Cuervo Reports Closing of Financing Accord with Strike Resources Limited to Advance Cerro Ccopane Iron Ore Project in Peru
Toronto, Ontario CANADA, July 28, 2011 /FSC/ - Cuervo Resources Inc. (FE - CNSX, CRR - FWB),("Cuervo" or the "Company") is pleased to announce that it has closed an investment agreement with Strike Resources Limited (ASX:SRK; "Strike") that was originally announced on July 18, 2011. Under the terms of the agreement Strike is providing financing of up to $CDN 15 million to Cuervo to fund advanced exploration work on the Company's Cerro Ccopane iron ore exploration project in the Cusco area of southern Peru. The first tranche of the funding, which has now been received by the Company, totals $CDN 5,250,000. Strike itself is also an important explorer for iron ore in southern Peru through its interest in Apurimac Ferrum S.A. The companies believe that a cooperative exploration effort between Cuervo and Strike will be strategic to the development of the iron ore resource potential of Peru.
Under the investment agreement Strike has provided the $CDN 5.25 million first tranche in the form of a non-cash interest-bearing three-year secured promissory note to fund an initial 15-month exploration program. At Strike's election, a further $CDN 9.75 million of non-cash interest-bearing secured funding may be advanced to fund the remaining 21 months of the expected three-year exploration program. Security for the financing is provided by a pledge of the shares held by Cuervo in its Peruvian subsidiary and a mortgage over the Cerro Ccopane concessions. In addition Cuervo has agreed to certain customary negative covenants in favour of Strike that are typical of transactions of this type.
As interest consideration for the provision of funding by Strike, Cuervo has issued to Strike two warrants, each with an initial term of three years commencing at the closing of the financing, to purchase Cuervo common shares: the first warrant entitles the holder thereof to purchase 17,500,000 common shares at $CDN 0.30 per share; and the second warrant entitles the holder thereof to purchase 17,727,273 common shares at $CDN 0.55 per share. The second warrant will be cancelled if Strike elects not to advance a total of $CDN 15 million. The term of the warrants may be extended if there are delays in the exploration program.
Under the agreement, proceeds from the exercise of warrants will be applied against amounts owing under the promissory note(s). Automatic exercise of warrants and retirement of outstanding amounts under the promissory note(s) will occur if Cuervo common shares trade for 20 consecutive days above $CDN 1.00 (volume-weighted average price), with a minimum 20-day trading volume of 1.5 million shares, or if Cuervo files a National Instrument 43-101-compliant Mineral Resource Estimate (CIM definition "Inferred Mineral Resources" category) of iron ore that is at least 700 million tonnes with an average grade of 40% Fe or greater. Upon the full exercise of both warrants Strike would own approximately 49% of Cuervo's outstanding common shares and approximately 46% on a fully diluted basis. As part of the financing, Cuervo has provided Strike with certain pre-emptive rights on future share issuances during the term of the investment agreement.
Certain changes to the composition of the Cuervo Board of Directors occur as part of the closing of the financing. Mr. Velasquez Spring, P.Eng., has resigned from the Board, having served Cuervo with dedication as an independent director over the past five years. Nonetheless, Mr. Spring's immense value to the Company will be retained as he joins the Company's Advisory Board as senior geological consultant to the Company. Mr. Spring is replaced on the Board by Mr. Kenneth J. Hellsten, the Managing Director of Strike Resources Limited. Mr. Hellsten has an extensive managerial and exploration background related to iron ore and nickel projects including many years of service with Billiton Australia and BHP Billiton. He is a Fellow of the Australasian Institute of Mining and Metallurgy (AusIMM) and a Member of the Australian Institute of Company Directors (AICD).
Mr. Brian Berner has stepped down as Chairman of the Board and been replaced by Mr. Gordon D. Watts, P.Eng. Mr. Watts has been an independent Board member for six years and has extensive mining project experience, in particular as related to iron ore. Mr. Watts was also a member of the Baffinland Iron Mines Corporation board of directors until its recent takeover by a consortium led by Arcelor Mittal. Mr. Berner continues as Chief Executive Officer and as an executive director of the Company.
A sixth Board member has also been appointed: Professor Malcolm R. Richmond, the Chairman of Strike. Professor Richmond is a Visiting Professor at the University of Western Australia, seconded jointly to the Graduate School of Management and the School of Engineering. Professor Richmond has spent much of his career with the Rio Tinto Group; immediately prior to his retirement he held the position of Managing Director - Development of Hamersley Iron Pty Limited and Executive Director of Hamersley Holdings. He has previously served as Deputy Chairman of the Australian Minerals Research Council. Professor Richmond is a Fellow of AusIMM and a Fellow of the Australian Academy of Technology, Science and Engineering.
Mr. Brian M. Cloney, C.A., (independent director) and Mr. John M. Siriunas, P.Eng., (executive director) remain as the other members of the Board.
Cuervo common shares are listed on the Canadian National Stock Exchange (CNSX), and also trade on the Frankfurt Stock Exchange (FWB). Post closing there are 36,334,750 shares outstanding (76,623,023 shares fully diluted).
For further information, please contact Mr. Brian Berner, CEO, at 416-203-3957 ext 201 or Mr. Tom Berner, Investor Relations, at 416-203-3957 ext 202. Additional information about Cuervo can be found at the Company's website at www.cuervoresources.com.
The Canadian National Stock Exchange (CNSX Markets Inc.) has neither approved nor disapproved of the contents of this press release.
247 Major Street, Toronto, ON, M5S 2L5 Canada Tel. 416-203-3957 Fax 416-203-4197 www.cuervoresources.com
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