AMS/AMSOA worth a look!

Cash flow positive miner came out with a ripper of an annoucement after market close

AMS
Announcement: Agreement to Acquire 60% of Colibri Mining Nth Peru

Date: 05 July 2002 - 17:04:03
Market Sensitive: Yes

ALLIED MINING & PROCESSING LIMITED 2002-07-05 ASX-SIGNAL-G

HOMEX - Perth

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The Directors of AMS are pleased to announce the signing of an
agreement that, subject to the satisfaction of certain conditions
precedent, will result in the Company acquiring a 60% shareholding in
a Peruvian company which holds extensive mineral interests in Peru
including two (2) gold treatment facilities. The Peruvian company,
Colibri Mining North SAC (CMN) and its associates, Laurence Stefan
and Adamastor Resources Limited, have assembled a very attractive
package of projects in Peru and have a demonstrated ability to
operate in that country.

The projects include -

MINERA COLIBRI SAC (51% SHAREHOLDING)

Minera Colibri operates two small gold treatment plants in southern
Peru. High grade gold ore is toll treated from small scale mining
operations in the area. These operations currently produce
approximately 1.5 kg of gold daily. Increased production should be
possible by adding gravity circuits to the plants and providing
improved transport options for the miners. These operations are cash
positive on a monthly basis.

In addition to these operations, CMN holds tenements in its own right
in the area in which are located known high grade veins.

TICRAPO/HUARASACA

These projects are held under Option to purchase by CMN. The gold
mineralisation is hosted by epithermal quartz veins which have been
subject to small scale mining. CMN is actively exploring these
systems and, on present indications, these two projects are possible
future sources of high grade gold ore.

TAILINGS DAMS

CMN has an option to purchase two tailings dams: 1.3 million tonnes
grading 2.8g/t and 0.5 million tonnes grading 7.6g/t, and is
investigating the viability of other similar opportunities. If the
current assessment work confirms the stated volumes and gold grades,
these deposits offer CMN excellent opportunity for increased cash
flow in the short term.

MARCONA

The iron ore deposits being mined in the hinterland of Marcona
contain Significant levels of copper and cobalt. Operating since the
mid 1900's, the mine has produced over 100 million tonnes of
tailings. CMN is currently assessing the viability of extracting
these minerals under an option agreement with the current mine
owners.

TABACONAS

CMN holds various options to purchase tenements covering the
Tabaconas and Chinchipe Rivers in northern Peru. Gold has been mined
from the river terraces and the rivers, beyond recorded history.
Recent work completed on the terraces and the rivers has confirmed
the presence of concentrations of gold similar to those required for
a viable alluvial mining operation.

MATERIAL TERMS OF THE AGREEMENT

The material terms of the agreement with CMN and its associates are
as follows:

a) The transfer of the 51% holding in Minera Colibri SAC to CMN;

b) The transfer of shares in CMN to AMS such that AMS will hold 60%
of the issued capital of CMN for the Consideration;

c) The Consideration to be provided by AMS shall consist of -

* Transferring the AMS mobile gold treatment plant located in WA to
CMN;

* Providing CMN with US$1.2m of working capital;

* committing to provide a further US$3.6m of working capital before
the remaining shareholders (holding collectively 40% of the shares)
are required to provide additional funding;

* the issue of 7.35 million AMS shares to the CMN shareholders;

* the issue to Adamastor Resources Limited, at the direction of CMN,
of 7.35 million AMS shares and 7.35 million AMS options in
consideration for the transfer to CMN of the loan account equal to
US$32.0m owing by Minera Colibri SAC to Adamastor Resources Limited,
Repayment of this loan by Minera Colibri will represent a further
cash injection of US$2.3m to CMN

d) As soon as practicable after execution of the agreement, AMS will
advance to CMN the sum of US$200,000 to be secured by personal
guarantees, to be replaced by a convertible note for 10% of CMN or
repayment.

Completion of this transaction is Subject to:

* The transfer by Adamastor Resources Limited and Laurence Stefan of
their 51% holding in Minera Colibri SAC to CMN;

* the completion of due diligence by 6 September 2002;

* the preparation of formal documentation;

* compliance with ASX Listing Rules, including the requirement for
shareholder approval of the issue of new AMS shares and options; and

* AMS securing an agreement for a capital raising to fund the US$3.6m
working capital commitment.

In seeking out this opportunity, AMS has endeavoured to obtain value
associated with the gold treatment plant owned by the Company. Based
on the confirmation of any one of a number of opportunities, this
plant could significantly increase the current cash flow of the
Peruvian operation.

The Company considers this potential acquisition an excellent
opportunity to participate in the growth of the gold industry in
Peru, which currently produces 150 tonnes of gold annually.

Upon completion of this transaction (scheduled for 30 September) AMS
will have issued 14.7 million new shares and 7.35 million new
options, transferred the mobile gold processing plant and paid US$1.4
million (in capital that remains in the projects) in exchange for a
controlling 60% interest in a group of Peruvian gold projects that
have current positive cash flow and significant identified
opportunities.

D Lymburn
COMPANY SECRETARY