Rey Salomon Gold Property Update
Vaudreuil-Dorion (Quebec), October 19, 2012– Rocmec Mining Inc. (the "Corporation" or "Rocmec") (TSX-V Symbol: RMI), is pleased to announce that its mining operations in Peru generated gold sales for an amount of approximately US$308,000 following the mill commissioning that produced a total of 200.3 gold ounces. Rocmec's 50 tpd Carbon-in-pulp (CIP) milling plant processed the mineralized ore and the gold was extracted from the gold loaded carbon at a recognized precious metal refinery located in Lima, Peru. The revenues generated from the gold sales were used to offset a portion of the development, production and milling costs of the Rey Salomon property.
The summer months enabled the Corporation to confirm various metallurgic parameters, train the local workforce and establish certain logistical procedures necessary to support full time mill operations at the Rey Salomon property. During the same period, underground development progressed at a steady pace and aimed at building a safe working environment. The resulting development ore was processed directly at the Corporation's mill, generating gold sales. The mining crew is now in place, trained and ready to start underground mining operations.
Rocmec is pleased with the progress made in such a short period of time and fully recognizes the worthiness of the property. In order to advance the start of production and continue mine development on the Rey Salomon property, additional funds will be required. The Corporation is therefore pleased to announce that its current joint venture partner, Chazel Capital Inc. ("Chazel"), has agreed to raise $671,750 and, with the exception of an amount of $90,000 to be disbursed directly to Rocmec, to invest such amount in the Rey Salomon property in exchange for an additional 15% interest in the project (the "Transaction"). Taking into consideration this investment, Rocmec's interest in the property shall be reduced from 50% to 35%.
In connection with the Transaction, on October 18, 2012, Rocmec and Chazel entered into an addendum (the "Addendum") to the joint venture agreement entered into by the same parties in November 2011 (as announced by press release on November 15, 2011). The Addendum provides for, among other things, the following terms and conditions: (i) for an initial period of 7 years, Rocmec will be entitled to 35% of the profits generated from the Rey Salomon property while Chazel and its financial partners will be entitled to 65% of the profits, and (ii) at the end of the 7-year period, Rocmec will be entitled to 60% of the profits whereas Chazel will be entitled to 40% of the profits. The initial period of 7 years will commence once production at the Rey Salomon property has reached 400 gold ounces per month. Until the commencement of such initial 7-year period, the allocation of the profits generated from the Rey Salomon property will increase gradually from 50% to 65% in the case of Chazel and decrease gradually from 50% to 35% in the case of Rocmec pursuant to a schedule provided for in the Addendum that is based on the aggregate amount raised by Chazel as part of the total investment of $671,750.
Rocmec will remain the mine operator and will have the option to buy back the 15% interest on or before July 31, 2013, at a price equal to the addition of the two following amounts: (i) $300,000, being an amount that has already been expended by Chazel and that will be credited from the total amount of $671,750, and (ii) the portion of the total amount of $671,750 exceeding $300,000 that will have been raised by Chazel as of the date on which Rocmec exercises its option to repurchase, carrying a 35% premium.
Mr. Gérald Désourdy, Rocmec's Chairman of the Board states: "The progress accomplished and this Transaction are key for the long term growth of Rocmec as a mine operator. Thorough independent reviews and negotiations took place for the Addendum with our joint venture partner. Considering the fact that there is a related-party relationship between the current Chief Executive Officer of Rocmec and Chazel and in order to maintain impartiality, it was determined that it was in the best interests of our shareholders and essential to have an independent review of the Addendum over which I presided with the involvement of independent Board members".
André Savard, who is the President and Chief Executive Officer and director of the Corporation, is also the Chairman and majority shareholder of Chazel and consequently, the Transaction was concluded on a non-arm's length basis and constitutes a "related party transaction" as defined under Multilateral Instrument 61-101 - Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Transaction is exempt from the valuation and minority shareholder approval requirements of MI 61-101 by virtue of the exemptions contained in Sections 5.5(a) and 5.7(1)(a) of MI 61-101 based on that neither the fair market value of the subject matter of, nor the fair market value of the consideration for, the Transaction exceeds 25% of Rocmec's market capitalization. Chazel and Rocmec were not related parties at the time of signing the joint venture agreement in November 2011 (described above), however became related parties due to the appointment of Mr. Savard as President and Chief Executive Officer and director of Rocmec in February 2012.
Completion of the Transaction is subject to the approval of the TSX Venture Exchange.
The Rey Salomon concessions are currently being developed under a tight schedule at no cost and no dilution to our shareholders under a joint venture agreement and represent a key concept for the Corporation's corporate strategy aimed at eliminating its debts and increasing its market value.
Subject to the approval of the TSX Venture Exchange, Rocmec also announces that it wishes to proceed with payment of an amount totaling $31,357.61, representing the interest due on the convertible redeemable unsecured debentures of Rocmec, bearing an annual interest rate of 7.5% and maturing in December 2014, through the issuance of 272,675 common shares of Rocmec at a deemed price of $0.115 per share. As announced by Rocmec by way of press release on May 8, 2012, the interest on such debentures is payable by Rocmec on a quarterly basis in cash and/or common shares of Rocmec, at its own discretion.
The common shares issued pursuant to the conversion will be subject to a four-month and one day hold period from the date of issuance of said common shares.
Rocmec is active in the exploration and the development of gold resources in Quebec and Peru. The Corporation holds a gold property with resources recognised in accordance with NI43-101, a modular treatment plant and also an exclusive license for the thermal fragmentation mining method for exploiting narrow-vein ore deposits.
The company's growth strategy is based on:
The development of its gold deposits with the objective of producing revenue from its operations;
• Increasing the value of its mining assets by prioritizing the exploration targets; and
• The commercialisation and employment of its thermal fragmentation technology.
For additional information:
John Stella, Investor relations (514) 718-7976
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
This press release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future exploration drilling, exploration and production activities and events or developments that the Corporation expects, are forward looking statements. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions.
Corporation Minière ROCMEC Mining Inc. 162 Saint-Charles Avenue, Vaudreuil-Dorion (Quebec) J7V 2L1
Tel: (450) 510-4442 Fax: (450) 510-9901 www.rocmec.com