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Eagle Star Minerals acquires Samba phosphate project in Brazil, shifts strategic focus

Eagle Star Minerals (CVE:EGE) said Monday it will acquire the Samba phosphate project, located in the western portion of Piaui state in Brazil, prompting a shift in the company's strategic focus.

Over the past year, the company said it had recognized certain "opportunistic trends" in Brazil, in a significant lack of sufficient domestic supply of agro-minerals, and as a result has decided to reposition itself to focus on its agro-minerals projects in the country.

With the help of its senior advisors and its local geological team, the company said it has identified and staked areas with significant potential to host large phosphate deposits.

In light of these new developments, the company said it has decided to stop its exploration work on the Angico iron ore property, despite its "excellent potential" to host significant iron ore mineralization.

Under the terms of the new agreement announced Monday, Eagle Star can earn a 100 percent interest in the Samba project - which it now considers its flagship property - by issuing one million shares of its common stock to an unnamed, arms-length third party within one year from the start of the first exploration stage at the asset, as well as by making various cash payments over a certain time frame.

The 109,285-hectare Samba property, which consists of 60 mineral claims, is located near the cities of Valenca and Sao Jose do Peixe in Brazil, and near Eagle Star's Ruth project.

The new asset is also located near potential future end-markets, including the Balsas and Bom Jesus agricultural centres, the company said.

Eagle Star also said it was drawn to the property by regional reconnaissance work, which investigated an area of 200 by 170 kilometres in the region of Piauí state covered by the Longá Formation (Parnaiba Basin). Three sub areas of the Parnaiba Basin were identified with rock types carrying phosphate mineralization.

Due to the large target area of the regional exploration program, Eagle Star completed regional and follow up sampling on existing road cuts, generating 201 channel samples.

Lab results received so far showed an "excellent exploration case", the company said, with 12 percent of samples returning values of over the 2.5% phosphorus pentoxide (P2O5) cut-off grade.

In the regional area of the project, sample 49855 returned 11.87 percent P2O5, while samples 49871 and 50577 returned a whopping 17.6 percent P2O5 and 12.35 percent P2O5, respectively.

On the actual Samba property, sample 51028 returned 9.42 percent P2O5, while sample 51063 returned 6.4 percent P2O5, and sample 51070 yielded 48.51 percent P2O5.

"We are extremely pleased with the acquisition of our Samba agro-mineral project," said president and CEO Eran Friedlander.

"The results from the regional recognition work and follow up field sampling are very positive and on that basis, we believe this will lead us to discover a significant phosphate deposit in Samba."

Friedlander said the company looks forward to investigating the extent of lateral continuity of phosphate mineralization by way of a follow-up exploration program at the site.

Indeed, the "aggressive" follow-up exploration program will investigate the project's potential to host significant phosphate resources. This program will include detailed geological mapping, topographic surveys, additional channel and trench sampling, and, if warranted, a diamond drill program in the second quarter of 2012.

"Eagle Star is convinced that the strong technical, logistical and economical fundamentals of this opportunity, coupled with the potential for near-term production at relative low capital cost will ultimately deliver significant returns to our shareholders," he concluded.

To secure the 100 percent interest in Samba, Eagle Star will also pay an initial down payment of US$50,000 in cash, as well as BRL 1.0 million (USD $581,666.33) within one year or upon completion of the first exploration stage, or BRL 2.0 million (USD $1.16 million) within two years or upon completion of the second exploration stage, or BRL 3.0 million (USD $1.75 million) within three years or upon completion of the third exploration stage.

Alternatively, Eagle Star can choose to make no additional cash payments beyond the initial US$50,000, and therefore will retain a 70 percent interest in the property.

In a statement Monday, Eagle Star commented on its strategic shift to agro-minerals: "Eagle Star's management and board of directors believe that the macro economic fundamentals of the agro-mineral sector in Brazil, the strong technical merits of the company's current agro-mineral projects and the knowhow and specific experience of its Brazilian team, lend strong support to this strategic decision.

"Furthermore, now that Eagle Star has developed in house capabilities to identify and claim lucrative, wholly owned, mineral opportunities in Brazil, the company intends to keep project acquisition costs at bare minimum and use these significant savings towards expansion and development of its own asset portfolio."

Of the shares issued as consideration for Samba, 25 percent will be free trading immediately, 25 percent will be free trading within six months of issuance, 25 percent will be free trading within one year of issuance, and the remaining 25 percent will be free trading within 18 months of issuance, the company said.