Summo finances Lisbon Valley project

Junior Summo Minerals (SMA-T) is joining forces with St. Mary Land & Exploration (MARY-Q) to develop the Lisbon Valley copper project, southeast of Moab, Utah.

A new company, Lisbon Valley Mining, will be formed to arrange financing, complete development and oversee the project. Summo will hold a 45% interest in the company and act as operator, with St. Mary holding the balance.

St. Mary has granted Summo a 1-year option to buy an additional 5.1% interest in Lisbon Valley Mining.

The project will be developed into an open-pit mine, with processing achieved by heap leaching and solvent extraction-electrowinning (SX-EW). Annual production is projected to be 39 million lb. cathode copper over a mine life of eight to ten years. The cash operating cost is pegged at US47 cents per lb.

Minable reserves, contained in three deposits, total 35 million tonnes grading 0.46% copper at an average stripping ratio of 1.84-To-1.

The project’s capital cost is estimted to be US$58.2 million, including construction costs, contingencies, working capital and a US$5-Million debt service reserve.

In an arrangement with ING Capital and Heller Financial, Summo has arranged up to US$45 million in financing. The arrangement is contingent on Summo’s ability to raise the remaining US$13.2 million required for capital expenditures.

As part of the arrangement with St. Mary, Summo will transfer ownership of the Lisbon Valley project to Lisbon Valley Mining, including all permits and contracts, US$3.2 million in cash and the US$45-Million senior debt facility.

In return, St. Mary will contribute US$4 million in cash and US$8.6 million in letters of credit to Lisbon Valley Mining. St. Mary will also relinquish its 49.6% stake in Summo, representing some 9.9 million shares, which will be returned to Summo for cancellation.

Upon completion of the plan of arrangement, Summo will have 10.1 million shares outstanding.

Summo has also entered into financing agreements with the mining and construction contractors at the project. The company will issue the mining contractor a US$3-Million note, convertible into Summo shares at $1.20. The note carries a 10% interest rate and includes a half purchase warrant to buy one share at $1.25 for two years.

In a separate agreement with the construction contractor, Summo can convert the last US$1.5 million of billing into an 8% note, which would be convertible into its common shares at $1.20.

Summo has completed all necessary permitting to begin construction and received a “record of decision” approving the Lisbon Valley plan of operations, as well as a final environmental impact statement approved by the U.S. Bureau of Land Management. However, a group of environmentalists and anti-Mining activists recently filed a petition to have the construction permit stayed.

Summo responded to this action stating, “All of the issues raised by the groups in their appeal have been addressed by the regulatory community in the various permits issued for the project.”

Summo Minerals was formed three years ago, its mandate being to acquire low-Cost, medium-size oxide copper deposits that can be subjected to heap-leaching and SX-EW.

In addition to Lisbon Valley, the company’s portfolio contains: the Champion project, in north-Central New Mexico; the Cashin project, in western Colorado; and the Copper Spur property, also in Colorado.

At the beginning of this year, Summo acquired an option to buy the former-producing Cactus open-pit, heap-leach gold mine in Kern Cty., Calif.

The property is said to represent an opportunity to pursue a significant resource at a reasonable cost and does not signal a departure from its primary focus of developing open-pit, heap-leach copper properties.

The Cactus mine has, since 1986, produced 400,000 oz. gold and 3 million oz.

silver.

As part of a 6-Month due diligence, the company will spend up to $250,000 drill-Testing the continuity of an unmined extension of the Shumake deposit.

Widely spaced drill intercepts from a 2,000-by-1,000-ft. area average a grade of 0.07 oz. gold over a thickness of 109 ft. and a depth of 600 ft.

Summo recently arranged a $6.8-Million private placement of 6.8 million units priced at a $1 each. A unit comprises one common share and one warrant, entitling the purchase of an additional share at $1.25 for a period of two years.