| Property Description | San Cristobal Mill and Plant located on the Pan American Highway west of the city of El Divisadero. |
| Nature of Interest | Mill and Plant owned by Joint Venture. The real estate is owned by an agency of the Government of El Salvador. Environmental permit has been revoked but legal challenge is pending. |
| Date Interest was Acquired | Equipment was acquired on February 23, 1993; lease was acquired on November 12, 1993. |
| Cost of Interest | Equipment purchased and extensive retrofitting was and continues to be performed. The cost of the investment through March 31, 2008, including the crushing system located at the San Sebastian Gold Mine, is $6,956,540. |
| Amount of Funds to Make Property Operational | To expand the plant, including a crushing system to a capacity of 500 tons per day; an estimated sum of up to $4 million may be required, all dependent on whether new or used equipment will be purchased. |
| Date Mine will be Operational | Curbed production commenced March 1995; operations suspended on December 31, 1999 until the existing equipment is overhauled, repaired, restored and expansion of the SCMP facilities are completed, and dependent on the price of gold and restoration of the environmental permit. |
SCMP Location
SCMP is located near the city of El Divisadero (bordering the Pan American Highway), and is approximately 13 miles east of the city of San Miguel, the third largest city in the Republic of El Salvador, Central America.
SCMP Lease Agreement
Although the Joint Venture owns the mill, plant and related equipment, it does not own the land and certain buildings.
On November 12, 1993, the Joint Venture entered into an agreement with Corporacion Salvadorena de Inversiones (“Corsain”), an El Salvadoran governmental agency, to lease for a period of ten years (expiring November 12, 2003), approximately 166 acres of land and buildings on which its gold processing mill, plant and related equipment (the SCMP) are located, and which is approximately 15 miles west of the SSGM site. The basic annual lease payment was U.S. $11,500, payable annually in advance, unless otherwise amended, and subject to an annual increase based on the annual United States’ inflation rate. As agreed, a security deposit of U.S. $11,500 was paid on the same date and this deposit was subject to increases based on any United States’ inflationary rate adjustments.
On April 26, 2004, a three-year lease, which includes an automatic additional three-year extension subject to Corsain’s review, was executed by and between Corsain and the Company. This lease is retroactive to November 12, 2003 and the monthly lease payments are $1,418.51 plus the El Salvadoran added value tax. The lease is subject to an annual increase based on the U.S. annual inflationary rate adjustments. The SCMP is strategically located to process mineralized material from other mining projects.
SCMP MILL AND PLANT PROCESS DESCRIPTION
Current Status
The SCMP (a precious metal cyanidation carbon-in-leach system) has a capacity of processing up to 200 tons of virgin mineralized material per day. The following units of operation are required: crushing, grinding, thickening, agitated leaching and recovery of precious metals via a carbon-in-leach (CIL) system.
The SCMP has been designed to process up to 500 tons of virgin mineralized material per day. The SCMP operations were suspended as of December 31, 1999, as the plant, equipment, and facilities have been placed on a care and maintenance status until such time as the Company has sufficient funds to complete a major overhaul in order to place it into operating condition to increase the SCMP’s processing capacity from 200 to 500 tons per day and at a time the price of gold is stabilized to assure a profit.
On or about September 13, 2006, the El Salvador Ministry of the Environment delivered to Commerce’s El Salvadoran legal counsel its revocation of the environmental permits issued for the SSGM and SCMP. This Company’s legal counsel on December 6, 2006, filed with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice two complaints relating to this matter. (See the Company’s discussion in the section entitled “Environmental Matters.”) These legal proceedings are pending.
Commerce Group Corporation. All rights reserved. 2008.