Metallica gets $30 million bought deal boost

Vancouver – Metallica Resources (MR-T, MRB-X) has arranged a $30 million bought deal financing enabling it to continue development of its Cerro San Pedro gold-silver mine in Mexico and fund other exploration projects in the company’s portfolio.

The financing is a boost for Metallica, which has been fighting efforts by local land owners in the State of San Luis Potosi to ban the use of explosives on certain parts of the Cerro San Pedro property, including the access road.

Under an agreement, investment firm Canaccord Capital has committed to buy 6.67 million shares of Metallica at $4.50 per unit in a bought deal private placement. Each unit is comprised of one common share of the company and one-half of a warrant.

One warrant entitles the holder to subscribe for one additional share of the company at a strike price per warrant share of $5.50 for a period of up to three years from the closing date of the financing.

Shares of Metallica fell 14 cents to $4.55 Monday, after terms of the financing were announced to the public.

The company has granted the underwriter an overallotment option to purchase up to an additional 15% of the units at a price of $4.50 per unit, on the same terms and conditions for up to 30 days after the closing date. If the option is exercised, total gross proceeds to Metallica will rise to over $34.5 million.

Under the agreement, Metallica will pay the underwriter a cash commission of 5% of the gross proceeds of the units sold pursuant to the financing, which is scheduled to close on Dec. 20.

Richard Hall, Metallica’s Denver-based chief executive officer, said about US$14 million will be devoted to Cerro San Pedro, where the company recently won a court ruling enabling it to continue using explosives on the property

Metallica is deploying heap leach mining methods at the site and hopes to reach the commercial production stage by the third quarter of 2007, Mr. Hall said

The Cerro San Pedro property is located, approximately 20 kilometers outside the city of San Luis Potosi.

The company is forecasting an average annual production rate of approximately 85,500 oz of gold and 2 million oz of silver, or approximately 115,000 oz of gold-equivalent, over an estimated nine-year mine life.

Part of the proceeds of the financing will also be used to fund exploration work at properties in Chile and Alaska, Mr. Hall said.