INV Metals and the Government of Ecuador Agree to Terms of Exploitation Contract



29- may - 2017

TORONTO, ONTARIO--(Marketwired - May 29, 2017) - INV Metals ("INV Metals" or "Company") (TSX:INV) is pleased to announce that it has successfully reached agreement with the Ministry of Mining on the terms and form of the Mining Exploitation Contract ("Exploitation Contract") for Loma Larga ("Loma Larga" or "Project"), the Company's 100% owned gold project located in Ecuador. The Company anticipates the Exploitation Contract will be executed after the successful completion of the feasibility study ("FS") and other key milestones.

Ms. Candace MacGibbon, CEO, stated, "We are extremely pleased to announce the Company and the Government of Ecuador have agreed on the form and terms of the Exploitation Contract for the Company's flagship Loma Larga gold project. When executed, the Exploitation Contract will govern certain fiscal and other matters relating to the development and operation of Loma Larga. The Company may now move forward incorporating the fiscal terms of the Exploitation Contract into the FS."

She added, "The agreement on the terms and form of the Exploitation Contract marks a major achievement and milestone for the development of the Project and the Board of Directors and Management wish to thank the Ministry of Mining for its continued support of INV Metals and the mining industry. With the completion of our successful $27.6 million financing in March, the Company is fully financed to complete the FS, undertake ramp development and fund planned exploration at Loma Larga and our regional properties."

The Company commenced formal negotiations with the Ministry of Mines in early March. With the Exploitation Agreement negotiations substantially complete, INV Metals is advancing its plans to develop the underground mine with anticipated annual gold production of approximately 150,000 ounces over a 12 year mine life. Management is in the final process of selecting consultants to prepare the FS to advance the engineering design, support environmental permitting, provide information for community engagement, and determine financing requirements. The FS is expected to commence in early June and it is anticipated to be completed in up to 18 months.

Concurrent with the commencement of the FS, the Company intends to complete the engineering required to design and permit the development of the mine adit, related infrastructure and underground ramp to access the Loma Larga ore body. Depending on permitting requirements and timelines, management plans to commence the underground development in 2018, to engage in an advanced exploration program, confirm geotechnical conditions and provide employment and training opportunities for the local work force.

Exploration is ongoing at Loma Larga and on the Company's Tierras Coloradas and Las Peñas greenfield properties. The Company's exploration budget for 2017 is $5 million.

Summary of Key Terms

A summary of the key items of the Exploitation Contract are noted below.

  • INV Minerales Ecuador S.A. INVMINEC ("INV Minerales"), the Company's wholly owned Ecuadorian subsidiary, has the right to develop and operate Loma Larga for a period of 25 years, subject to renewal.
  • INV Minerales will pay a royalty of 5% on the net income ("Royalty" or "Royalties") of precious metals and related by-product sales.
  • INV Minerales will pay US$15 million of the Royalty in advance ("Advanced Royalty") to primarily support community development and social programs.
  • Payments of the Advanced Royalty will be subject to the following schedule and milestones:
       i   US$5 million on the execution of the Exploitation Contract;
       ii  US$5 million on the first anniversary of the execution of the Exploitation Contract; and
       iii US$5 million on the second anniversary of the execution of the Exploitation Contract.
  • The Advanced Royalty is deductible against future Royalties payable in the amount that is the lesser of 50% of the Royalties payable in a six month period or 20% of the total Advanced Royalty calculated annually.

    Additional Taxation Matters

INV Minerales is also expected to be subject to the following taxes, which are currently in effect:

  • 22% corporate income tax;}
  • 12% state profit sharing;
  • 3% employee profit sharing;
  • Value added taxes ("VAT") which will be refundable on expenditures incurred after January 2018 when, and if, INV Minerales generates export sales;
  • An extraordinary revenue tax ("Windfall Tax") payable if the market price exceeds a stipulated base price for gold, silver and copper. The Windfall Tax will be calculated at 70% of the difference between INV Minerales' gross revenue and the theoretical revenue at a base price ("Base Price"). The Base Price will be determined on a monthly basis as the 10-year trailing average of the daily price of gold, silver or copper, adjusted for the US Consumer Price Index, plus one standard deviation. The Windfall Tax will not apply until 4 years after INV Minerales has recovered the undiscounted value of the cumulative investment in Loma Larga since the concession was granted.
  • INV Minerales will be subject to a "Sovereign Adjustment" in the event that the cumulative benefit derived from Loma Larga to the Government of Ecuador is not equal to at least 50% of the total benefits from the Project. The benefits to INV Minerales will be calculated annually as the net present value of the cumulative free cash flows of Loma Larga since the concession was granted. The benefits to the Government of Ecuador will be calculated as the net present value of the cumulative sum of corporate income tax, Royalties, Windfall Taxes, state profit sharing taxes, non-recoverable VAT and previous Sovereign Adjustment payments, if any, over the same period.

About INV™ Metals

INV™ Metals is an international mineral resource company focused on the acquisition, exploration and development of precious metal projects in Ecuador. Currently, INV™ Metals' primary assets are: (1) its 100% interest in the Loma Larga gold property in Ecuador, (2) its 100% interest in the Las Peñas, Tierras Coloradas, and La Rebuscada exploration projects in Ecuador, and (3) its 35% interest in the Kaoko property, located in Namibia.

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