Oroco Signs Option Agreement to Acquire Additional Interest IN Santo Tomas Properties
OCTOBER 9, 2018 NEWS RELEASE
FOR IMMEDIATE RELEASE:
OROCO SIGNS OPTION AGREEMENT TO ACQUIRE
ADDITIONAL INTEREST IN SANTO TOMAS PROPERTIES
VANCOUVER, British Columbia – (October 9, 2018) Oroco Resource Corp. (TSX -V:
OCO) (“Oroco” or the “Company”) is pleased to announce that further to its news release
dated February 23 , 2018, Oroco has entered into a definitive option agreement (the “ Option
Agreement”) with Altamura Copper Corp. (“Altamura”) and its shareholders (the “Optionors”)
whereby the Optionors have granted to Oroco the exclusive option to acquire the remaining
issued and outstanding common shares of Altamura not owned by Oroco (the “Option ”). The
Company currently holds an approximate 13% equity interest in Altamura.
The Company may exercise the Option by issuing an aggregate of 39,800,000 (thirty -nine
million eight hundred thousand) common shares of Oroco to the Optionors in exchange for all of
their common shares of Alt amura. Oroco may exercise or terminate the Option in its sole
discretion at any time within three years. Oroco also entered into a loan agreement (the “Loan
Agreement”) with Altamura to advance, for working capital purposes, an aggregate amount of
up to US$600,000 (the “Loan”), of which US$275,000 has already been advanced to Altamura.
Each advance of a Loan amount is subject to Oroco’s approval at its sole discretion. The Loan is
secured by a promissory note, bears interest at the rate of 12% pe r annum and is re -payable
within 90 days of demand, such demand not to be made during the term of the Option. The
Company has also entered into an agreement dated September 27, 2018 with Altamura granting
the Company the right to convert the Loan into common shares of Altamura at a price of
US$0.057 per share at any time within six months after the expiry or termination of the Option.
Altamura currently has 45,750,000 shares issued and outstanding, of which 5,950,000 are held by
the Company.
Altamura holds a controlling 65% interest in Xochipala Gold S.A de C.V. (“ XG”), which holds
the rights to acquire up to a 90% interest in a group of seven mineral concessions (the “Santo
Tomas Concessions”) located in Sinaloa, Mexico. The registration of XG’s concession rights is
subject to a legal dispute between Compania Minera Ruero, S.A. de CV. (“ CMR”), which holds
the registered title to the Santo Tomas Concessions , and third parties. CMR is the vendor to XG
of the concession rights. Following an extensive legal review, Oroco management and Oroco’s
Mexican legal counsel are confident that the legal dispute involves an unenforceable judgement,
that the dispute will be favourably resolved, and that the concession titles will be registered to
XG. Altamura’s interest in XG may be increased in stages to 90 %, effectively an 81% indirect
interest in the Santo Tomas Concessions, by funding up to CAD$30 million in property -related
expenditures, with no minimum funding obligations (see the investment table in the Management
Discussion and Analysis filed by the Company on October 1, 2018) . In addition, Altamura holds
an indirect 50% interest in CMR and an opti on to acquire both the remaining interests in CMR
and the remaining equity of XG for US$18,000,000.
The Santo Tomas Concessions are subject to a 0.5% (one half of one percent) Net Smelter
Royalty in favour of Ruben Rodriguez of Mexico City and a 1 % ( one percent) Net Smelter
Royalty in favour of ATM Mining Corp., a company own ed by the spouse of Oroco’s President,
Craig Dalziel. In furtherance of its acquisition of rights to the Santo Tomas Concessions, which
involved the resolution of several legal challenges, Altamura agreed to pay certain fees
contingent upon the sale, as a final disposition, of Al tamura’s interest in the Santo Tomas
Concessions to a third party (other than Oroco), as follows : (i) 10% of the sale price, to an
aggregate maximum of US$3.6 million to Mexican legal counsel, of which US$600,000 is
payable six months after the registratio n of title to the Santo Tomas Concessions to XG, and (ii)
1.5% of such sale price, to an aggregate maximum of US$4.1 million, to seven persons, of which
up to US$1 million is payable to David Rose, an officer of the Company.
The Company formed a special committee (the “ Special Committee”) with a mandate to
evaluate, review and report on this transaction and carry out negotiations in good faith on behalf
of the Company with regards to the Option Agreement and Loan Agreement. Upon careful
consideration of the proposed Option Agreement and Loan Agreement, the Special Committee
made a recommendation to the board of directors of the Company (the “ Board”) to approve the
Option Agreement and the Loan Agreement, and t he Board subsequently approved both
agreements.
In conjunction with this transaction, the Company intends to carry out a “part and parcel”, non-
brokered private placement (the “Private Placement”) of up to 3,000,000 units at a price of $0.20
(twenty cents) per unit to raise gross proceeds of up to $600,000. Each unit will consist of one
common share and one-half of one common share purchase warrant. Each whole share purchase
warrant will be exercisable into one additional common share for a period of 18 months from
closing at a price of $0. 32 per share. The Private Placement is subject to its acceptance by the
TSX Venture Exchange. The net proceeds of the private placement will be used for the balance
of the loans to Altamura, the costs and expenses related to obtaining TSX Venture Exchang e and
shareholder approvals , and those expenses necessary to the Company’s obligations , under the
Agreement, to maintain the Santo Tomas Concessions.
Oroco’s exercise of the Option is subject to closing conditions set out in the Option Agreement,
which include: due diligence; completion and review by the Special Committee of a formal
valuation report prepared by an independent qualified person in accordance with National
Instrument 43- 101 Standards of Disclosure for Mineral Projects (the “Valuation ”); TSXV
acceptance; and approval by the shareholders of Oroco, as required.
The exercise of the Option will not create any new insiders or control persons and the Oroco
shares issuable to the Optionors will be subject to a hold period of four months in accordance
with applicable TSXV regulations and securities laws. In addition, 75% of these shares will be
subject to a pooling arrangement, pursuant to which the shares will be subject to resale
restrictions as follows: (i) 25% of the shares will be subject to a six -month resale restriction; (ii)
25% of the shares will be subject to a twelve -month resale restriction; and (iii) the remaining
25% of the shares will be subject to an eighteen-month resale restriction.
The Option Agreement involves non- arm’s length parties pursuant to TSXV polic y 5.3. David
Rose is one of the Optionors and a senior officer of Oroco. ATM Mining Corp. is also one of the
Optionors and a company of which Craig Dalziel, a director of Oroco, and David Rose are
directors. Accordingly, David Rose and ATM Mining Corp. are both considered to be non-arm’s
length parties of Oroco pursuant to the policies of the TSXV. Pursuant to TSXV policy 5.3, the
transaction involves non-arm’s length parties and the Company is required to provide evidence of
value and disinterested shareholder approval.
The Option Agreement also involves a related party pursuant to Multilateral Instrument 61 -101
Protection of Minority Security Holders in Special Transactions (“MI 61 -101”). As a senior
officer of Oroco and one of the Optionors , David Rose is considered to be a related party of
Oroco. The exemptions from the formal valuation and minority shareholder approval
requirements of MI 61- 101 are available for the related party trans action pursuant to section
5.5(a) and section 5.7(1)(a) of MI 61-101 on the basis that, at the time the transaction was agreed
to, neither the fair market value of the subject matter of the transaction, nor the fair market value
of the consideration for the t ransaction, insofar as it involves interested parties, exceeds 25 % of
Oroco’s market capitalization.
Having provided the TSXV with certain documentation in support of the contents of this news
release, and having received TSXV approval to resume trading, the Company intends to resume
trading of its securities at the market opening on October 10, 2018.
Information about the Santo Tomas Concessions:
The Santo Tomas Concessions are located in Choix, Sinaloa State, Mexico . The names of the
seven individua l claims and their title numbers are as follows: Roberto Verde, title number
149,672; Bob, title number 149,675; Karisu, title number 209,594; Karisu Fraccion 1, title
number 209,595; Tona, title number 215,721; Santo Tomas, title number 212,003; and Esme ,
title number 211,954. The Santo Tomas mineral camp is characterized by copper porphyry and
skarn/replacement style mineralization linked to the Laramide Orogeny (80 -40 Ma age). The
Santo Tomas Cu- Mo-Au-Ag porphyry mineralization lies mostly on the Sant o Tomas
Concessions and is associated with a NNE -trending zone of quartz monzonite porphyry stocks
and dikes, hosted in Cretaceous limestone and metamorphosed andesite. The mineralization is
primarily comprised of chalcopyrite, pyrite, and molybdenite sul fides with lesser bornite and
chalcocite sulfides. Minor oxide copper occurs on surface. Taken together, the porphyry
intrusions and mineralization comprise the Santo Tomas mineralization zone.
The Santo Tomas mineralization zone is mapped on surface and drill tested along a strike length
of 4 km on the Santo Tomas Concessions and Papago 17 area . The Company has assembled
information from historic diamond drilling, rotary and reverse circulation holes from exploration
programs spanning 1968 to 1993. In 1994, Mintec, Inc. prepared a mineral resource estimate
based on assay information from 14,881 meters of drilling in 49 drill holes drilled by ASARCO
and Tormex–Peñoles, and 40 drill holes drilled by Exall Resources Limited (“ Exall”). During
that year, Exall commissioned Bateman Engineering Inc. (“ Bateman”) to conduct an economic
assessment of the Santo Tomas project, based on technical work by a team that included Mintec,
Inc., Mountain States Research and Development, Inc., and Minetek S.A. de C.V. In July of
1994, Bateman completed this study, termed “Santo Tomás Project, Sinaloa, Mexico, Pre -
Feasibility Study,” and did not use any inferred mineral resource estimates in its work. The
economic assessment by Bateman contains favorable metallurgical tes t results and engineering
designs that remain broadly acceptable today. However, the Company considers these historical
economic studies and associated mineral resource estimates to be only conceptual in nature until
confirmed by current technical programs.
In 2017, the Company initiated a program of mineral exploration in the Santo Tomas mineral
camp with surface geological mapping and the assembly of historical drilling information on the
Santo Tomas Concessions and surrounding properties. Additionally, Auracle Geospatial
Science, Inc. (“Auracle”) was contracted to task MDA’s RadarSat 2 satellite for the acquisition
of Synthetic Aperture Radar (“SAR”) data for the entire camp. Modeling by Auracle of the SAR
data has confirmed and significantly enhanced t he structural geology results from the 2017 field
mapping by the Company. Historic drilling indicates a well- mineralized zone of quartz
monzonite dikes and hornfelsed andesite of the Santo Tomas mineralization zone passes
southward from the Santo Tomas Concessions onto the Papago 17 area.
The geological information contained in this news release has been approved by Dane A. Bridge,
M.Sc., P. Geol., who is an Independent Qualified Person and who conducted surface geological
mapping on the site of the Santo Tomas Concessions and the surrounding properties in 2017.
For further information, please contact:
Mr. Craig Dalziel, President and CEO
Oroco Resource Corp.
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.
Cautionary Notes Regarding Forward-looking Statements
This news release contains certain forward -looking information and forward -looking statements within
the meaning of applicable securities legislation (collectively “forward -looking statements”). Certain
information contained herein constitutes “forward -looking information” under Canadian securities
legislation. Generally, forward- looking informati on can be identified by the use of forward -looking
terminology such as “expects” , “will”, “intends”, “is expected to” and variations of such words and
phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are
based on the opinions and estimates of management as of the date such statements are made and they are
subject to known and unknown risks, uncertainties and other factors that may cause the actual results,
level of activity, performance or achievements o f the Company to be materially different from those
expressed by such forward -looking statements. In particular, the Company’s expectations regarding the
completion of the transactions contemplated in the Option Agreement and Loan Agreement , the outcome
of litigation in Mexico, as well as obtaining shareholder approval and exchange acceptance are forward
looking statements. There can be no guarantee that the transaction s contemplated by the agreements will
be completed, the valuation, shareholder approval a nd exchange acceptance will be obtained, that the
outcome of litigation in Mexico will be favourable, or that a strategic alternative will be pursued if the
transactions do not proceed. Although management of the Company has attempted to identify important
factors that could cause actual results to differ materially from those contained in forward- looking
statements or forward -looking information, there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that such statements will prove to be
accurate, as actual results and future events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on forward- looking statements and
forward looking information. The Company does not undertake to update any forward- looking statements
or forward -looking information that are incorporated by reference herein, except as required by
applicable securities laws.