interest in the 6 sq km project, subject only to a 3% Net Smelter Return (“NSR”) royalty on part of the property to the French company COGEMA, from whom the property was acquired by EMC in February, 1999.
EMC has made the decision to farm-out the Paccha project in order to focus its exploration efforts during the remainder of 1999 on its top priority targets, the Beroen gold/silver project in Ecuador (currently being drilled) and the Vetaspata gold project in Peru where drilling is planned in September this year. The agreement with Southern Metals allows the Paccha high grade gold target to be initially explored on an accelerated basis prior to the end of 1999 at no additional cost to EMC while EMC retains a significant ultimate percentage interest in the property.
The principal target of interest on the property is a 10 to 20m wide, steeply dipping, highly silicified, gold-bearing vein/breccia zone which was traced over a strike length of approximately 1 km by COGEMA during their exploration program in the early 1990's. This program included surface rock sampling and the completion of 6 shallow core drill holes (totaling 170m) to a maximum depth of 39m covering only 60m of the strike length of the zone. In an area designated as “Roca 3" by COGEMA high grade drill intercepts included uncut gold values of 10.3m at 17.4 g/t (including 2.6m at 25.1 g/t) in drill hole HUA-2B, 15.6m at 5.1 g/t (including 5.0m at 11.0 g/t) in drill hole HUA-11 and 0.6m at 47.3 g/t in drill hole HUA-1. A comprehensive description of COGEMA’s and EMC’s exploration programs on the project is given in EMC’s news release dated February 8, 1999.
Agreement Terms
Under the terms of the Letter Agreement, Southern Metals can earn an initial 50% interest in the property by expending a total of US$1 million within three years following completion of due diligence (maximum 30 days) of which US$150,000 will comprise a guaranteed expenditure during the first year. In addition, Southern Metals must issue 2 million shares to EMC over a 3 year period as follows: 250,000 shares at the completion of due diligence, 250,000 shares at the end of year one of the agreement, 500,000 shares at the end of year two and 1,000,000 shares at the end of year three.
Southern Metals has the option to earn an additional 10% interest in the property (to obtain an aggregate interest of 60%) by completing a bankable feasibility study at a minimum cost of US$2.5 million by the end of year five of the agreement and by paying EMC US$1 million as to 50% in cash or shares at EMC’s option and 50% in cash or shares at Southern Metals’ option. A further 10% interest in the property may be acquired (to provide an aggregate interest of 70%) by arranging all financing for the development and construction of the project based on the feasibility study design. An additional condition of the agreement is that Southern Metals is required to obtain additional financing of at least US$200,000 by October 1, 1999.
The Letter Agreement remains subject to due diligence and approval by the regulatory authorities.
Planned Work Program
Southern Metals is currently planning a detailed surface rock sampling program to be followed-up by a diamond drilling program in order to test the Paccha vein/breccia zone and to evaluate the surrounding alteration envelope.
Stephen J. Kay, President and CEO
The Toronto Stock Exchange neither approves nor disapproves the information contained in this News Release.
For additional information, contact Linda North at Tel: (602) 483-9932 or Fax: (602) 483-9926.