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Anaconda sells Chilean iron assets for $11 million

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Anaconda Mining (TSE:ANX) sold its Chilean iron ore assets, which it owns through its wholly-owned subsidiary, Inversiones La Veta SpA (La Veta), to privately-held Hierro Tal Tal S.A. (Hierro Tal Tal) on Wednesday, for $11 million in cash.

As per the terms of the agreement, La Veta sold its 50 percent interest in Minera Hierro San Gabriel S.A. (MHSG), and its 20 percent interest in Inversiones Hierro Antofagasta S.A. (IHA), to the Chilean-based Hierro Tal Tal.

The $11 million sum is payable in a cash payment of $2.0 million at closing, and another $2.0 million cash payment on May 31, 2012.

La Veta can earn another $3.0 million once commercial production is achieved at any of the properties that are controlled by either MHSG or IHA. It can earn another $4.0 million, based on the realized sales price for certain volumes of production from the properties.

Furthermore, La Veta can earn a 0.8 percent gross sales royalty for all production sold from the MHSG properties, and a 0.5 percent gross sales royalty for all production sold from the IHA properties.

La Veta will also receive a 1.25 percent carried interest in Compania Portuaria Tal Tal S.A., a private Chilean company which has the right to build a port in the city of Taltal.

Anaconda president and CEO, Dustin Angelo said: "The sale of the Chilean iron ore assets is a very positive step for the Company in realizing its long term strategic goals.

"The company has sought a way to derive value from the iron ore assets while separating them from our gold asset, and the sale achieves those objectives. Anaconda can now focus its efforts on enhancing the performance of the Pine Cove mine and build off its recent success at the producing project."

Anaconda said it will use the cash proceeds from the sale to repay the full principal amount plus accrued interest, totaling about $711,000, to holders of the Series III Debentures. It will also pay other outstanding debt service obligations and vendors payable it said.

"In addition, the cash infusion from the sale has helped the company improve its balance sheet. With the other US$2 million payment in approximately six months and cash flow from Pine Cove, Anaconda could potentially pay down a significant amount of its debt by the summer 2012," Angelo concluded.

Hierro Tal Tal's general manager, Antonio Barros added: "[Hierro] Tal Tal is currently undertaking advanced economic studies in preparation for financing the construction of an iron mine, near the town of Taltal in northern Chile, which will produce sinter feed for the Asian markets. 

"Production is expected to begin by December of 2012. [Hierro] Tal Tal is also planning further exploration with the goal of expanding resources in the area."

In Toronto, Anaconda shares rose 20 percent to $0.09, as of 1:41 pm EDT.

Quick facts: Anaconda Mining Inc

Price: 0.58 CAD

TSX:ANX
Market: TSX
Market Cap: $84.9 m
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