Linear Metals Corporation
TSX : LRM

Linear Metals Corporation

March 13, 2009 08:13 ET

Linear Metals Provides Update on Cobre Grande Purchase Option

HALIFAX, NOVA SCOTIA--(Marketwire - March 13, 2009) - Linear Metals Corporation (TSX:LRM) wishes to provide an update on the status of the purchase option for its Cobre Grande Property, located in Oaxaca, Mexico and the possible loss of its interest in the property.

Pursuant to an agreement expiring March 13, 2009, the Company holds the right to acquire an 80% interest in the 6,238 hectare Cobre Grande polymetallic mineral project, located in Oaxaca, Mexico, by fulfilling the remaining terms of a purchase option agreement (the "Option Agreement"), initially negotiated by Linear Gold Corp. with the Community of San Baltazar Guelavila (the "Community") in March 2004. Linear Gold retains a 20% interest in the Option Agreement, which the Company can purchase, at any time prior to December 31, 2012, for US$1.2 million. The remaining terms of the Option Agreement require the Company to make final payments to the Community totaling US$90,000 by March 13, 2009 following which the Company can provide notice to the Community of its intention to exercise the purchase option to acquire its interest in the Cobre Grande Project, also by March 13, 2009. If the Company were to exercise its purchase option, the Community could then choose between a US$12 million buyout, a 2% net smelter return royalty or a 15% joint venture interest.

Linear will not make the final payment or exercise its purchase option by March 13, 2009 and, in accordance with the Option Agreement, will have no further legal right to the property beyond this date. Nevertheless, Linear has advised the Community of its interest in making the final payments and exercising its purchase option, subject to the Community's choice of consideration being acceptable to Linear, or alternatively, in renegotiating the terms of the Option Agreement. Linear has also advised the Community that it does not have US$12 million and it is unlikely that the Company could raise US$12 million in the current market. Should the Community decide to discontinue discussions with the Company or pursue the US$12 million option, the Company expects that it will lose all rights to the Cobre Grande project, resulting in a material write-down of approximately $6.6 million in costs associated with the property.

Over the past nine months, the Company has made several proposals to the Community with the objective of revising the terms of the Option Agreement. To date, the Community has not accepted any of these proposals and there can be no assurance that the Option Agreement will be extended or amended on terms acceptable to the Company. The Company believes that it has developed a good relationship with the Community over the term of the Option Agreement and remains hopeful that the Company and Community will work cooperatively to continue the advancement of the Cobre Grande Project.

Brian MacEachen, Linear Metals President & CEO, states, "Linear Metals has always valued its relationship with the Community of San Baltazar Guelavila, making a fair and balanced relationship with the Community a top strategic priority for the Company. We are disappointed that the Option Agreement will expire on March 13, 2009, but we will continue to work in good faith with the Community in an effort to renegotiate the Cobre Grande Purchase Option Agreement on mutually beneficial terms that reflect both the current economic realities and the exciting long term potential of the Cobre Grande Project."

In May 2008, Linear Metals announced the completion of an independent 43-101 compliant Inferred Mineral Resource Estimate for the Main Zone of the Cobre Grande Project was completed, with an inferred mineral resource of 49.8 million tonnes of 0.92% copper equivalent.

Linear's KM61 Project

In December 2008, Linear Metals announced the completion of an independent 43-101 Mineral Resource Estimate for the Main Zone at the Company's 100% owned KM61 Project located near Armstrong, Ontario, with an indicated resource of 66.6 million tonnes at 0.063% molybdenum equivalent and an inferred resource of 38.9 million tonnes at 0.065% molybdenum equivalent, using a cut-off grade of 0.02% molybdenum, and includes in-situ metal quantities of 127.7 million pounds of copper, 78.2 million pounds of molybdenum, and 5.5 million ounces of silver. In addition, the 38.9 million tonne Inferred Resource includes in-situ metal quantities of 78.0 million pounds of copper, 46.5 million pounds of molybdenum, and 3.4 million ounces of silver.

For further details on Linear Metals Corporation and its Cobre Grande and KM61 Projects, please visit the Company's website at www.linearmetals.com or contact investor relations at (416) 216-4708 or within North America toll free at (1-866-376-7683).

Brian MacEachen, President & CEO

Forward-Looking Information:

This release includes certain statements that may be deemed "forward-looking statements". All statements in this release, other than statements of historical facts, that address future production, reserve potential, continuity of mineralization, exploration drilling, exploitation activities and events or developments that the Company expects are forward-looking statements. Although the Company believes that the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. The likelihood of future mining at either Cobre Grande or KM61 is subject to a large number of risks and will require achievement of a number of technical, economic and legal objectives, including obtaining necessary mining and construction permits, completion of pre-feasibility and final feasibility studies, preparation of all necessary engineering for pits and processing facilities as well as receipt of significant additional financing to fund these objectives, as well as funding mine construction. Such funding may not be available to the Company on acceptable terms or on any terms at all. There is no known ore at either Cobre Grande or KM61 and there is no assurance that the mineralization at either Cobre Grande or KM61 will ever be classified as ore. For more information on the Company and the risk factors inherent in its business, investors should review the Company's Annual Information Form at www.sedar.com.

The TSX Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Linear Metals Corporation
    Investor Relations
    (416) 216-4708 or Within North America: 1-866-376-7683
    Website: www.linearmetals.com