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Message: New Debt Facilities and Cost Reductions

New Debt Facilities and Cost Reductions

posted on Dec 29, 2008 09:19AM
December 29, 2008
Amerigo Resources Ltd.: New Debt Facilities and Cost Reductions
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Dec. 29, 2008) -

All dollar amounts are $US unless otherwise stated

Amerigo Resources Ltd. (TSX:ARG) ("Amerigo" or the "Company") announced today that it has been successful in extending its existing banking line with a Chilean bank beyond its previous renewal date of December 15, 2008. The facility has also been increased to 3.5 million pesos (approximately $5.6 million) and has a next renewal date of June, 2009. The Company has also established a new line of credit of $5 million with a second Chilean bank with a renewal date of May 2009.

As outlined in the Company's Q3 report, the global financial crisis and resulting precipitous decline in metal prices has resulted in the Company incurring significant copper and molybdenum negative price settlement adjustments from October to December 2008. The Company is finalizing arrangements with its smelter counterparty Enami which provide for deferral of the negative copper price settlement adjustments incurred during this period. These amounts will most likely be repaid over a 12 month period commencing in April 2009. Similar arrangements are under discussion with Molymet, with whom the Company has contracts for the roasting and refining of its molybdenum production.

As a state owned entity, one of Enami's mandates is to support small to medium sized copper producers in Chile. The Chilean government has also recently announced that it will provide some copper price protection through Enami, although the precise details of this support have yet to be finalized.

In addition to various cost reductions that have been negotiated with contractors and suppliers, the Company has been successful in negotiating the partial deferral of energy cost payments to its energy supplier and of royalty payments to El Teniente.

Subject to energy and oil prices, smelting and refining terms and the price of molybdenum for 2009, the Company believes that it can reduce its cash costs before royalties to $1.20 to $1.25 per pound of copper during the course of 2009.

The combination of the above arrangements provides capacity for the Company, subject to copper prices, to meet its commitments on an ongoing basis into 2009. Management is however working on establishing new long term credit facilities of $10-20 million in the near term which will provide some additional medium term liquidity during this period of challenging market and operating conditions.

Amerigo's board of directors has also officially adopted the shareholder rights plan (the "Rights Plan") originally announced in the Company's December 16, 2008 news release, and the Company has entered into the Rights Plan with its transfer agent, both effective December 24, 2008.

Amerigo Resources Ltd. is a Canadian junior company producing copper and molybdenum from its MVC operations near Santiago, Chile.
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