News

Ely Echo
January 15, 2010

Shareholders in Duluth Metals saw their stock increase 52 percent when the company announced Thursday it has signed a binding agreement with Antofagasta on a joint venture development of the large scale Nokomis project southeast of Ely.

Nokomis is an underground deposit that contains copper, nickel and platinum group minerals and is said to rival the deposits in the Sudbury Basin in northern Ontario and Voisey's Bay in Labrador among the world's largest nickel and copper reserves.

"This is an important announcement in the history of Duluth Metals," said company chairman Christopher Dundas in a teleconference call to shareholders. "Antofagasta has proven expertise in planning, funding and building copper mining projects."

Under the agreement:

• Duluth Metals will contribute the Nokomis Project and approximately 5,000 acres in the Duluth Complex for a 60% interest in the joint venture, with Antofagasta to acquire an initial 40% interest;

• Antofagasta holds the option to acquire an additional 25% of Nokomis from Duluth;

• Antofagasta will provide $130 million in direct funding to the project for its 40% interest in the joint venture;

• Thereafter, if Antofagasta elects to proceed with the further funding of the project and to maintain its 25% option, Antofagasta will disproportionately fund 65% of the joint venture expenditures and Duluth will fund 35%;

• Additionally, Antofagasta has agreed to provide Duluth with up to $30 million in additional funding to cover Duluth's share of subsequent project expenditures, which will ultimately be repayable in cash, Duluth shares or offset against the 25% option exercise price;

• Antofagasta will also immediately buy $11.6 million in Duluth Metals shares;

• The combination of the initial funding commitment, private placement and incremental funding from Antofagasta ensures that up to $ 227 million of funding will be available to advance the project with Antofagasta involvement, before any additional funding would be required from Duluth;

• Antofagasta has also committed to pursue project financing, on a common basis with Duluth in respect of the large development capital cost financing requirements of the project.

"The agreement announced with Antofagasta is an outstanding partnership for an outstanding deposit," said Dundas

"This is a significant step forward for Duluth. This joint venture provides three key benefits that will act as catalysts to the development and construction of Nokomis.

"First, it delivers near and longer-term project development financing that we expect will be sufficient to bring the project to production. Second, Antofagasta is providing a commitment to arrange project financing for the large capital cost requirements, which are projected to be $1.3 billion. Third, it brings outstanding execution capability and mitigates execution risk."

Antofagasta is one of the largest international copper producing companies in the industry with over 4,000 employees. Its activities are mainly concentrated in Chile where it now owns and operates three copper mines: Los Pelambres, El Tesoro and Michilla, with a total production of 428 thousand tonnes in 2007

"Nokomis is an excellent deposit and we are very pleased to enter into this agreement with Duluth," said Marcelo Awad, CEO of Antofagasta Minerals. "This is a large deposit that has the potential to become one of the world's premier low-cost copper-nickel producers. We are looking forward to working with Duluth to advance this very promising project.

"Duluth Metals has done a very good job at advancing Nokomis to its current stage, and we are confident that, together with Antofagasta's technical, operational and development skills, these properties could eventually be developed to their full potential for the mutual benefit of the shareholders of both Antofagasta and Duluth Metals."

Awad added, "Antofagasta employs high standards of health, safety, and environment performance and community relations wherever it operates. Nokomis could represent a major investment in the Arrowhead region of the State of Minnesota and lead to increased local employment there."

"Antofagasta is one of the world's premier major copper producers with an excellent pedigree and track record of success on this type of project," said Dr. Henry J. Sandri, President and CEO of Duluth Metals.

"Antofagasta possesses proven expertise in planning, building and operating large-scale mining complexes and will apply its in-house capability to develop Nokomis," said Sandri. "We believe this partnership is the mechanism required to unlock the tremendous value residing in the Nokomis deposit."

Duluth Metals expects development activities at Nokomis to proceed on an accelerated basis, and anticipates pre-feasibility and bankable feasibility studies to be completed within 36 months.

Currently the Nokomis deposit contains 550 million tonnes of indicated resources grading 0.639% copper, 0.200% nickel, 0.660 grams per tonne PGM (platinum-palladium-gold) for a copper equivalent (CuEq) grade of 1.51%, plus an additional 274 million tonnes of Inferred Resources grading 0.632% copper, 0.207% nickel, 0.685 grams per tonne TPM for a CuEq grade of 1.53% (more information available at www.Duluthmetals.com).

When in operation, Nokomis could produce up to 40,000 tonnes of ore per day, based on an initial 22-year mine life. This estimate is based on utilizing only approximately one-third of the currently identified resource, with 40% of the Nokomis property yet to be explored.

David Oliver, is the project manager for Duluth Metals, and is based in the company's Ely office.