May 12, 2011
Dear Shareholder,
The past year has been a significant one in the growth of our Company. It finds us in a strong position and ready to move the Company forward. The discovery of San Luis was an important event in the evolution of our company. I am proud of the work done by our team in identifying the prospect, acquiring the mineral concessions and outlining the deposit. New discoveries are relatively rare events; being part of this one is something we all can look back on with true satisfaction.
Now we have the opportunity to capitalize on our hard work and investment and bring an immediate return to you, the shareholder. Under the terms of our agreement with Silver Standard we will be paid $17 million in cash. Silver Standard will also return, and we will cancel, the 6,459,600 Esperanza shares that it owns. At a share price of $2.00 each, this has an additional value of $12.9 million. Esperanza will retain a 1% royalty on net revenue. This allows your company to anticipate a steady source of near-term cash flow as well as participate in future discovery within this large and prospective claim block. Our spending on the project to date is slightly less than $1 million dollars. No matter how you calculate the value of the transaction it represents a significant return on investment.
This divestiture also will provide us with financial strength and management time to focus on other opportunities. First and foremost, it will allow us to focus on the advancement of our Cerro Jumil property. We have begun drilling to expand the resource base and are currently updating this project’s Preliminary Economic Assessment. The funds to be received from Silver Standard will enable us to continue to move the project forward.
Our strategic investment in Global Minerals Ltd. is also developing handsomely. We own approximately 35% of this publicly traded company. Our initial outlay of just under $3 million now has a market value of over $20 million. We believe that through continued exploration, Global’s Strieborná deposit has real potential for substantial growth in resources – but this will take continued funding. As a result of the San Luis transaction we will be in a position to maintain our ownership participation and partake in the expected benefits.
We’ve achieved our current position through exploration and discovery. We have an exciting portfolio of new prospects in Peru in Mexico. We have begun drilling on Pucurana and will shortly do so on Colqui Orcco. We continue to generate and pursue new opportunities as well.
At Esperanza’s Annual General Meeting of shareholders being held on Wednesday, June 8, 2011, your company will be seeking approval for the sale of its minority interest in the San Luis, Peru joint-venture to Silver Standard Resources Inc., the majority partner. Your approval is required as Silver Standard, through its 11.8% shareholding in Esperanza, is considered a ‘related party’ under Canadian securities regulation and TSX Venture Exchange policies. Those requirements provide that such approval must be by a majority of the disinterested votes, therefore, any votes by Silver Standard and its associates and affiliates on this matter will be excluded.
Esperanza’s Board of Directors has unanimously approved this transaction with Silver Standard and recommends that you vote in favour of it. I’m certain you will agree with us that this transaction not only provides an immediate and significant return on our San Luis investment but also provides us with the strength and flexibility for capitalization of our other and future assets. Please take the time to review the accompanying materials and vote your shares online, by telephone or by returning the enclosed proxy or voting instruction form.
Thank you,
William Pincus
President and CEO
