SOLA Resource Corp. (SL-TSXV)

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August 13, 2010 Issue

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SOLA Resource Corp. Is In The Process Of Making An Acquisition That Will Change The Face Of The Company And Give Them 50% Interest In A Producing Mine In Rondōnia State, Brazil, Where It Is 50% Manganese – A Rarity In That Market

William E. Pfaffenberger
Chief Executive Officer

 

Company Profile:

Sola is a junior exploration company with assets in Canada and Brazil. The Company has primarily focused on diamond, gold and base metal resource properties since inception. All available resource reports and information on the Company’s properties are located on the Company website.


Rio Madeira is a Brazilian company with which Sola has a Memorandum of Understanding with to purchase 50% of its share capital and is presently producing 2,000 tonnes per month of 53.6% average grade Manganese.


For further information about Sola Resource Corp., please visit the Company’s website at www.solaresourcecorp.com or contact the Company at +1 403 269 2065 or preferably email: sola.ir@solaresourcecorp.com.


Resources
Diamond, Gold and Base Metal Exploration
(SL-TSXV)


SOLA Resource Corp.
Suite 1600, West Tower, Sun Life Plaza, 144-4th Avenue S.W.
Calgary, AB Canada T2P 3N4
Phone: 403-269-2065

 

Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published - August 13, 2010


CEOCFO: Mr. Pfaffenberger, what is the focus at Sola Resource today?

Mr. Pfaffenberger: We have been an exploration mining company. However, we are just in the process of a purchase agreement with a small mine in Rondōnia State, Brazil, for buying 50% interest in a producing mine that produces high-grade manganese ore.

 

CEOCFO: Why the attraction to manganese, and why that particular property?

Mr. Pfaffenberger: What attracted us to this particular operation was the grade of manganese that they have been producing and the fact that they have been producing for several years. It is above 50% manganese, which is a rarity in the manganese market and there are as we understand it, only two other resources in the in the world that produces that grade and the grade gets a premium to other ores and sells for about $450 US for the raw ore. If you look at the profit margins that are possible at what they are doing, they are quite high. We are just in the process of completing our due diligence on their operation, and hopefully that will lead to a positive decision on us buying 50% of their company.

 

CEOCFO: What is the world market for manganese?

Mr. Pfaffenberger: The principle use of manganese is in production of steel. You cannot make steel without manganese. It is the principle additive metal that was found at the beginning of the making of steel. In other words, it takes manganese to give steel its properties. If you look at the various grades making steel, this particular high grade manganese is the most useful in making the highest grades of stainless steel. That is one of the reasons why you get a premium price for the ore.

 

CEOCFO: Why have you chosen this approach?

Mr. Pfaffenberger: We have been in the exploration business for quite a long time and when you are an exploration company one of the difficulties is developing properties that you hope to bring to market. You don’t produce cash flow so you are constantly having to go to the market to do placements in your shares to raise more money. Only then, can do your exploration and prove up your property. The advantage with this purchase would be that it would place us as a producer. So it should produce sufficient cash flows for us to do the things we are doing without having to go to the marketplace and raise capital.

 

CEOCFO: Will you still hold other properties?

Mr. Pfaffenberger: We have a gold property in British Columbia, which is called DASH and we have been developing that property. Last year was the year we picked up the property and we did drilling on it late last summer. Now DASH has moved onto the back burner while we are trying to complete our acquisition of this mine in Brazil.

 

CEOCFO: What is the financial picture at Sola?

Mr. Pfaffenberger: The one thing that this purchase should give us is the ability to go out and raise capital on the basis of a production agreement. What we would do is go to financiers and they would lend us money on the basis of the production that we are anticipating from our half of the manganese purchase. So we are hoping we can do that without using any equity, and we will be able to get interested parties that will come in to loan us money. This purchase should be attractive enough to get us a production loan and then we could pay that loan off with the cash flows that we get from our half of the operation.

 

CEOCFO: Will you be involved with the running of the mine?

Mr. Pfaffenberger: In the partnership, we are bringing the capital and the connection to the market to be able to sell the product. We are depending on our Brazilian partners who have been producing from this mine for four years now, to actually be the ones to do the operation in Brazil. We will be making the operating decisions through a joint committee of both parties so that we can add our own expertise in terms of the connections we have to people who have a background in this type of a mining operation. The Brazilian partners have been very receptive to us bringing this, because where they are in Brazil, it is a long way from markets. Rondōnia State is close to the border with Bolivia in the Amazon Basin, where the rivers start to flow and actually form the Amazon. It is quite a ways from anything. It is really farm country, but just turns out to be farm country with a very interesting geology.

 

CEOCFO: Being this is such high-grade manganese, why has it gone unnoticed?

Mr. Pfaffenberger: They are a small producer and the way that the mines are developed in Brazil is they get permits to produce small amounts of ore to prove up the ore. In that process, you don’t need much capital, so basically you can make your money off producing from the small operation. However, the expectation of the Mining Ministry is for you to then go to the next step, which is to actually get a mining license and this is an expensive process. So they put all their capital into getting a mining license and basically have not been able to get out from under the debt they had to take on in doing that. It is kind of ‘what came first, the chicken or the egg”. They are making relatively good money, but the problem is they can’t advance themselves to developing higher production, and do the exploration that they need to do to prove up more resource. We are proving right now that they have about 1 million tonnes of ore in the vicinity of their mine, and the 1 million tonnes is worth $150 million. That is a fair amount of money. Therefore, it is about us doing our due diligence, presenting them with the connections that we have and then getting them to be a larger producer. So it really is capital finding the right project. We are in the mining business and have the expertise to get them over the next steps they need to take. So when we approached them it was kind of a mutual admiration society. What we offered them was exactly what they needed to get to the next stage. We have gotten quite a bit of attention with the kind of grades that they have, with the tonnage that they claimed they have. We have now done our due diligence and are about to start to release our results on what we have found. We are excited about the fact that we think that we have reached the turning point in terms of this project becoming a real success.

 

CEOCFO: Why should potential investors be interested in Sola?

Mr. Pfaffenberger: Given the financial calamities that began a year and a half ago, one of the difficulties for small exploration companies was that their normal markets basically dried up, because people were so risk averse. We are normally in the position where the people that would invest in us are putting in capital on the chance that we would find an ore body. Further, it would be that we could actually find something that was economic, then bring it to the attention of capital, and eventually come out with a mine. The success of such companies may be one in 600 that you could actually make the bet and it would pay off, but you are usually dealing with penny stock so if you are investing a nickel and the stock is successful, it might be worth $3 or $4. Of course, if it is not successful, you may end up just losing your capital. So what we looked for in this project and what we were faced with in terms of what the market wants us to do, is to look for something that would give us a cash flow, and we have been fortunate enough to find it. The potential is very large if you actually look at the mathematics of it in terms of where our share price could go, we are now trading at 6 or 7 cents. So the leverage in this is extremely large and I think once we put out our data it will be taking a lot of risk out of it because we are dealing with a known entity. We are dealing with somebody that has already been producing, so we have been very fortunate in getting on to what we have. We wouldn’t have found it unless we had already been doing work in Brazil and it turns out that this property was just north of a property that we had an option on and we just looked at the producer that was north of us and now we are doing a deal with them. We were just doing exploration in Brazil on manganese and now we are actually marrying that together with a producing company.

 

CEOCFO: So it is a good time to pay attention to Sola!

Mr. Pfaffenberger: I have been in the markets for a long time and I have never seen anything like this producing manganese mine in Brazil. The last year and a half have been a lot of work, but I expect it to pay off handsomely for our shareholders.

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What attracted us to this particular operation was the grade of manganese that they have been producing and the fact that they have been producing for several years. It is above 50% manganese, which is a rarity in the manganese market and there are as we understand it, only two other resources in the in the world that produces that grade and the grade gets a premium to other ores and sells for about $450 US for the raw ore. If you look at the profit margins that are possible at what they are doing, they are quite high. We are just in the process of completing our due diligence on their operation, and hopefully that will lead to a positive decision on us buying 50% of their company. - William E. Pfaffenberger

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