Redcorp Ventures Ltd.
TSX : RDV

Redcorp Ventures Ltd.

June 12, 2008 19:23 ET

Redcorp Enters into a US$90 Million Gold Sale Agreement with Gold Wheaton Corp. and Announces Updated Tulsequah Chief Mine Capital Cost Estimate

VANCOUVER, BRITISH COLUMBIA--(Marketwire - June 12, 2008) - Redcorp Ventures Ltd. (TSX:RDV) ("Redcorp") and its wholly-owned subsidiary, Redfern Resources Ltd. ("Redfern") (together, the "Company") is pleased to announce the execution of a letter of intent with Gold Wheaton Corp. ("Gold Wheaton") (currently, Kadywood Capital Corp.) pursuant to which Gold Wheaton has agreed to purchase 100% of the life of mine gold production from Redfern's Tulsequah Chief Mine and any other mines within a defined project area for a staged US$90 million upfront payment plus US$400 per ounce produced, subject to adjustment (the "Gold Sale Agreement").

Gold Sale Agreement Terms

The Company and Gold Wheaton will enter into a number of agreements pursuant to which Gold Wheaton will purchase 100% of the payable gold produced from the Tulsequah Chief Mine and any other mines within the project area developed by Redfern in the future. The US$90 million upfront payment is to be payable as US$10 million on receipt of certain required material environmental and operating permits, with the balance to be payable to the Company on a drawdown basis once Redfern has expended all funds (other than the US$80 million drawdown funds) required to complete construction and commissioning of the Tulsequah Chief Mine and upon satisfaction of certain additional funding conditions.

Gold Wheaton will also pay an ongoing per ounce payment to Redfern equal to the lesser of (a) US$400 per ounce (subject to an inflation accelerator commencing in the 4th year after production begins) and (b) the then prevailing market price per ounce of gold. Gold Wheaton will not be required to contribute to any capital or exploration expenditures in respect of Redcorp's mining operations, over and above the upfront payment. Redcorp will provide Gold Wheaton with a completion guarantee such that, if within the earlier of (i) 18 months of commencement of production and (ii) three years following the entering into of the Gold Sale Agreement, the Tulsequah Chief Mine is not producing a minimum of 75% of the payable gold as set out in Redcorp's feasibility study or processing a minimum of 1,800 tonnes of ore per day at a recovery rate of not less than 70% as averaged over a rolling 120 days, then Gold Wheaton will have the option to require Redcorp to return to Gold Wheaton that percentage of the upfront payment which is equal to that portion of the underproduction of gold relative to the feasibility study. Finalization of the Gold Sale Agreement is subject to certain terms and conditions.

Note Amendments

Completion of the transactions contemplated by the Gold Sale Agreement will require the approval of the holders of Redcorp's 13% senior secured redeemable series D notes due July 11, 2012 (the "Notes"). Redcorp anticipates that there will be a special meeting of the holders of the Notes in July 2008 for such purpose. The Note indenture is available for review under the profile of the Company at www.sedar.com.

Project Update and Revised Capital Cost Estimate

Redfern continues to advance the development of the Tulsequah Chief Mine. Mine facility construction, planning and design, equipment acquisition and site preparation activities are all taking place concurrently, with the goal of beginning production in the second half of 2009. Recently, Redcorp has announced the HSBC Bank Canada Credit Facility (April 21, 2008) and the MRI Trading AG Contingent Credit Facility (February 4, 2008).

Wardrop Engineering Inc. (Engineering and Procurement Contractor), with the assistance of Sandwell Engineering Ltd. (Construction Manager) and Redfern, has finalized an updated pre-production capital cost estimate for the Tulsequah Chief Mine. The revised estimate replaces the original capital cost estimate prepared by Wardrop Engineering Inc. and published in the March 2007 Feasibility Study Technical Report for the Tulsequah Chief Mine. The construction costs for the project are now estimated to be $297.1 million (which includes a contingency of $17.9 million). The project cost increase is primarily related to labour and materials cost increases and other costs related to increases in scope for certain aspects of the project, principally excavation costs for mine roads and bridges and forecast site and tailings excavation costs. The detailed updated costs, including comparison and variance with the 2007 Feasibility Study estimate, are as follows:



Table of Capital Costs (net of lease deferments) (CAD$ million)

2007
Feasibility
Cost Area Study June 2008 Difference

Overall Site 9.6 16.6 7.0
Mining 26.3 40.4 14.1
Crushing 2.7 4.7 2.0
Crushed Ore Storage 1.3 1.2 (0.1)
Mill Building 42.2 38.3 (3.9)
Tailings 5.5 17.4 11.9
Site Services & Utilities 5.8 10.8 5.0
Ancillary Facilities 11.7 15.1 3.4
Mobile Fleet 1.2 1.8 0.6
Temporary Services 5.5 11.9 6.4
Offsite Infrastructure 4.8 16.6 11.8
Construction and Material Shipping 15.1 15.0 (0.1)
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Total Direct 131.7 189.8 58.1
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Project Indirects 45.0 70.4 25.4
Owner's Costs 3.4 19.0 15.6
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Total Indirect costs 48.4 89.4 41.0
Contingency 21.4 17.9 (3.5)
Capital Requirement 201.5 297.1 95.6


Redcorp has analyzed the revised economic forecast for the project taking into account the increased capital costs and the effects of the Gold Sale Agreement. Using consensus metal prices as per the table below and allowing for the gold price on production to be paid at US$400 per ounce to reflect the Gold Sale Agreement, and an exchange rate of US$1.00 equals CAN$1.05 for the life of mine the project is now expected to generate a pre-tax IRR of 34.3%, average annual pre-tax cash flow of CDN$65 million and life of mine pre-tax cash flow, based on current reserves, of CDN$377 million (net of all capital expenditures, Gold Sale Agreement payment and operating costs). The net present value (NPV) of the project at an 8% discount rate is CDN$204 million. The project has considerable potential for expansion of the existing resources through ongoing exploration, which will be facilitated by mine development and improved infrastructure.



Consensus Metal Price Forecast
(US$ per pound for Copper, Zinc & Lead)
(US$ per ounce for Silver and Gold)

2009 2010 2011 2012 2013 2014 2015 2016 2017
------ ------ ------ ------ ------ ------ ------ ------ ------
Copper $ 3.05 $ 2.80 $ 2.41 $ 2.25 $ 2.00 $ 1.73 $ 1.73 $ 1.73 $ 1.73
Zinc $ 0.96 $ 0.99 $ 0.92 $ 0.87 $ 0.74 $ 0.73 $ 0.73 $ 0.73 $ 0.73
Lead $ 0.85 $ 0.73 $ 0.59 $ 0.42 $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.40
Silver $16.07 $15.63 $13.97 $14.50 $14.50 $12.00 $12.00 $12.00 $12.00
Gold $ 900 $ 863 $ 760 $ 725 $ 700 $ 650 $ 650 $ 650 $ 650


"The Gold Sale Agreement is a critical step in the path allowing the Company to bring the Tulsequah Chief Mine into production and is a key part of unlocking the potential of the Tulsequah Property. The revised capital estimate has been carefully and conservatively prepared. We are confident that the mine can be brought into production within the cost and timeline projected. Redcorp is pleased to be associated with the formation of Gold Wheaton as a significant future player in Canada's mining industry," stated Terry Chandler, President and CEO of Redcorp.

About Redcorp

Redcorp is a Vancouver based mineral exploration and development company with active projects in British Columbia, Canada and Portugal. Further information on Redcorp and the Tulsequah Project can be obtained on our website at www.redcorp-ventures.com and at Redfern's website at www.redfern.bc.ca or by calling toll-free to Troy Winsor, Manager of Investor Relations or Salina Landstad, Manager of Public Relations at the contact numbers listed below.

ON BEHALF OF THE BOARD OF DIRECTORS OF REDCORP VENTURES LTD.

Terence Chandler, President and CEO

604-669-4775 ext. 109

Under National Instrument 43-101 Pierre Berger, P.Eng of Acxis Consulting is the qualified person responsible for the preparation of the capital cost estimate for the project and Richard Goodwin, P.Eng, of Redcorp, is the qualified person responsible for the revised economic evaluation of the Tulsequah Project. Certain of the statements made and information contained herein is "forward-looking information" within the meaning of the Securities Act (Ontario) and the Securities Act (Alberta). Forward-looking information includes disclosure regarding possible or anticipated events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action and includes future oriented financial information with respect to prospective results of operations or financial position that is presented either as a forecast or a projection. Forward-looking information is often, but not always, identified by the use of words such as "seek", "anticipate", "believe", "plan", "estimate", "expect" and "intend"; statements that an event or result is "due" on or "may", "will", "should", "could", or "might" occur or be achieved; and, other similar expressions.

More specifically, forward-looking information contained herein includes, without limitation, statements concerning our plans at our Tulsequah Project (inclusive of the Big Bull Project), the net present value of the Tulsequah Project, the timing and amount of estimated future production and mine life, expected future prices of gold, silver, copper, lead and zinc, mineral reserve and mineral resource estimates, estimated capital and operating costs of the project, estimated capital pay-back period, estimated asset retirement obligations, timing of development and permitting time lines; all of which involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Forward-looking information contained herein is based on material factors and assumptions and is subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from a conclusion, forecast or projection in the forward-looking information. These include, without limitation, material factors and assumptions relating to, and risks and uncertainties associated with, the availability of financing for activities when required and on acceptable terms, the accuracy of the interpretation of drill results and the estimation of mineral resources and reserves, the geology, grade and continuity of mineral deposits, the consistency of future exploration, development or mining results with our expectations, metal price fluctuations, the achievement and maintenance of planned production rates, the accuracy of component costs of capital and operating cost estimates, current and future environmental and regulatory requirements, favourable governmental relations, the availability of permits and the timeliness of the permitting process, the availability of shipping services, the ultimate recovery amount, if any, of our investment in third-party asset-backed commercial paper (ABCP) that is currently undergoing liquidity restructuring by the Committee representing the Montreal Accord, the availability of specialized vehicles and similar equipment, costs of remediation and mitigation, maintenance of title to our mineral properties, industrial accidents, equipment breakdowns, contractor's costs, remote site transportation costs, materials costs for remediation, labour disputes, the potential for delays in exploration or development activities, timely completion of future NI 43-101 compliant reports, timely completion of future feasibility studies, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, continuing global demand for base metals, expectations and beliefs of management and other risks and uncertainties, including those described under Risk Factors Relating to Our Business in our Annual Information Form, filed on SEDAR on March 31, 2008, and in each subsequent Management's Discussion and Analysis.
Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from any conclusions, forecasts or projections described in the forward-looking information. Accordingly, readers are advised not to place undue reliance on forward-looking information. Except as required under applicable securities legislation, we undertake no obligation to publicly update or revise forward-looking information, whether as a result of new information, future events or otherwise.

News Release 08-12

Contact Information

  • Redcorp Ventures Ltd.
    Troy Winsor
    Manager, Investor Relations
    (604) 466-8934 or 1-888-225-9662
    or
    Redcorp Ventures Ltd.
    Salina Landstad
    Manager, Public Relations & Corporate Communications
    (604) 639-0135 or 1-888-669-4775 ext. 103
    Website: www.redcorp-ventures.com