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Prism inks deal to buy Huampar silver-gold mine in Peru

PrismResources Inc. struck a deal to buy 100% ownership of the Huampar Silver-Gold mine inwest-central Peru.

In a deal with Trevali Mining Corp., Nueva Condor SA and Carlos Loret De Mola De LaValle,Prism Resources will issue 5,750,000 common shares to Trevali at a deemed priceof 10 cents per share; pay US$30,000 cash to Trevali within 90 days of theclosing of the deal; and issue 3.3 million common shares to Carlos Loret DeMola De LaValle at a deemed price of 10 cents per share, the company said July8.

Additionally, Prism will offer Carlos Loret De Mola DeLaValle a 3% net smelter royalty of which 2% may be acquired in 1% tranches forpayments of US$1.5 million and US$2 million, respectively, within a period oftwo years of the closing of the deal. Prism will also make annual payment toCarlos Loret De Mola De LaValle of US$100,000 commencing on the secondanniversary of the purchase agreement; and retain the services of importantNueva Condor executives for a monthly retainer fee of US$5,000 which fee iscapped at US$240,000 over a period of four years from the closing of the agreement.

The completion of the deal is subject to certain conditions,including, approval of the TSX Venture Exchange. When closed, the deal wouldconstitute a reactivation transaction pursuant to an exchange policy, afterwhich Prism will be listed as a Tier 2 mining issuer on the TSX VentureExchange. Also subject to its approval, Prism plans to issue 780,000 commonshares to a finder in consideration for services provided in respect to thedeal.

In connection with transaction, Prism entered into a non-brokeredprivate placement to issue 15,604,000 units consisting of one common share andone half of 1 common share purchase warrant at 10 cents per unit to raise grossproceeds of about $1.6 million. Each warrant will have an exercise price of 13cents per common share and will be exercisable for a period of three years fromclosing.

The company expects to use about $600,000 of the proceeds tofinance the exploration of Huampar, $200,000 to fund exploration of Cerro Oro,and the remaining funds are expected to be used for working capital of thecompany. The financing remains subject to TSX Venture Exchange approval.

Regarding the Cerro Oro drill program, the company expectsthe drilling to commence within the next two weeks. The drilling was temporarilystopped due to the regulatory delays in Colombia.