December 08, 2010

President's Letter to Shareholders

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Solfotara Mining Corporation
(the “Company”)

December 1, 2010

President’s Letter to Shareholders

Dear Shareholder:

As you are aware our proposed merger with Metallum Resources Ltd. on the TSX Venture Exchange (“TSXV”) did not proceed.  Instead we have decided to undertake in the early new year a financing and a listing on the AIM market of the London Stock Exchange. This listing is anticipated to be completed in the 2nd quarter of 2011. It is our experience that the AIM market looks very favorably on copper plays in foreign jurisdictions, especially the Philippines.

In December 2009 we undertook a corporate reorganization. As part of this reorganization we spun out our Hinoba’an copper project to Copper Development Corporation (“CDC”) in consideration for US$1,500,000 represented by the issuance by CDC to us of 42,861,793 CDC shares. We in turn distributed 35,832,459 of the CDC shares to our shareholders as a reduction of capital. Each shareholder received .84 of a CDC share for every one of our shares. In addition our warrant holders received a like number of share purchase warrants from CDC.

We recently signed a binding letter of intent with CDC on our fully permitted Basay Project, whereby CDC will make payments towards the property of US$1.9 million, incur exploration and development expenditures of US$5 million and complete a bankable feasibility study on the project within 6 years, to earn a 70% interest in the property.

We are pleased to advise that CDC has just this week completed an IPO offering on AIM raising US$65 million at 35 pence per share. The funds raised will be used to complete bankable feasibility studies at both the Hinoba’an and Basay projects.

It is anticipated that CDC’s shares will commend trading on AIM on December 13, 2010.  We have been advised by CDC’s legal counsel that share certificates of CDC will be delivered approximately 7 days later to each shareholder entitled to receive them.

For those warrant holders who would like to exercise their warrants in CDC please note that no warrants can be exercised for a period of 30 days from commencement of trading. As the exercise of warrants is a cumbersome chore for CDC they would very much prefer if we could action all those warrant holders who wish to exercise them together and complete the process in  on step in mid January 2011. If you wish to do so please advise us as soon as possible.

For those parties who became our shareholders after December 2009 and did not benefit from our reorganization we have decided to reduce the exercise price of the half warrant they received in the 2010 financing from $0.75 to $0.50 a share.

With respect to our projects we provide the following update.

Hinoba’an Project

The successful acquisition and spinout of the Hinoba’an project to CDC highlights our ability to enhance and develop our Philippine projects.  Our cost of this project was approximately US$2 million. Base on CDC’s funding price of 35 pence per share we and our shareholders have realized a significant potential gain of approximately $21,000,000 without even taking into account the “in the money” value of the unexercised warrants in CDC.

Since acquiring the project CDC had previously raised over $10 million privately of which the bulk has been spent on the Hinoba’an project towards the completion of an updated 2010 scoping study which shows the following robust economics for both the 12Mtpa and 15Mtpa cases.

Treatment rate:

12 Mtpa

15 Mtpa

Mine life:

22 years

18 years

Total copper produced:

1.4 billion lbs

1.4 billion lbs

Annual copper production:

29,000 t

35,000 t

Initial capital costs:

$297 million

$352 million

Average operating cost:

$1.65/lb Cu

$1.62/lb Cu

Project NPV at 10%2:

$416 million

$485 million

Project IRR2:




Basay Project

The Basay Project is located on the peaceful island of Negros, and consists of a granted Exploration Permit, approximately 1,800 hectares in size (18 sq. km) which covers the historic Basay Copper Porphyry Mine, including pre-existing infrastructure. This mine was operated in the late 1970’s and early 1980’s at a rate of up to 24,000 mT per day.

At the time the mine was shut down, historic reserves stood at 233 mT grading .443% copper, and containing significant molybdenum. These reserves were calculated on only a portion of the known mineralization. Reserves were calculated to a maximum depth of only 400 meters below surface.

St. Anthony Project including the Ampusongan Property

The purchase of the granted St. Anthony Project from Gamban Mining and Development Corporation (“Gamban”) has now been completed. Our only remaining obligation to Gamban is a $500,000 payment upon the commencement of commercial production, and a 0.5% NSR royalty.

19,000 meters of drilling in 64 drill holes which was performed by Philex Mining Corporation in the late 1970’s and early 1980’s on the project. In addition 1,200 meters of tunneling were performed to bulk test the deposit.

The deposit has been modeled several times and it is a historically defined open pit minable deposit with 101 million mT at .32% Cu, .41 g Au/T. Higher cutoff grades give a smaller deposit with a grade of approximately .5% Cu and .6 g Au/t. The deposit is permitted as Mining Lease Contracts.

In addition the surrounding and adjacent areas covered by EXPA -105, known as the Ampusongan Property, have been paid for, with the only remaining obligations to the underlying claimholder being a payment of $250,000 upon commencement of commercial production, and a 0.5% NSR royalty. All necessary requirements for the issuance of this permit have been completed except for the National Commission on Indigenous People clearance, which is currently being undertaken.

The Ampusongan Property is contiguous and to the north and south of St. Anthony. To the north, large areas of porphyry copper mineralization are seen in outcrop on the Ampusongan River, but no systematic exploration has been done in the area to date. To the south, several drill holes were drilled in the past by Western Minolco including SKG – 16 which encountered 236 meters of 0.71% Cu and 0.825 g Au/T.

The Ampusongan and St. Anthony Properties are within 10 kilometers of the Lepanto Far Southeast Deposit containing 650 million mT at .65% Cu and 1.3 g Au/T.

We have been active doing community work in both these areas, and are expecting to commence drilling on the project shortly after completion of our anticipated IPO.

Tawi-Tawi Project

The Tawi-Tawi project in Benguet Province is a large well defined porphyry copper-gold asset. We are currently awaiting NCIP clearance for the project, which recently has not been pursued actively, due to the recent election campaign, and the uncertainty as to the personality of the local officials post-election. The NCIP process is now being actively pursued so that we can commence drilling of the project in the near future

The project was drilled by Benguet Corporation in the early 1970’s who drilled over 32,000 meters of diamond core in 58 drill holes. A 138 meter shaft was sunk and an additional 963 meters of tunneling confirmed a portion of the resource. Ten holes drilled up to 1010m in depth (QS-15, 28, 35, 36, 40, 44, 46, 47A, 50, and 56) all ended in significant mineralization.

The recent total wire frame historic resource calculated by Motton (2006) using the original Benguet data, is 261 million mT at 0.40% Cu, .25 g Au/T and .007 Mo. Significant improvement can be made to this figure as it is based upon the 20m composite data rather than individual assays. The deposit is open laterally and to depth.

The prospect is large porphyry copper-gold-molybdenum deposit. It is partially delineated and has excellent potential for increased tonnage; at similar or slightly better grades of 0.5% Cu. Better assay techniques and systematic sampling will further define the gold and molybdenum credits.

A recent IP survey to the north of the deposit, and within our project area, shows a large IP anomaly indicating that mineralization extends well beyond the historic drilling.

Kilong-Olao and Boyosen Project

The Kilong-Olao Project in Abra Province, as with the Tawi-Tawi project, is currently awaiting NCIP approval prior to the commencement of exploration work. This clearance also was not actively pursued prior to the recent election, due to the uncertainty as to the personality of the local officials post election. This clearance is now being actively pursued so that we can begin exploration work in the near future.

The Kilong-Olao property was explored by Marcopper who drilled 5,951 meters and established an initial historic resource of approximately 50 million mT grading about .4% copper. The drilled area sits within a large (3km x 1.5km) soil anomaly grading greater than 500 ppm copper. Initial exploration was disrupted by a local insurgency and no work has been done in the area for over 30 years.

The Boyosen property, located some 8 kilometers to the south of Kilong-Olao, was explored by Carpentaria Resources at the same time and a grid soil sampling program was conducted over the area. Multiphase intrusions underlie the area which shows a 3km x 1.5km copper in soil anomaly grading in excess of 500 ppm copper, with several large areas grading in excess of 2000 ppm copper. The anomaly remains untested by drilling.

Biliran Project

The Biliran Project is ready for the issuance of the necessary exploration permits, which have not been actively pursued while we were awaiting for the Metallum transaction to close. All necessary requirements, including NCIP clearance, for the approval of the exploration permits are in place.

The project is a large epithermal gold target. Historic geothermal holes drilled in the area were never assayed, but drill logs show extensive areas of quartz-adularia-calcite-pyrite veining below this zone.


We have demonstrated the ability to acquire and enhance our Philippine mining and exploration projects such as Hinoba’an and Basay, in the pursuit of increasing shareholder value.

We are of the opinion that our current assets are exceptional exploration targets, many having undergone extensive historic drilling with historically outlined resources. We are committed to developing these assets into current NI 43-101 compliant resources, using the best modern practices, and in symbiotic partnership with the local communities and Philippine people.

As your president, I thank you for your long standing support of our projects, and urge you to remain loyal shareholders as management continues to pursue the corporate goal of continuing to increase your wealth.

Yours truly

Brian Lueck