Surge Exploration Enters into MOU for an Option to Acquire the Atacama Cobalto Project in the Atacama Region of Chile
Vancouver, BC – July 24, 2018 – Surge Exploration Inc. (the “Company” or “Surge”) (TSX‐V: SUR, OTCQB:SURJF) is pleased to announce that it has entered into a non-binding Memorandum of Understanding (the “MOU”) with Compañía Minera del Pacífico S.A. (“CAP Minería”) for an option to acquire up to 100% of the Atacama Cobalto Project in the prolific Atacama Region in Northern Chile.
Tim Fernback, Director of Surge, said: “Surge Exploration is excited to pursue exploration in this historically IOCG and cobalt rich area. We look forward developing the Atacama Cobalto Project through timely execution of exploration programs for the benefit of our shareholders.”
Compañía Minera del Pacífico S.A. owns and operates several iron ore mines such as Los Colorados and Cerro Negro Norte and is a controlled subsidiary of CAP S.A. (http://www.cap.cl) a Chilean company founded in 1946. CAP S.A. is publicly traded on the Santiago Stock Exchange (SSE: CAP) with a market capitalization in excess of US$1.65 billion. CAP S.A.’s principal operations include steel making and steel processing plants, iron ore mines, marine ports, desalination plants, and power transmission lines. In 2017, CAP S.A. reported revenues in excess of US$1.9 billion and employed over 4,000 people, and CAP Minería reported profits in excess of US$200 million and employs over 2,000 people in its operations.
Subject to completion of a comprehensive due diligence process by Surge, the Company and CAP Minería intend to enter into a Definitive Option Agreement (the “Agreement”), subject to TSX Venture Exchange (“TSX-V”) approval. The Agreement will contain three distinct (3) phases (“Phase 1”, “Phase 2”, and ”Phase 3”).
As part of the First Phase, the Company may choose to acquire 51% of the mining concessions with consideration in the amount of US$3,000,000 and 1,000,000 common shares of Surge Exploration Inc., in addition to certain work commitments on the property.
Once Surge fulfills Phase 1, a mining legal partnership will be created between Surge and CAP Minería (the “Newco”), in which the parties will participate with 51% equity in the case of Surge, and 49% equity in the case of CAP Minería.
Within two (2) years of completing Phase 1, the Company may elect to pursue Phase 2, whereby Surge can to acquire an additional 9%, for a total of 60%, of the Newco upon completion of a positive Preliminary Economic Assessment (the “PEA”).
Within two (2) years of completing Phase 2, the Company may elect to pursue Phase 3, whereby Surge can acquire an additional 10%, for a total of 70%, of the Newco upon completion of a positive Pre-Feasibility Study (the “PFS”).
Surge can earn up to 100% of the mining concessions by contributing in excess of its 70% obligation to the Newco, thereby diluting CAP Minería’s interest in Newco. In the event that CAP Minería’s interest is diluted below 10%, CAP Minería share will automatically convert to a 2% Net Smelter Return (“NSR”). Throughout the term of the agreement, CAP Minería shall maintain the right to convert its ownership percentage in exchange for a 2% NSR at any time. In either case, upon CAP Minería’s conversion to NSR, Surge shall achieve 100% ownership of the Newco, and therefore, 100% ownership in the Atacama Cobalto Project.
This Transaction is subject to applicable finder’s fees and is subject to TSX Venture Exchange approval. As per the terms of the non-binding MOU, a binding Definitive Option Agreement will be negotiated within the next 90 days by both parties, and is subject to the terms contained within the MOU.
About the Atacama Cobalto Project:
The Atacama Cobalto Project is located in the Atacama Province in northern Chile, 15 km northwest of the town of Copiapó, where mining is the largest economic activity, and the mining industry is one of the region’s major employers. The Atacama Cobalto Project consists of 1,059 hectares and is located only 3 km East of the Cerro Iman Mine. To date, CAP Minería has drilled over 20,250 m on the Atacama Coblato Project.
The area of interest hosts several other mining companies and is situated near the mylonitic corridor that is part of the Atacama Fault System that hosts many of the IOCG deposits in northern Chile. The Atacama Cobalto Project corresponds to a “cobalt anomalous IOCG” associated with the geographic area.
The Atacama Cobalto Project benefits from access to excellent infrastructure, including port access, energy supply, and access through the Pan American Highway.
About Surge Exploration Inc. https://surgeexploration.com/
The Company is a Canadian-based mineral exploration company which has been active in the resource sector in British Columbia and elsewhere in Canada. The Company has an exploration office in Santiago, Chile to review mineral exploration opportunities in Chile and elsewhere in South America.
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On Behalf of the Board of Directors
Neither the 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 news release may contain forward‐looking statements which include, but are not limited to, comments that involve future events and conditions, which are subject to various risks and uncertainties. Except for statements of historical facts, comments that address resource potential, upcoming work programs, geological interpretations, receipt and security of mineral property titles, availability of funds, and others are forward‐looking. Forward‐looking statements are not guarantees of future performance and actual results may vary materially from those statements. General business conditions are factors that could cause actual results to vary materially from forward‐looking statements.