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Uruguay Minerals & Fortune Valley Merger Set To Create a Significant Latin American Focused Gold Producer

Published: 20:31 13 Oct 2009 AEDT

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A proposed merger between Uruguay Minerals (AIM: UGY, TSX-V: UME) and Fortune Valley (TSX-V: FVX) is set to create a significant Latin American focused gold producer. A newly combined group would have the financial and technical resources to develop its business and capitalise on growth opportunities in Latin America. Additionally the group would have no debt and no hedging, with approximately $8m of cash.

Uruguay Minerals intends to acquire all of the issued and outstanding common shares of Fortune Valley. Under the terms of a letter of intent signed by the two companies, it is proposed that Fortune Valley shareholders will receive approximately 0.456 UME common shares for each common share of Fortune Valley held. The offer represents a purchase price of approximately C$0.23 per Fortune Valley share valuing Fortune Valley at approximately C$8.2m.

Uruguay Minerals Exploration has a production profile of at least 190,000 ounces of gold over the next four years in Uruguay. Their principle operation is the San Gregorio gold operation, which is located within the Isla Cristalina Belt.

The San Gregorio property comprises a number of open pit mines and a processing plant. The mineralized system covers a 7km shear zone with three major deposits identified to date - Arenal, San Gregorio and Santa Teresa, which have collectively produced more than 800,000 ounces of gold.

Fortune Valley is acquiring the Pantanillo property in the Maricunga Belt in Chile through an option agreement from a subsidiary of Anglo American Plc (LSE: AAL). Based on historic exploration work conducted by Anglo American and Kinross Gold (NYSE: KGC), the potential mineral deposit at Pantanillo is estimated at between 2.18 to 2.95 million ounces of gold. The current resource estimates is conceptual in nature as there has been insufficient exploration to define a NI 43-101 mineral resource compliant.

Uruguay Minerals has provided Fortune Valley interim financing in the form of a convertible debenture of C$250,000 to complete the acquisition of the option on the Pantanillo property.

The proposed merger would result in Latin American operating gold producer, with a profile of at least 190,000 ounces over the four years to May 31, 2013. The open pit operations at the San Gregorio mine in Uruguay has the potential to significantly improve this production profile and reduce cash costs with the development of the Arenal Deeps underground deposit.

In Chile a planned exploration and development program will target the definition of an NI 43-101 compliant mineral resource. The program is expected to commence within 3 months of completing the transaction. The objective is to create a second production asset for the group within 3 to 4 years.

In addition to the new company’s enhanced production capacity there is further growth potential from the combined exploration portfolio in Chile and Uruguay including the Anillo project in Northern Chile which neighbours the El Peñón mine operated by Yamana Gold Inc (LSE: YAU, NYSE: AUY).

Yamana’s El Peñón is a high grade mine with a proven track record of consistent, low cost production. El Peñón has Proven and Probable Reserves of 8.9M tonnes at 6.72 grams per tonne gold and 240 grams per tonne silver, equating to 1.9m ounces of gold and 69m ounces of silver.

Uruguay Minerals Exploration CEO, David Fowler commented on the deal: “This proposed combination of UME and Fortune Valley would move UME towards its strategic objective of developing a more significant Latin American focused gold production profile ... this proposed acquisition would improve our growth profile in an established mining country such as Chile with two quality projects, Pantanillo and Anillo in significant mining districts.”

Uruguay Minerals will put a resolution to its shareholders at its Annual General Meeting to be held on October 13, 2009 for approval to change its name to Orosur Mining Inc.

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