Dear Shareholders,
As the rights issue closed with shares to be issued tomorrow, the situation facing your company is very difficult. A series of unforeseen problems has combined to leave the company in a precarious position. Specifically these are:
1. The titles to the Achatayhua concessions have now transferred to Pastoral Mining s.a.c., a company controlled by Luis Goyzueta. Our application for an injunction to stop the transfer is yet to be deliberated on by the Peruvian High Court, seven months after our application was made. Frankly the Peruvian legal system has failed us badly and we have lost about $35,000 in legal costs with a completely negative outcome.
2. Mr Goyzueta is still talking about doing a share-swap, all AMP shares in exchange for 30% of the shares of Raya Minerals, to be listed in Canada. However, he has been so slow in fulfilling his promises and he has such a dubious reputation that we are no longer able to take his offer seriously. We have now appointed Angus MacDonald, an experienced international Mining Lawyer to negotiate a new deal with Goyzueta where we cease our legal actions and sell him our drilling permit and concession AMP1 in exchange for US$2.0 Million payable over 2 years. We shall keep you informed of progress in this regard.
3. The Crucero Mining operation has failed to produce any revenues yet, although we are very close. We have 350 tonnes of about 5% Cu plus 3 gms gold and 10 grams silver accumulated, 50% at the processing plant in Nazca, some 200 kilometres from the mine and the other 50% at the mine still. It has a value of around US$95,000 to US$120,000, to be determined during the processing operation. We have three potential buyers of the product and have appointed a trusted Chilean, Marcelo Martinez, to fight hard to ensure that costs are contained and CML achieves a fair and proper share of future profits. Salt has been rubbed into the Crucero wound by the USA intermediary banks freezing US$13,000 of funds sent to Peru on 16th July. These funds are needed to pay for concession fees, transport and processing. After waiting 3 weeks for the funds to appear, we wrote to Westpac yesterday will to cancel the transfers so we can find another way to get funding to Peru.
4. The rights issue has been supported only to a minimum extent, $10,181.36 from other investors, apart from my own contribution of $100,000 provided during May and June as working capital provided to keep the company solvent. In August I will be willing and able to provide an additional $100,000 to honour my commitment made in the May 2022 statement to shareholders. I will also stop drawing a wage forthwith. However, in the interim the company will remain reliant on loans from myself and possibly other directors until the revenue from Crucero becomes available.
5. Because of the lack of funds we have been unable to undertake any due diligence work on the Rihoco gold tailing project.
So the lack of capital which the company is enduring is a heavy weight upon management and may cause the company to cease operations if the situation does not improve within the next couple of months.
In this regard the more positive news we can report is:
1. We have entered into a new JV agreement with the owner of Crucero, Lino Flores. It is a 5 year agreement where we will form a new company and joint bank account in Arequipa to operate the mine. The new company will be called Mineria Phoenix and will be 50% owned by Lino Flores and 50% by CML. Legalia will not be involved in managing the company and we will use Arequipa lawyers and accountants. The agreement will give CML the right to sell its share. In terms of Crucero outlook the current production is running at only 3-5 tonnes per day. Our breakeven, based on several variables such as grade and daily production is around 4 tonnes per day. It has been agreed that part of the money generated from the sale of the current stockpile will be used to build a new tunnel about 40-50 meters long at a lower altitude than the existing tunnel. This will theoretically give us access to mine 20-25 tonnes per day of higher grade and higher recovery Sulphide copper. If the net margin improves from $200/tonne to $300/tonne and the volume increases 5 fold then the monthly revenue to share with Lino Flores should increase to around $150,000. We will know this by the end of July all going well.
2. Finally, we are investigating the possible purchase of a Copper project in Chile and have signed a letter of intent to purchase it. The benefits of the Chilean project are that it is located adjascent to a huge Copper mine in a desert area with zero agriculture or “posesionarios” as in Peru. Additionally it comes with mining history, a permit to mine 5000 t per month and a Government run outlet to purchase the Copper at a fair market price. With funding from the Crucero JV we intend to conduct due diligence in August and September. The DD will focus on defining a probable resource for small scale mining and beneficiation techniques to allow for the production of Copper fines of up to 5-6% Cu. If this DD proves successful then the company will seek further funding to establish an open cut mining and beneficiation production line. The concept will be to mine perhaps 3,000 per day and beneficiate it to say 150 tonnes per day of a 5% Cu product. Such an operation, if feasible, would generate gross incomes of over $1.4 Million per month. This project could prove to be a company saving, company making project.
So whilst our backs are very much to the wall, the future may well prove to be rosy for the company if the Crucero project can support the next stage of its development.
Your continued support and assistance will be appreciated.
Mark Newton
Executive Chairman and CEO