Zaruma finances under TSX listing review

2009-01-30 10:39 ET - News Release

Dr. Thomas Utter reports

ZARUMA RESOURCES REPORTS TSX REVIEWING LISTING

Zaruma Resources Inc. has been advised by the Toronto Stock Exchange that the TSX is reviewing the eligibility for continued listing on the TSX of the common shares of the company.

It is the company's understanding that the TSX is primarily concerned with the company's financial condition. At the moment, the company's wholly owned subsidiary, Minerales Libertad, S.A. de C.V. (ML), is in debt to Empresa Minera Los Quenuales S.A. (EMLQ), a subsidiary of Glencore International AG, for financing $24.3-million (U.S.) of the capital cost of the 75-million-pound Luz del Cobre copper leach project in San Antonio, Sonora, Mexico.

Development was suspended in October, 2008, when the company announced that it had not been able to raise additional financing to complete the project.

There is also approximately $10-million (U.S.) owing to suppliers and contractors for work performed prior to the suspension of the project, which was then approximately four months from commencing production. Since the suspension of development, the estimated cash cost of producing copper has dropped to $1.15 (U.S.) per pound.

The company reported in Stockwatch Jan. 28, 2009, that as a consequence of being in default under the credit agreement with EMLQ, EMLQ claimed the voting rights for the shares of ML owned by Zaruma, and purported to pass a shareholders' resolution replacing the Zaruma officers on ML's board of directors.

The company has been granted 60 days to comply with all requirements for continued listing. Management is taking all the necessary actions to address the situation in current difficult financial markets.

As recently reported (news in Stockwatch Jan. 28, 2009), the company proposed to EMLQ that at the estimated capital cost of approximately $2-million (U.S.), ML should commence gold production from gold mineralization located close to the Luz del Cobre project, which could result in leaching 31,000 ounces of gold with a net cash flow from operations of $15-million (U.S.) in the first 12 months of production. Additional gold resources on site would likely be sufficient for at least an additional two years of production. EMLQ is considering the proposal.

In addition to the copper and surface gold material referred to above, the Realito area of the company's San Antonio property holds measured and indicated gold resources of 551,000 tonnes at a grade of 4.37 grams per tonne for 244,000 ounces, and 162,000 tonnes of inferred resources at a grade of 3.97 g/t for 21,000 ounces, NI 43-101-compliant estimates reported in Stockwatch Aug. 20, 2004, when gold was priced at $375 per ounce (report by Micon International Limited, qualified person: Eugene Puritch, PEng). The close to surface Realito open pit and underground resources are mostly open down dip and along strike and are considered to have untested significant upside resource potential. Note: Mineral resources that are not mineral reserves do not have demonstrated economic viability.

The company's 11,000-hectare San Antonio property is highly prospective for both gold and copper deposits, and is considered geologically to be part of an extensive iron-oxide-gold-copper system. The recently reported new discovery of primary copper mineralization with persistent alteration in drill holes at Carrizo, in the central part of the property, supports this interpretation. Additionally, the shallow near-surface oxide copper mineralization found at Sapo is metallurgically similar to the Luz del Cobre copper deposit, located six kilometres to the northeast. Further drilling is warranted to assess the economic significance, but it is believed that open pit and leachable copper reserves can be identified at Sapo in addition to a possible major discovery of primary copper at Carrizo. The very successful exploration on the 1,000-hectare Sapo-Carrizo parcel is being financed by EMLQ on an earn-in basis, whereby it can earn a 51-per-cent interest in the property by expending $2.25-million (U.S.) on exploration and paying ML $2-million (U.S.).

We seek Safe Harbor.