South Atlantic looks to purchase Zinkgruvan

Vancouver — South Atlantic Ventures (SAA-V) has inked a deal with Rio Tinto (RPT-N) to purchase the Zinkgruvan mine located in southern Sweden.

Zinkgruvan is one of the largest underground mines in Europe and has been producing zinc, lead and silver on a continuous basis since 1857. The 800,000 tonne per year operation and processing facility produced 145 million lbs. zinc, 70 million lbs. lead and 1.8 million oz. silver last year.

The total proven and probable reserves are estimated at 9.5 million tonnes averaging 9.8% zinc, 4.8% lead and 97 grams silver per tonne. The total measured, indicated and inferred resources are pegged at 10.4 million tonnes averaging 9.7% zinc, 3.9% lead and 94 grams silver per tonne. Additional indicated and inferred copper resources are pegged at 3.5 million tonnes averaging 3.1% copper, averaging 49 grams silver and 0.4% zinc. The resources are reported exclusive of reserves and the reserves figures include estimated mining dilution and are exclusive of stope pillars.

South Atlantic will spend US$100 million in cash plus payments for working capital and a US$1 million non-refundable deposit. In addition, the junior will pay to Rio Tinto a maximum of US$5 million in price participation payments based on the performance of zinc, lead and silver prices for a period of up to two years.

"Strength has returned to global base metal equities and the market is experiencing strong performance in base metal prices," commented Ted Posey, president of South Atlantic. "The acquisition of the Zinkgruvan mine provides a timely investment opportunity for South Atlantic."

South Atlantic has almost completed its due diligence and the transaction is expected to close once the due diligence has been accepted and the respective boards of directors have inked the formal sale and purchase agreement as well as the necessary regulatory approvals and financing. South Atlantic expects the deal to close in the second quarter of 2004.

The current mine plan estimates a 19-year mine life based on reserves and resources. South Atlantic believes that there is significant potential to expand the mine. In addition, there are numerous under explored regional targets that are part of the land package. Adjacent to existing underground infrastructure, weigh in at about 3.5 million tonnes grading 3.1% copper.

Once the acquisition is completed, South Atlantic, intends to fast-track studies in order to incorporate the unexploited copper resources into the mine plan. These resources lie adjacent to existing underground infrastructure.

When combined with its 38% interest in the Storliden mine, South Atlantic would be poised to produce over 170 million lbs. of zinc, and 10 million lbs. of copper in 2004.