New Debt Facilities and Cost Reductions
December 29, 2008
All dollar amounts are $US unless otherwise stated
VANCOUVER, BRITISH COLUMBIA ‚Ä" December 29/CNW/Amerigo Resources Ltd. (TSX:ARG) ("Amerigo" or the ‚ÄúCompany‚ÄĚ) announced today that it has been successful in extending its existing banking line with a Chilean bank beyond its previous renewal date of December 15, 2008. The facility has also been increased to 3.5 million pesos (approximately $5.6 million) and has a next renewal date of June, 2009. The Company has also established a new line of credit of $5 million with a second Chilean bank with a renewal date of May 2009.
As outlined in the Company‚Äôs Q3 report, the global financial crisis and resulting precipitous decline in metal prices has resulted in the Company incurring significant copper and molybdenum negative price settlement adjustments from October to December 2008. The Company is finalizing arrangements with its smelter counterparty Enami which provide for deferral of the negative copper price settlement adjustments incurred during this period. These amounts will most likely be repaid over a 12 month period commencing in April 2009. Similar arrangements are under discussion with Molymet, with whom the Company has contracts for the roasting and refining of its molybdenum production.
As a state owned entity, one of Enami's mandates is to support small to medium sized copper producers in Chile. The Chilean government has also recently announced that it will provide some copper price protection through Enami, although the precise details of this support have yet to be finalized.
In addition to various cost reductions that have been negotiated with contractors and suppliers, the Company has been successful in negotiating the partial deferral of energy cost payments to its energy supplier and of royalty payments to El Teniente.
Subject to energy and oil prices, smelting and refining terms and the price of molybdenum for 2009, the Company believes that it can reduce its cash costs before royalties to $1.20 to $1.25 per pound of copper during the course of 2009.
The combination of the above arrangements provides capacity for the Company, subject to copper prices, to meet its commitments on an ongoing basis into 2009. Management is however working on establishing new long term credit facilities of $10-20 million in the near term which will provide some additional medium term liquidity during this period of challenging market and operating conditions.
Amerigo‚Äôs board of directors has also officially adopted the shareholder rights plan (the "Rights Plan") originally announced in the Company‚Äôs December 16, 2008 news release, and the Company has entered into the Rights Plan with its transfer agent, both effective December 24, 2008.
Amerigo Resources Ltd. is a Canadian junior company producing copper and molybdenum from its MVC operations near Santiago, Chile. Tel: (604) 681-2802; Fax: (604) 682-2802; Web: www.amerigoresources.com; Listing: ARG:TSX
For further information, please contact:
Dr. Klaus Zeitler, President (604) 681-2802, (604) 218-7013
Amerigo Resources Ltd.
The Toronto Stock Exchange has not reviewed nor accepted responsibility for the adequacy or accuracy of the contents of this news release, which has been prepared by management. Statements contained in this news release that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and forward looking information within the meaning of the Securities Acts of Ontario and Alberta. In particular, statements regarding energy, oil and metal prices, cost estimates and deferrals, future banking arrangements and government and regulatory deferrals and price support programs, are based on a number of assumptions and constitute forward looking information. There can be no assurance that such assumptions will be accurate. In addition, such forward-looking information is subject to risks and uncertainties which could cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in the Company‚Äôs filings with the TSX and on SEDAR. Forward-looking statements are based on the beliefs, estimates and opinions of the Company‚Äôs management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements if management‚Äôs beliefs, estimates or opinions, or other factors, should change.