Pacific Imperial options Fenton property from Hudbay

Executive Summary

• Pacific Imperial Mines Inc. has entered into an option agreement with Hudbay Minerals Inc. to acquire a 100% interest in the Fenton property, a 1,700-hectare precious metal exploration site in British Columbia.
• The transaction requires Pacific Imperial to complete specific earn-in requirements, including $5.25 million in exploration expenditures and cash/share payments totaling C$2.175 million over six years, subject to TSX Venture Exchange approval.
• Upon full exercise of the option, Pacific Imperial will acquire the property, and Hudbay will receive a 1.25% Net Smelter Return (NSR) royalty, along with significant upfront cash payments ($5 million and $10 million) tied to permitting and commercial production.

Key Details

• Target Asset: Fenton Property, located approximately 30 km south of Houston, B.C., covering ~1,700 hectares with road access.
• Geology: Epithermal, high-to-low-sulphidation, precious metal system hosted in felsic volcanic rocks of the Kasalka formation; characteristics similar to the Artemis Blackwater deposit.
• Earn-in Requirements (to be completed within 6 years of TSX Venture Exchange approval):
  • Exploration: Aggregate of $5.25 million in exploration expenditures, paid in staged amounts for each anniversary.
  • Initial Payment: $25,000 cash to Hudbay within 180 days of receiving exchange approval.
  • Staged Payments: Aggregate cash payments of C$2,175,000 (or equivalent common shares) paid in staged amounts for each anniversary.
• Share Issuance Terms:
  • Issue price: Volume weighted average trading price (VWAP) over the 10 trading days preceding issuance, subject to a minimum of $0.05 per share.
  • Ownership Cap: If issuance results in Hudbay holding >9.99% of shares, payment must be settled in cash.
  • Hold Period: Shares are subject to a hold period of four months and one day post-issuance.
• Post-Exercise Consideration & Royalties:
  • NSR Royalty: Hudbay receives a 1.25% NSR royalty upon exercise.
  • Advance Payment 1: $5 million cash payment to Hudbay within 10 days of receiving all governmental permits for mine construction/operation (counts as advance NSR).
  • Advance Payment 2: $10 million cash payment to Hudbay within 10 days of announcing commencement of commercial production (counts as advance NSR).
  • Right of First Refusal: Pacific Imperial granted Hudbay a right of first refusal on future metals or ore production.
• Existing Encumbrances:
  • Property is subject to a 2% NSR royalty payable to a third party (assumed by Pacific Imperial upon exercise).
  • Pacific Imperial has the right to purchase 50% of this underlying NSR (1% total) for $700,000.
• Regulatory Status: Transaction is subject to approval by the TSX Venture Exchange.