Summo arranges loan for Terrazas work (January 14, 2002)

Summo Minerals (SMA-T) is easing its cash crunch with a US$500,000 loan from major shareholder Resource Capital Fund II, and plans to use the money to complete a feasibility study on the Terrazas copper-zinc project in Mexico.

The loan is being advanced in exchange for an advance fee of 250,000 Summo shares, and will bear interest at the 1-month London Interbank Offer Rate (currently 1.85%) plus 4%. It matures at the end of 2005.

Summo has the option of paying back interest on the loan by issuing shares, and the loan itself is convertible at a price of 5.5 per share. Should Summo sell or joint-venture any of its major assets (which include Terrazas, the Lisbon Valley project in Utah, and Summo’s interest in Australian copper producer Matrix Metals), the loan becomes repayable, though the fund can waive that provision.

A prefeasibility study on Terrazas is now expected to come out during the first quarter of the year. Tests of acid heap-leaching on oxide material crushed to a 20-mm size indicated minimum recoveries of 85% of both copper and zinc.

Summo’s own scoping study projected annual production of 18,000 tonnes copper and 27,000 tonnes zinc from the project, which has a resource of 99 million tonnes grading 0.33% copper and 0.40% zinc. A pit with a stripping ratio of 0.69:1 has been designed around a resource of 61 million tonnes grading 0.36% copper and 0.58% zinc, at a cutoff grade of 0.15% copper.