IPR Inca Pacific Resources

Inca Pacific Resources Inc. (TSX VENTURE:IPR) announces that Minera Ancash Cobre
S.A. ("MACSA"), the Company's wholly-owned subsidiary in Peru, has initiated
arbitration proceedings against Activos Mineros S.A.C. ("Activos Mineros") with
respect to the Magistral Project. MACSA has also requested that notice of
arbitration be served on the Agency for the Promotion of Private Investment
("ProInversion) and the National Fund for Financing State Enterprise Activity
("Fonafe"). 


MACSA has initiated the arbitration in response to the seizure by Activos
Mineros of a US$3 million bond in October 2009 and the follow-on termination in
December 2009 of the Mining Concession Transfer Agreement between Activos
Mineros and MACSA ("Transfer Agreement") which governs the five core mining
concessions within the Magistral Project. The Company has suffered significant
damage from the actions of Activos Mineros and will be seeking monetary damages
of approximately US$195 million. The Company will continue to work with the
local community in Conchucos in seeing the Magistral Project through to a
positive conclusion for the Company and our stakeholders.


Magistral Dispute

Under the Transfer Agreement, MACSA posted a bank guarantee of US$3 million as a
performance bond in connection with MACSA's investment commitment for
expenditures to be incurred at Magistral for the year ending February 2009. Over
the course of 2009, MACSA and Activos Mineros disputed the amount spent. The
2009 expenditures were audited by PricewaterhouseCoopers which found that Inca
Pacific and MACSA together had spent approximately US$15 million, compared with
a commitment to spend US$12 million. Activos Mineros claimed that only US$4.6
million had been spent, since expenses incurred by Inca Pacific could not be
considered for purposes of the Transfer Agreement. Activos Mineros also claimed
that MACSA had failed to incur certain specific expenditures committed for the
year ending February 2009. This dispute led to Activos Mineros calling the
performance bond without any justification or support. Activos Mineros further
demanded the immediate posting of a bond for $24 million for expenditures in
2009.


MACSA responded by asserting that Activos Mineros is in breach of the Transfer
Agreement. MACSA demanded that Activos Mineros remedy its breach and reimburse
the US$3 million. Furthermore, MACSA advised Activos Mineros that, as long as
the breach was in place, MACSA would suspend the fulfillment of any other
obligations under the Transfer Agreement, as permitted under Peruvian law. 


In response to our demand for reimbursement of the US$3 million and notice of
arrears, Activos Mineros notified MACSA that it had terminated the Transfer
Agreement on the grounds of a non-existent breach by MACSA and had registered
such contract termination in the public registration records of the mining
concessions referred to in the Transfer Agreement. 


For the past three months the Company attempted to find a legal and commercial
solution to the Magistral dispute. The lack of progress in finding a commercial
solution with Activos Mineros and ProInversion has left the Company no choice
but to start arbitration. The Company has initiated the arbitration with a
request that the Transfer Agreement be terminated for causes attributable to
Activos Mineros, and that the Company be compensated for resulting damages. 


Arbitration Proceedings

Disputes under the Transfer Agreement are handled through arbitration and are
governed by the Arbitration Regulations of the National Institute of Mining and
Petroleum Law. Each party selects an arbiter with the two arbiters selecting a
third arbiter. It is anticipated that once the arbitration panel has been named,
the arbitration proceedings could last up to 12 months. However, the Transfer
Agreement dictates that the arbitration procedure must not take more than 120
days, something the Company will look to enforce. All decisions by the
arbitration panel are final and no appeal can be filed to contest the
arbitration panel's decision.


Damages Claimed

The Company is seeking monetary damages of US$195 million. The amount of damages
reflect the US$3 million performance bond seized, the Company's investment in
Magistral to date of approximately US$40 million, and the loss of the project
which has a net present value (NPV) based on the Company's Feasibility Study of
US$152 million (at prices of US$1.50/lb copper and US$12/lb molybdenum). The
Feasibility Study was accepted and approved by Activos Mineros in 2008.


The disputed concessions are five of the twenty-six contiguous concessions held
by MACSA in the Magistral Project area. While the five disputed concessions
contain the bulk of the known copper/molybdenum mineralization, the other
concessions have several other mineral occurrences which MACSA will continue to
evaluate. 


The Company will continue to seek a commercial resolution with government
representatives as we believe that an agreement that allows the project to be
developed in the short term is in the best interest of all the stakeholders. In
addition, the Company will continue its community relations program in the
Conchucos region. 


INCA PACIFIC RESOURCES INC. 

Michael Winn, CEO and Director

Forward-Looking Statement - Some of the statements in this news release contain
forward-looking information that involves inherent risk and uncertainty
affecting the business of Inca Pacific Resources Inc. Actual results may differ
materially from those currently anticipated in such statements


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