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Message: Zaruma Resources Announces Default Notice

Zaruma Resources Announces Default Notice

posted on Jan 28, 2009 04:35AM

Zaruma Resources Announces Default Notice


Toronto, Ontario, Canada. Zaruma Resources Inc. (TSX-ZMR) today announced that its wholly owned subsidiary, Minerales Libertad, S.A. de C.V., (“ML”), had received a written Notice of Default from Empresa Minerales Los Quenuales S.A., (“EMLQ”), under the terms of the Credit Agreement whereby EMLQ, a member of the Glencore International AG group of companies, (“Glencore”), was financing the development of the Luz del Cobre copper project in Sonora, Mexico.

ML borrowed US$23.5 million from EMLQ, and when no further funding was made available in October, 2008, advised EMLQ that it was no longer able to pay its debts generally as they became due. Amounts outstanding relate to the capital costs incurred in developing the mine, purchasing the necessary processing equipment and building the infrastructure. Development of the project was halted on October 17, 2008, approximately four months prior to the planned commencement of copper production. The projected cash cost of production of copper at Luz del Cobre is currently US$1.15 per pound.

As a result of receiving the Notice of Default, the loan becomes immediately payable, a condition that was anticipated in the Quarterly Report to Shareholders of Zaruma released on November 13, 2008.

EMLQ holds the shares of ML as security for the loan, and one effect of the Notice of Default is that Zaruma may no longer vote the shares of ML regarding corporate matters of ML, as the voting rights pass to EMLQ. Under the laws of Mexico, EMLQ is obligated to safeguard and preserve the shares’ current value.

ML has presented an internal scoping study to Glencore indicating that by using existing equipment in place at Luz del Cobre, at a minor capital cost it can put into production in five months, a gold leaching operation which, at a gold price of US$800 per ounce, is expected to yield a net cash flow from operations of US$450,000 per month.

Zaruma recently announced a very successful first phase of a copper exploration project some eight kilometres from Luz del Cobre, concluding that the Sapo-Carrizo area had every indication of being an economic prospect, (see news release, December 11, 2008). The cost of this first phase was financed by EMLQ on an earn-in basis, whereby it can earn a 51% interest in the 1,000 hectare property by expending US$2,250,000 on exploration and paying ML US$2 million.

The shares of ML have a value far in excess of the debt to EMLQ, so Zaruma will take all necessary action to protect the interest of the shareholders.

Zaruma Resources Inc. is listed on The Toronto and Frankfurt Stock Exchanges, (symbol: ZMR). Common shares outstanding: 117,608,747.

This News Release contains forward-looking statements which are typically preceded by, followed by or including the words “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans” or similar expressions. Forward-looking statements are not guarantees of future performance as they involve risks, uncertainties and assumptions, including securing additional funding to continue its development programs.

For further information, please contact:

Zaruma Resources Inc.
20 Toronto Street
12th Floor
Toronto ON, M5C 2B8
Fax +1 416 367 3638

Dr. Thomas Utter
President and CEO
Tel. +49 6101 6367

Frank van de Water
CFO and Secretary

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