Mr. Michael Hudson reports
HANNAN ANNOUNCES US$2M JOGMEC JV ANNUAL BUDGET AT SAN MARTIN, PERU AND EXERCISE OF C$1.1M WARRANTS
Hannan Metals Ltd.'s joint venture partner in Peru, Japan Oil, Gas and Metals National Corp. (JOGMEC), has confirmed a $2-million (U.S.) budget from April, 2021, through to March, 2022, for the San Martin project. Additionally, during the current fiscal year, a total of 4,877,233 common share purchase warrants have been exercised, for aggregate gross proceeds to the company of $1.1-million.
- JOGMEC has confirmed a $2-million (U.S.) budget from April, 2021, through to March, 2022, for the 815-square-kilometre San Martin JV project as part of the second base earn-in period. Under the JV agreement, JOGMEC has the option to earn up to a 75-per-cent beneficial interest in the project by spending up to $35-million (U.S.) to deliver to the joint venture a feasibility study.
- An additional $1.1-million has been received from warrant exercises, which will finance general working capital and exploration within 1,339 square kilometres of mining concessions that Hannan has applied for in its own right in Peru, making it a top 10 in-country landholder.
- During 2021, work on the San Martin JV project will focus on three different scales from the large project scale, prospect definition to drill targeting, and include groundbreaking lidar airborne surveys over very large areas.
- Multiple field teams continue to work actively in the field undertaking reconnaissance prospecting and soil sampling at both the Tabalosos project at the San Martin JV project and at Hannan's 100-per-cent-owned Previsto project.
Michael Hudson, chief executive officer, stated: "We are thankful for JOGMEC's continued support and involvement at the San Martin JV sediment-hosted copper-silver project. We aim to have an active and successful year of continued high-grade copper and silver discoveries over large areas combined with social and environmental permitting advances. Equally, I would like to thank our shareholders for their support in bringing additional funds to the company, as we continue to advance our own exploration efforts to find large-scale mineral systems throughout Peru's frontier areas."
Hannan holds 2,154 square kilometres of granted concessions and applications and is a top 10 concession holder in Peru. The top 10 are dominated by some of the world's largest exploration and mining companies, and Hannan stands out as one of the very few juniors to acquire such a significant land position. Hannan is exploring 815 square kilometres at the San Martin JV area prospective for copper and silver. The company is also exploring 277 square kilometres of mining concessions prospective for copper-silver and in its own right in the San Martin area for sediment-hosted copper and silver, and 1,062 square kilometres of mining concessions prospective for copper-gold 100 per cent owned by Hannan, prospective for back arc porphyry copper-gold systems in central-eastern Peru.
The San Martin JV project is located in northeastern Peru. Project access is excellent via a proximal paved highway, while the altitude ranges from 400 metres to 1,600 metres in a region of high rainfall and predominant forest cover. Hannan has staked a total of 88 mineral concessions for a total of 815 square kilometres, covering multiple trends within a 120 km of combined strike for sedimentary-hosted copper-silver mineralization. A total of 45 granted mining concessions for 349 square kilometres have been granted, while the remaining 43 are under application.
The $2-million (U.S.) annual JV budget will focus on three different scales:
- At the project scale, work will identify the most prospective zones within the large 815-square-kilometre land position by completing the regional-scale stream sediment sampling, combined with large-scale lidar airborne surveys to define geology, structure, outcrops and access in the densely forested terrain.
- At the prospect scale, targeted prospecting will then be undertaken in areas of interest with regional mapping along creeks and extensive soil sampling, with real-time portable XRF (X-ray fluorescence) analysis. Trial electrical geophysics will be undertaken to determine if reduced copper-rich horizons can be identified in the subsurface.
- At the drill scale, the company plans to complete environmental permitting over three separate areas during the year to set the joint venture up with large-scale and multiple drill targets for 2022.
The company also announces that during the current fiscal year a total of 4,877,233 common share purchase warrants have been exercised to date, for aggregate gross proceeds to the company of $1,098,339. No commission has been paid in connection with the exercise of the warrants. Proceeds are being used for the company's continuing exploration programs and for general working capital purposes.
The warrants were exercised pursuant to the terms of warrant certificates issued in connection with the closing of unit private placement financings undertaken by the company in July, 2018, April, 2019, and February, 2020. Each outstanding warrant is exercisable for one common share of the company. The April warrants originally comprised 2.5 million warrants at an exercise price of 15 cents and were exercised in full.
Following the exercise of the warrants, the company has 6,619,300 July warrants, 12,752,629 February warrants and two million warrants at 35 cents expiring on July 13, 2022, outstanding. If the July warrants are exercised in full by their expiry date of July 6, 2021, the company will receive additional proceeds of $1,654,825 from such exercise. The company has a total of 84,471,444 shares issued and outstanding as at today's date.
About the San Martin JOGMEC JV agreement (copper-silver, Peru, 87 mining concessions for 815 square kilometres)
On Nov. 30, 2020, Hannan announced that it had signed a binding letter agreement for a significant option and joint venture agreement with JOGMEC. Under the agreement, JOGMEC has the option to earn up to a 75-per-cent beneficial interest in the San Martin project by spending up to $35-million (U.S.) to deliver to the joint venture a feasibility study.
The agreement grants JOGMEC the option to earn an initial 51-per-cent ownership interest by financing $8-million in project expenditures at San Martin over a four-year period, subject to acceleration at JOGMEC's discretion. JOGMEC, at its election, can then earn:
- An additional 16-per-cent interest for a total 67-per-cent ownership interest by achieving either a prefeasibility study or financing a further $12-million (U.S.) in project expenditures in amounts of at least $1-million (U.S.) per annum (for a $20-million (U.S.) total expenditure);
- Subject to owning a 67-per-cent interest, a further 8-per-cent interest for a total 75-per-cent ownership interest by achieving either a feasibility study or financing a further $15-million (U.S.) in project expenditures in amounts of at least $1-million (U.S.) per annum (for a $35-million (U.S.) total expenditure).
Should JOGMEC not proceed to a prefeasibility study or spend $2-million (U.S.) in total, Hannan shall have the right to purchase from JOGMEC for the sum of $1 (U.S.) and a 2-per-cent participating interest, whereby Hannan's participating interest will be increased to 51 per cent and JOGMEC's participating interest will be reduced to 49 per cent. At the completion of a feasibility study, JOGMEC has the right to either:
- Purchase up to an additional 10-per-cent participating interest from Hannan Metals (for a total 85-per-cent maximum capped participating interest) at fair value as determined in accordance with internationally recognized professional standards by an agreed-upon independent third party valuator;
- Or receive up to an additional 10-per-cent participating interest from Hannan (for a total 85-per-cent maximum capped participating interest) in consideration of JOGMEC's agreement to finance development of the project, by loan carrying Hannan until the San Martin project generates positive cash flow.
After $35-million (U.S.) has been spent by JOGMEC and before a feasibility study has been achieved, both parties will finance expenditures pro rata or dilute via a standard industry dilution formula. If the participating interest in the joint venture of any party is diluted to less than 5 per cent then that party's participating interest will be automatically converted to a 2.0-per-cent net smelter royalty (NSR), and the other party may at any time purchase 1.0 per cent of the 2.0-per-cent NSR for a cash payment of $1-million. Hannan will manage exploration at least until JOGMEC earns a 51-per-cent interest, after which the majority participant interest holder will be entitled to act as the operator of the joint venture. Initial exploration activities will focus on the collection of the geological, geophysical and geochemical data sets in the JV project areas.
Sediment-hosted stratiform copper-silver deposits are among the two most important copper sources in the world, the other being copper porphyries. They are also a major producer of silver. According to the World Silver Survey 2020 KGHM Polska Miedz's three copper-silver sediment-hosted mines in Poland are the leading silver producers in the world with 40.2 million ounces produced in 2019. This is almost twice the production of the second-largest producing mine. The Polish mines are also the sixth-largest global copper mines and in 2018, KGHM produced 30.3 million tonnes of ore at a grade of 1.49 per cent copper and 48.6 grams per tonne silver from a mineralized zone that averages 0.4 to 5.5 m thickness.
About Hannan Metals Ltd.
Hannan Metals is a natural resources and exploration company developing sustainable resources of metal needed to meet the transition to a low-carbon economy. Over the past decade, the team behind Hannan has forged a long and successful record of discovering, financing and advancing mineral projects in Europe and Peru. Hannan holds 1,864 square kilometres (186,400 hectares) of granted mineral concessions and applications in Peru, making it a top 10 in-country explorer by area.
Mr. Hudson, a qualified person as defined in National Instrument 43-101, has reviewed and approved the technical disclosure contained in this news release.
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