SilverCrest
Mines Inc. Gold Production Payments and Convertable
Loan to Finance Development of the Santa Elena Project, Mexico
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TSX-V: SVL
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For Immediate Release
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VANCOUVER, B.C. March 12, 2009 - SilverCrest
Mines Inc. (the "Company") is pleased to announce that it has
entered into a letter of intent with Sandstorm Resources Ltd. (Sandstorm)
whereby Sandstorm will provide US$12 million in development financing
("up front payment") by acquiring 20% of the future life of mine
gold production from SilverCrest's Santa Elena project (the "Santa
Elena Project") located in Mexico and, at SilverCrest's option, debt
financing of up to $US6 million. The capital to bring the Santa Elena
Project into production is estimated at US$20 million.
The Company entered into a letter of intent with Sandstorm pursuant
to which Sandstorm has agreed to purchase 20% of the gold produced over the
life of mine of the Santa Elena Project ("payable gold") for an
upfront payment of US$12 million plus a further payment upon delivery of
the gold equal to the lesser of (a) US$350 and (b) the then prevailing
market price per ounce of gold. The payments will increase at 1% per annum
commencing on the third anniversary of the date that the Santa Elena
Project begins commercial production. The Company estimates that
approximately 50,000 ounces of gold will be provided to Sandstorm over the
life of the current open pit plan or approximately 6,250 ounces per year. The
terms of the letter of intent do not affect the estimated 4.88 million
ounces of silver recoverable over the life of the initial open pit heap
leach operation.
Sandstorm 's President and Chief Executive Officer, Nolan Watson and
one of its Directors, David Awram are formerly executive officers of Silver
Wheaton Corp., a mining company listed on both the Toronto and New
York stock exchanges. Through Silver Wheaton, Messrs. Watson
and Awram were involved in the successful execution and financing of
approximately US$1 billion worth of metal streaming transactions over the
past five years.
UPFRONT PAYMENT: The upfront
payment is subject to (i) Sandstorm having received a final receipt for its
short form prospectus in respect of an equity financing of $60 million (ii)
SilverCrest having received all necessary permits to build, operate and
commercially extract gold from the Santa Elena Project and (iii)
SilverCrest having obtained sufficient financing, including appropriate
working capital and contingencies, to build and operate the Santa Elena
Project.
SilverCrest will provide Sandstorm with a completion guarantee such
that, if within 30 months from the date that Sandstorm makes the upfront
payment, the Santa Elena Project has not produced a minimum of 7,500 ounces
of payable gold in a consecutive three month period, then Sandstorm will
have the option to require SilverCrest to return that percentage of the
upfront payment which is equal to that portion of the underproduction of
gold relative to SilverCrest's internal estimate.
Sandstorm will not be required to contribute to capital or
exploration expenditures in respect of the mining operations of the Santa
Elena Project. In the event that SilverCrest completes a positive
technical report on an underground portion of the Santa Elena
Project, Sandstorm will have the right to purchase 20% of the payable
gold from the Santa Elena Underground Mine for an upfront payment that is
equal to 20% of the upfront capital expenditures made by SilverCrest,
adjusted pro rata for the gold to gold equivalent ratio of silver, plus
ongoing per ounce payments equal to the lesser of (a) US$450 and (b) the
then prevailing market price per ounce of gold. The subsequent payment will
increase at 1% per annum commencing on the third anniversary of the date
that the Santa Elena Project begins commercial production.
CONVERTIBLE LOAN: Concurrently
with the upfront payment of US$12 million being made to SilverCrest, at the
option of SilverCrest, Sandstorm will advance to SilverCrest, by way of a
senior secured convertible loan (the " Convertible Loan"), US$6
million to be used to advance the Santa Elena Project. The Convertible
Loan will be outstanding for a period of three years and will bear interest
at the rate of 7%. Fifty percent of the amount outstanding under the
SilverCrest Convertible Loan will be convertible at any time and at
Sandstorm's option, into shares of SilverCrest at a price of Cdn$0.80 per
share. The remaining fifty percent of the amount outstanding under the
Convertible Loan will be convertible at any time, and at Sandstorm's
option, into ounces of gold at a price of US$1,000 per ounce. The
Convertible Loan will be fully secured against the Santa Elena Project.
J. Scott Drever, President stated; "We are
obviously excited at the opportunity to be able to secure funding of this
nature to finance the construction and development of our Santa Elena
Project. The combination of the US$12 million upfront payment and the $6
million debenture will enable us to stay on track with our development
schedule for initial metal production by the end of this year. More
importantly, this arrangement will fund a major portion of the capital
requirements for the project which will keep our equity requirements and
hence our share dilution to a minimum. This financial structure will leave
100% of the silver production and 80% of our gold production unencumbered
and provides us with considerable flexibility as to how we structure our
total corporate financial requirements. With Santa Elena in production and
with the cash flow that this project will produce, we will be well
positioned to carry out our objectives for corporate growth."
The completion of the transactions contemplated remains subject to
the execution of definitive agreements, completion of satisfactory due
diligence, completion of the Sandstorm's equity offering and receipt of all
necessary regulatory and other approvals, including acceptance by the
TSX-V.
SilverCrest Mines Inc. is a
"Silver Focused" exploration and development company with a
portfolio of high grade silver and gold deposits and exploration properties
located in Mexico and El Salvador. This property portfolio, which includes
reported indicated and inferred silver resources and substantial
exploration potential, provides an important base from which SilverCrest
can develop its corporate objective of becoming a significant silver asset
based company. The Company's immediate initiative is to acquire and develop
substantial silver resources and ultimately to operate high grade silver
mines throughout North, Central and South America.
This news release contains forward-looking statements,
which address future events and conditions, which are subject to various
risks and uncertainties. The Company's actual results, programs and
financial position could differ materially from those anticipated in such
forward-looking statements as a result of numerous factors, some of which
may be beyond the Company's control. These factors include: the
availability of funds; the timing and content of work programs; results of
exploration activities and development of mineral properties, the
interpretation of drilling results and other geological data, the
uncertainties of resource and reserve estimations, receipt and security of
mineral property titles; project cost overruns or unanticipated costs and
expenses, fluctuations in metal prices; currency fluctuations; and general
market and industry conditions.
Forward-looking statements are based on the
expectations and opinions of the Company's management on the date the
statements are made. The assumptions used in the preparation of such
statements, although considered reasonable at the time of preparation, may
prove to be imprecise and, as such, undue reliance should not be placed on
forward-looking statements
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