Mexican Silver Mines Ltd. ("Mexican Silver") (TSXV: MSM; Frankfurt WKN: A0MSLE) is pleased to announce that is has acquired (the "Acquisition") Rio Alto Mining Limited ("Rio Alto "), subject to TSX Venture Exchange final approval.  Pursuant to the Acquisition, Rio Alto became a wholly-owned subsidiary of Mexican Silver and all shares and warrants of Rio Alto were exchanged for shares and warrants of Mexican Silver on a one for one basis, with the warrants of Mexican Silver issued in exchange for the warrants of Rio Alto having substantially the same terms and conditions of the Rio Alto warrants.  Pursuant to the Acquisition, Mexican Silver issued a total of 35,143,411 shares, 4 million warrants and 224,000 finder's warrants to the former holders of Rio Alto shares, warrants and finder's warrants.

 

In conjunction with the Acquisition, a total of 8,537,990 Mexican Silver shares issued to the former principals of Rio Alto are held in escrow, one-quarter of such shares being released from escrow on each of the 12 month, 16 month, 20 month and 24 month anniversaries of the closing date.  

 

The expiry date of the 930,000 options held by the departing directors and officers of Mexican Silver has been extended to May 7, 2012 subject to TSX Venture and, if applicable, shareholder approval.

 

The Acquisition is subject to TSX Venture Exchange final approval.  Conditional acceptance of the Acquisition was received from the TSX Venture Exchange on March 18, 2009.

 

After giving effect to the Acquisition, Mexican Silver has 75,550,424 shares issued and outstanding.

 

Please refer to Mexican Silver's news releases of March 10, 2009, April 6, 2009 and June 18, 2009 for additional information regarding the Acquisition and Rio Alto.

 

Option and Earn-In Right Purchase Agreement

Mexican Silver is also pleased to announce that prior to the completion of the Acquisition, Rio Alto acquired an option (the "Option") to purchase all of the shares of La Arena S.A. in consideration of cash payments of US$47.55 million (subject to adjustment) and the right (the "Earn-in Right") to acquire up to 38.7% of the shares of La Arena S.A. by incurring expenditures of up to US$30 million on the La Arena gold-copper project ("La Arena Project ") in Peru, pursuant to the Option and Earn-In Right Purchase Agreement with IAMGold Quebec Management Inc. ("IAMGold") and La Arena S.A. 

 

The consideration paid to IAMGold for the Option and Earn-in Right was US$1 million, which was paid by the issue of 5,789,717 common shares of Rio Alto at the deemed price of $0.20 per share and a 5.5% interest in Rio Alto was provided to IAMGold represented by the issuance of 2,234,794 Rio Alto Shares.  Additionally, warrants were issued entitling IAMGold to purchase 1.5 million Rio Alto common shares at any time before June 25, 2012, upon payment of the conversion price of $0.30.  All of the Rio Alto shares and warrants issued to IAMGold were exchanged for Mexican Silver shares and warrants pursuant to the Acquisition as described above.

 

Please refer to Mexican Silver's news release of April 6, 2009 and June 18, 2009 for additional information regarding the Option and Earn-In Right Purchase Agreement and the La Arena Project. 

 

"The option on the sale of La Arena further streamlines IAMGOLD's core assets," stated Joseph Conway President & CEO of IAMGOLD.  "We are confident that Mexican Silver Mines will be successful in advancing the project to production.  The 10.62% ownership interest acquired as part of the transaction allows IAMGOLD the opportunity to participate in the future success of La Arena."

 

Pursuant to the Option and Earn-in Right Agreement and subsequent Acquisition, IAMGold holds 8,024,511 Mexican Silver shares (or 9,524,511 Mexican Silver shares after the exercise of the 1.5 million Mexican Silver warrants), representing 10.62% (or 12.43% after the exercise of the 1.5 million Mexican Silver warrants) of the total issued and outstanding Mexican Silver shares.

 

Private Placement

Immediately prior to the completion of the Acquisition, Rio Alto completed a private placement (the "Private Placement") of 19,408,617 Rio Alto shares at the price of $0.20 per share for gross proceeds of $3,881,723.  This amount includes the initial payment of US$1,000,000 to IAMGold as described above which was elected by IAMold to be provided back to Rio Alto as subscription proceeds and Mexican Silver purchased 5,000,000 Rio Alto shares under the Private Placement for a total subscription price of $1 million.  

 

Finders acting in connection with the private placement received aggregate fees of $44,800 and 224,000 non-transferable warrants to purchase common shares of Mexican Silver at a price of $0.20 per share, which may be exercised for a period of twelve months following the closing date.  

 

Board of Directors and Executive Officers

Concurrently with the completion of the Acquisition three current members of Mexican Silver's Board of Directors resigned and were replaced with two nominees of Rio Alto, namely Alex Black and Anthony Hawkshaw, and one nominee named jointly by Mexican Silver and Rio Alto, namely Dr. Klaus Zeitler.  In addition, Mexican Silver replaced one of the three remaining Directors with Daniel Kenney.   The new Board of Directors comprise of Feisal Somji, Roger Norwich, Daniel Kenney, Klaus Zeitler, Alex Black and Anthony Hawkshaw.

 

Anthony Hawkshaw replaced Brian Farrell as Mexican Silver's Chief Financial Offer and Alex Black was named as Mexican Silver's Chief Operating Officer.  Feisal Somji continues to serve as Mexican Silver's Chief Executive Officer and President and Raul Ramirez Morton has been appointed as Vice President, Mexican Operations.  Other senior officers of Mexican Silver will continue with Mexican Silver in their current capacities.

 

Please refer to Mexican Silver's news release of April 6, 2009 for additional information regarding the new directors and executive officers of Mexican Silver.

 

Mexican Silver wishes to thank each of Harry McGucken, Joseph O'Farrell, James Glass and Brian Farrell for their dedication and service to the Corporation.  

 

"I wish to take this opportunity to thank the team at Rio Alto for its hard work, dedication and patience during the past two years in securing an option to acquire the La Arena Project. La Arena is arguably one of the best undeveloped gold / copper projects located in Peru and it is the objective of Mexican Silver Mines to bring the gold oxide component of the project into production as soon as possible," said Alex Black, Director, COO. "We are currently in the final stages of planning an aggressive 18 month development schedule and have engaged Independent engineers, Coffey Mining Limited, to complete an updated reserve estimate and 43-101 for the La Arena Oxide Project."   

 

Feisal Somji, President and CEO stated "Mexican Silver took the strategy several months ago to slow down our exploration activities, conserve our cash on hand and move into production by way of acquisition within commodities that had long term price strength. After looking at several opportunities we are very excited to have completed this deal with Rio Alto.  The joint company now has exposure to silver, gold and copper, a healthy bank account, we have a management team that has a proven track record in bringing mines into production, assets in two stable countries, Mexico and Peru, and we are moving towards obtaining production.  In addition we are pleased to have IAMGold as a major shareholder of our company and look forward to working with them to advance the La Arena Project in Peru."   

 

ON BEHALF OF THE BOARD OF
MEXICAN SILVER MINES LTD.
___________________________________
Feisal Somji, B.Sc., MBA
President and Chief Executive Officer


FOR FURTHER INFORMATION, CONTACT:

Mexican Silver Mines Ltd.

Feisal Somji, President & CEO  

Phone: 403.236.5089

Fax: 403.398.0693  

Email: fsomji@mexicansilvermines.com

Web:    www.mexicansilvermines.com

 

Tony Hawkshaw, Director, CFO

Phone: 1.778.995 1137

Email:  tonyh@rioaltomining.com

 

Alex Black, Director, COO

Phone: 51.1.99279.4655

Email:  alexb@rioaltomining.com

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts the responsibility for the adequacy or accuracy of this release.

 

This press release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this press release contains forward looking statements and information concerning completion of the Acquisition, the Private Placement and the acquisition of the Option and Earn-in Right pursuant to the Option Agreement. The forward-looking statements and information are based on certain key expectations and assumptions made by Mexican Silver. Although Mexican Silver believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward looking statements and information because Mexican Silver can give no assurance that it will prove to be correct. Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. There are risks also inherent in the nature of the Acquisition, incorrect assessment of the value of the respective properties of each of Mexican Silver and Rio Alto, and failure to obtain the required security holder, regulatory and other third party approvals. Readers are cautioned that the foregoing list of factors is not exhaustive. The forward-looking statements and information contained in this press release are made as of the date hereof and Mexican Silver undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.