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Significant Documents | Company Overview | Ajax Deposit | Preliminary Analysis | Technical Reports | Management | Board of Directors

Significant Documents



NEWS RELEASE


May 04, 2010
Abacus Mining and KGHM agree to form Strategic Joint Venture to advance the Afton-Ajax Copper-Gold Project into Production

Vancouver, B.C. May 4, 2010 — Abacus Mining & Exploration Corporation ("Abacus" or the "Company") is pleased to announce that it has signed an investment agreement (the "Investment Agreement") with KGHM Polska Miedź S.A. ("KGHM") to form a joint venture (the "Joint Venture") to advance Abacus' Afton-Ajax copper-gold project (the "Project") located near Kamloops, B.C. through bankable feasibility study ("BFS") and into production. KGHM is the world's ninth largest copper producer with annual production of over 500,000 tonnes, and the world's third largest silver producer with annual output approximating 1,100 tonnes.

A conference call and live audio webcast will be held on Tuesday, May 4, 2010 at 8:30 a.m. pacific time (11:30 a.m. eastern time). The live audio webcast and presentation can be accessed from Abacus' website at www.amemining.com.

Highlights of the Agreement:

  • Formation of a Joint Venture to fast track the development of a mine at the Afton-Ajax camp by combining Abacus' interests in the camp with the financial backing and operational expertise of a leading global copper and precious metals producer
  • Capital funding commitment by KGHM of US$37 million to fully fund the Project through BFS for a 51% interest in the Project
  • Funding provisions for the entire Project capex
  • Strategic partnership to jointly identify and develop other global targets leveraging Abacus' mineral exploration expertise and KGHM's financial strength and operational expertise
  • An immediate C$4.5 million private placement into Abacus by KGHM
  • Option for KGHM to acquire a further 29% interest in the Project upon completion of BFS for an additional payment of up to US$35 million

The transaction is expected to close by the end of the second quarter of 2010 or shortly thereafter, but no later than Sept. 30, 2010, and is subject to approval by Abacus' shareholders and the customary regulatory approvals.

Under the terms of the Investment Agreement, following an immediate private placement in Abacus of C$4.5 million, KGHM will invest US$37 million to fund the Project through BFS and earn a 51% interest in the Project. Upon completion of the BFS, KGHM will have the option to acquire a further 29% in the Joint Venture (for a total 80% interest in the Joint Venture) for cash consideration of US$0.025 per pound copper for 29% of the Proven and Probable copper equivalent reserve, to a maximum of US$35 million. At that time, KGHM will arrange the financing for its (80%) proportionate interest in the Project capex and will offer to arrange financing for Abacus' (20%) proportionate interest in the Project capex on commercially reasonable terms.

Commenting on the transaction, Tom McKeever, Executive Chairman of Abacus said: "The alignment of our interests with a major global copper producer such as KGHM has several distinct advantages for Abacus and its plans to advance the Afton-Ajax Project to production. It provides the capital funding for corporate operations during the bankable feasibility stage and development stage of the Joint Venture without the need for further financing. It also eliminates the uncertainty associated with financing the Project's capital requirements. The additional upside potential to collaborate with KGHM on future projects provides an exciting opportunity to create considerable shareholder value. I believe this transaction provides an exceptional opportunity to accelerate Abacus' transition into a world class copper and precious metals group."

Mr. Herbert Wirth, President of The Management Board of KGHM added: "We at KGHM are very pleased to have entered into this partnership with Abacus Mining to jointly advance the Afton-Ajax Project into an industry leading mining operation. We anticipate that from this collaborative relationship will flow a number of other prospective copper projects in Canada and elsewhere, to meet our growing production profile."

A) Details of the Initial Investment

i.  C$4.5 million Private Placement into Abacus Upon signing the Investment Agreement, KGHM has agreed to immediately enter into a C$4.5 million private placement involving the purchase of 15 million common shares (approximately 8.75% of the shares issued and outstanding following the private placement) in the capital of Abacus at a price of C$0.30 per share. The private placement is expected to close not later than May 10, 2010 and is subject to regulatory approval.

ii.  Payment to the Joint Venture of US$37 million in cash to acquire 51% interest KGHM will acquire a 51% interest in the Project by investing US$37 million in cash at closing of the transaction, to be allocated to: (A) completion of the BFS and certain other obligations, and (B) exploration of other targets in the Afton-Ajax Camp, in accordance with a jointly approved budget.

B) Development Option

Following the completion of the BFS, KGHM will have the option to acquire an additional 29% interest, for a total 80% direct interest in the Joint Venture, for cash consideration of US$0.025 per pound for the corresponding 29% of Proven & Probable copper equivalent reserves (as defined in the BFS) up to a maximum of US$35 million. This payment will be applied directly towards Abacus' proportionate share of the Project's capital costs, estimated at US$535 million in Abacus' Preliminary Economic Assessment ("PEA") written by Wardrop Engineering Inc. and dated July 31, 2009.

KGHM will arrange the financing for its proportionate share of 80% of the Project's capital costs and will offer to arrange the financing for the balance of Abacus' proportionate share of 20% of the Project's capital costs on commercially reasonable terms.

CIBC World Markets Inc. has acted as financial advisor and Davis LLP has acted as legal advisor to Abacus. Abacus has received an opinion from CIBC World Markets to the effect that, as of the date thereof, the proposed transaction is fair, from a financial viewpoint. TD Securities Inc. has acted as financial advisor and Stikeman Elliott LLP and Chadbourne & Park LLP have acted as legal advisors to KGHM.


Company Overview


In June 2009 Abacus completed a compliant positive preliminary economic analysis on the Ajax property after a series of successful drill programs from 2005-2008. The results of the PEA indicate the potential for a robust mining operation capable of processing 60,000 tonnes of ore per day. Metal prices used for the base case are US $2.00 per pound copper and US $700 per ounce gold.

The Ajax property comprises eight 100%-owned Crown grants including the historic Ajax East and West pits. Also included is an interest in claims between the pits acquired as a result of a joint venture agreement signed with New Gold Inc. The Ajax area lies nine kilometres southeast along an existing haul road from the Afton mill, shop facilities, tailings area, and water rights which Abacus agreed to purchase in 2005 from Teck-Cominco.


Highlights (all figures in U.S. dollars and pre-tax)

  • Average annual production estimated at 106 million pounds of copper and 99,400 ounces of gold in concentrate
  • Net present value of $192.7 million discounted at 8%
  • Mine life of approximately 23 years
  • Return on initial capital expenditures of $535 million is 40.4%
  • Existing infrastructure including mill buildings, shop facilities, tailings area, haul road, water rights and related permits
  • Excellent exploration potential for expansion on strike and at depth

Ajax Deposit


The 43-101 compliant resource estimate is based on 411 exploration drill holes, with more than 140,000 metres completed in the Ajax West, Ajax East and the New Gold joint venture ground in between. The mineral resources of the Ajax deposit were classified in accordance with CIM Definition Standards and 43-101 Best Practices. The mineralization is classified into Measured, Indicated and Inferred mineral resource categories.

The following table below presents the estimate of the resource of the Ajax deposit as at June 2009. At a 0.13% copper equivalent cut-off, the Measured and Indicated resource totals 442 million tonnes at an average grade of 0.30% copper and 0.19 g/t gold, with an additional 80.6 million tonnes of Inferred at 0.22% copper and 0.16 g/t gold.


A block model was created from the drill data, and conceptual pit shells were generated using the Lerchs-Grossmann algorithm. The resource was then estimated within the ultimate designed pit, and summarized in the following table, at a US$3.84/t Net Smelter Return ("NSR") cut-off grade. This estimated pit inventory resource is the basis of the PEA mine plan and financial analysis.


Approximately 15.5% of the mineral resources in the mine production plan are classified as inferred. Mineral resources are not mineral reserves and do not have demonstrated economic viability. There are no known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant issues which may materially affect the mineral resource.

Approximately 80% of the resource is located on land 100% owned by the Company. The remaining 20% of the resource is located within the ground covered by a joint venture with New Gold, Inc. As previously announced (October 30, 2007), interests in the joint venture down to 500 metres below surface are 60% Abacus and 40% New Gold. New Gold will have 90 days from receipt of the PEA report to elect to either accept agreed terms, or revert to a 10% net profits interests.


Preliminary Analysis


The preliminary analysis on Ajax underscores the potential for a robust mining operation. The National Instrument 43-101 compliant study completed by Wardrop, a Tetra Tech Company ("Wardrop"), contains production parameters, capital costs, operating costs, and other financial projections for an open pit mine processing 60,000 tonnes of mill feed per day. The metal prices used for the base case were US $2.00 per pound copper and US $700 per ounce gold.

The preliminary analysis on Ajax underscores the potential for a robust mining operation. The National Instrument 43-101 compliant study completed by Wardrop, a Tetra Tech Company ("Wardrop"), contains production parameters, capital costs, operating costs, and other financial projections for an open pit mine processing 60,000 tonnes of mill feed per day. The metal prices used for the base case were US $2.00 per pound copper and US $700 per ounce gold.


Base Case Highlights (all figures in U.S. dollars and pre-tax)

  • Net present value of $192.7 million discounted at 8%
  • Return on initial capital expenditures of $535 million is 40.4%
  • Average life of mine cash costs of $1.17 per pound copper net of gold credit at $700 per ounce
  • Average annual production estimated at 106 million pounds of copper and 99,400 ounces of gold in concentrate
  • Mine life of approximately 23 years
  • The pit inventory resource contains 2.6 billion pounds of copper and 2.4 million ounces of gold in the measured and indicated category
  • Highly sensitive to the upward movement in copper and gold prices

The following sensitivity tables provide net present value, internal rate of return, return on initial capital and payback period data at a discount rate of 8%:


The following table presents the cash cost per pound of copper which includes all site operating cost, concentrate shipping cost and concentrate smelting cost offset by a credit for payable gold production:


Mining and Milling

A detailed open pit mine plan was completed to supply 21.9 million tonnes of ore per year (60,000 tonnes per day) to the mill. The mine life is approximately 23 years and has an average strip ratio of 1.7:1 (waste tonnes: mill feed tonnes). The open pit was designed with 12 metre benches and pit slopes adjusted to comply with the geotechnical analysis. The ore and waste will be drilled for blasting utilizing electric drills capable of drilling 311 millimetre diameter blast-holes. Blasted material will then be loaded into 228 tonne haul trucks with 35 cubic metre electric rope shovels and 19 cubic metre front-end loaders.

The ore will be delivered to a 60 inch x 89 inch gyratory primary crusher. The crushed ore will feed to a conventional copper concentrator. The concentrator design includes a single 40 foot x 25 foot SAG mill followed by two 24 foot x 42 foot ball mills. Copper and gold are then recovered in concentrate through a conventional flotation circuit. The concentrate will then be filtered and shipped by rail to the port in Vancouver. Metal production in concentrate is estimated at approximately 106 million pounds of copper and 99,400 ounces of gold per year.

Metallurgical recovery equations were based on a series of lock-cycle recovery tests performed by G&T Labs of Kamloops, B.C. The expected recoveries were determined to be 81.5% copper and 81.1% gold providing a 25% copper concentrate at the average mill feed grade. Further metallurgical testing will be carried out in conjunction with the prefeasibility work.

Location and Infrastructure

The Ajax property is favorably situated in south-central British Columbia, approximately 10 kilometres from the city of Kamloops. The local economy is largely resource and service oriented with a major emphasis on forestry, mining, agriculture, and ranching. The city is a central trading hub to a region with population of 127,000 with established transportation routes and communication infrastructure.

The infrastructure that presently exists near the Ajax property is significant. The property is surrounded by two major highways and rail lines with direct access to deep sea ports. Power and water are also readily available, with both running up to the historic Afton mine camp that was operated by Teck between the 1970s and 1990s.

On the property, access is gained by haul roads constructed by Teck in the 1980s. The haul roads connect the Ajax area to the Company's tailings storage facility, and to other high priority targets in the Afton area, including the Rainbow and DM zones.

Capital

The total capital cost to commence production is estimated at $535 million. Included in the capital estimate are costs for the initial mining equipment, pre-production stripping, a 60,000 tonnes per day copper concentrator, shop, warehouse, infrastructure and indirect costs associated with the design engineering procurement and construction, commissioning, spare parts, contingency and owner's cost. The costs also include the initial expansion of the existing tailings facility. All capital costs are estimated to an accuracy of + 25% / -5%.

Environmental

In preparation for permitting an environmental baseline study was completed to assess the current environmental status across the mine site. The study includes evaluation of the flora and fauna, ground and surface water quality and static testing for acid generating potential. The study concluded that no significant issues are present that would impede the permitting process. The static testing for acid generating suggested the material to be mined is not acid generating. Kinetic testing is scheduled for completion during the upcoming pre-feasibility study.

Summary

The results of the PEA confirm the confidence in the economic viability of the Ajax project. In addition to the quality resource, the location of the project and existing infrastructure gives Abacus a significant advantage. The tailings storage facility can be re-activated with little effort. Water and power are readily available, along with access to major trucking routes and railways.

The focus for Abacus will be to complete a prefeasibility study on the Ajax deposit by the end of 2009. Drilling is planned on the Ajax East extension area with the intent to convert inferred resources into a measured and indicated status. Results of this drilling could also add additional tonnes of higher grade material and improve the economics shown in the PEA. The Ajax deposit remains open on strike and at depth.


Technical Reports


NI 43-101 Compliant Resource
2009 - February (Afton-Ajax E-W) View PDF (4.03 MB)

Preliminary Economic Assessment - Ajax Deposit
July 31, 2009 (Afton-Ajax E-W) View PDF (4.20 MB)

Historic Reports
2007 - May (Ajax) View PDF (4.26 MB)
2005 - June (Comet Davenport) View PDF (4.88 MB)
2005 - June (Rainbow) View PDF (1.90 MB)


Management


Michael McInnis
President and CEO

Mr. McInnis is a professional geologist with over 25 years of experience successfully managing junior mining companies, most recently as President and CEO of Riverstone Resources Inc., now True Gold Mining Inc. where he is presently Vice-Chairman. He has been a director of Abacus since 2002 and is a director of a number of other junior mining companies.

Jeannine Webb
Chief Financial Officer

Jeannine Webb, CPA (CGA), has over 25 years of experience in the mineral exploration sector as Chief Financial Officer and Corporate Secretary for various private, junior "small cap" domestic and international public companies. She currently serves as CFO and Corporate Secretary for several public companies.


Board of Directors


Michael McInnis
Chairman

Mr. McInnis is a professional geologist with over 25 years of experience successfully managing junior mining companies, most recently as President and CEO of Riverstone Resources Inc., now True Gold Mining Inc. where he is presently Vice-Chairman. He has been a director of Abacus since 2002 and is a director of a number of other junior mining companies.

Victor Lazarovici
Director

Mr. Lazarovici has worked as a highly ranked and successful global metals and mining analyst for the past 20 years. Prior to entering the financial sector as an analyst, he spent over 14 years in the corporate sector in engineering, financial management and corporate development roles. Most recently, Mr. Lazarovici was the managing director and senior base metals and minerals analyst for BMO Capital Markets in New York. There he led a team of analysts covering the base metals sector. The team was consistently ranked amongst the top tier in all of the major Canadian polls of institutional investors. Mr. Lazarovici has also served as a managing director and senior metals analyst for Smith Barney, where he was consistently ranked in the top tier of Wall Street mining and metals analysts in all of the major U.S. polls of institutional investors. He is the only analyst to receive the top honour in both the Canadian and U.S. Greenwich Associates surveys. He also worked at UBS, HSBC and Scotia Capital.

Tom McKeever
Director

The appointment of Mr. McKeever is a significant step in the development of Abacus as a mineral exploration and development company. Mr. McKeever has a distinguished career that spans over forty years, most of which were spent as senior management in the mining and metal trading industry. Mr. McKeever's experience and advice will benefit Abacus as it rapidly advances the development of our copper gold resources in the historical Afton mining camp.

Louis Montpellier
Director

Mr. Montpellier has been practicing law in Vancouver, British Columbia since 1981 and since 1983 has worked exclusively in the capital markets as counsel to emerging issuers and listed public companies engaged in mineral exploration and mining. Mr. Montpellier has assisted a wide range of businesses across the entire spectrum of corporate finance activities, from accessing seed capital for private companies through to IPO's and subsequent public and private financings. Mr. Montpellier has worked extensively in the field of mergers and acquisitions, hostile and friendly takeover bids, proxy contests, corporate reorganizations and arrangements. Mr. Montpellier also has experience in debt and project financing, acting both for lenders and borrowers, with a particular emphasis on the financing of mineral projects. Mr. Montpellier is identified in a number of publications including the Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada, the Lexpert Guide to the Leading 100 Industry Specialists in Canada, Who's Who Legal, the International Who's Who of Mining Lawyers, and The Best Lawyers in Canada, as one of Canada's leading mining lawyers. Mr. Montpellier also has a wide range of experience in the mineral exploration and development business.


Contact Information


Abacus Mining & Exploration Corp.
Suite 615, 800 West Pender Street
Vancouver, BC V6C 2V6
Canada

Tim Mikula (Corporate Development)
tmikula@amemining.ca

t. 604.682.0301
f. 604.682.0307


Corporate Profile on Stockhouse


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