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Mexican JV to process lithium from Cierro Prieto geothermal brines

Alexander Richter 23 Dec 2009

A Canadian-Mexican joint venture CPI Internacional and Escondidas Internacional are planning to exploit, industrialize and commercialize lithium chloride minerals and derivative lithium products from the brines of the Cierro Prieto geothermal power plant in Mexico.

Reported from Mexico, Etna Resources Inc. announced it has entered a share option agreement to indirectly acquire lithium rights in the geothermal operations at Cierro Prieto.

Etna Resources Inc. (TSX VENTURE: ETN) has entered into a Share Option Agreement dated December 18, 2009, with Escondidas Internacional S.A. de C.V., a privately held Mexican corporation and the shareholders of Escondidas. Following the entry into the Option Agreement, the Shareholders granted an option to Etna to acquire 76% of the shares of Escondidas (the “Option”). Escondidas has entered into a joint venture and development agreement with CPI Internacional S.A. de C.V., a privately held Mexican corporation (“CPI”), whereby CPI and Escondidas have agreed to jointly process lithium and precious metals in the Cierro Prieto geothermal brines that are owned by CPI through concessions and located in Baja California, Mexico, roughly 30 km south of the city of Mexicali.

CPI is the owner of concessions granted by the Mexican Federal Water Commission that hold residual brine waters which are produced from deep wells at Cierro Prieto by the Mexican Federal Electrical Commission (the “MFEC”). The MFEC operates the Cierro Prieto geothermal power plant, which, at 720 MW, is the second largest such plant in the world. MFEC pumps brines from these deep wells and diverts the steam fraction to its power plant, delivering the residual brines to CPI.

The CPI Joint Venture calls for Escondidas and CPI to mutually exploit, industrialize and commercialize lithium chloride minerals and derivative lithium products from the brines. At a minimum, Escondidas will receive a 33% interest carried through production of lithium products. Should CPI be unable to provide project financing for the lithium production facilities, Escondidas has the opportunity to bring project financing and increase its interest in any lithium project and resultant products.

Upon the exercise of the Option, Etna will acquire the irrevocable right to receive 76% of the issued and outstanding shares of Escondidas held by the Shareholders. In consideration for the Option, Etna has agreed to pay or issue the following on the closing date of the Option Agreement on a pro rata basis: (i) payment of US$125,000 to the Shareholders; (ii) issuance of 10,300,000 common shares in the capital of Etna to the Shareholders; and (iii) issuance of 7,500,000 warrants (each, a “Warrant”) to the Shareholders, each Warrant of which entitles the Shareholder to acquire an additional Etna share at the exercise price of CDN$0.50 per share for a period of two years from the closing date. In addition, Etna is obligated to pay to the Shareholders the following sums on a pro rata basis: (i) US$500,000 6 months from the date of closing; (ii) US$500,000 12 months from the date of closing; and (iii) US$750,000 18 months from the date of closing. The proposed acquisition is between arm’s length parties. As a result, the proposed acquisition will not require shareholder approval from the shareholders of Etna.

The Option Agreement further provides that Etna will pay: (i) US$150,000 to Escondidas on signing for the repayment of outstanding indebtedness owed by Escondidas; (ii) US$50,000 to Escondidas on signing, and US$25,000 on a monthly basis thereafter until the earlier of the closing date or the termination of the Option Agreement to cover costs relating to outstanding expenses, due diligence, legal fees and other general and administrative expenses of Escondidas; and (iii) US$50,000 to Escondidas at closing for the repayment of outstanding indebtedness owed by Escondidas.”

Source: release via Earth Times