/NOT FOR DISSEMINATION IN THE UNITED STATES OR TO UNITED STATES NEWSWIRE SERVICES/
Significant reduction in the purchase price
with an accelerated payment schedule
Issued Capital: 193,578,180
LONDON, ON, Aug. 20, 2014 /CNW/ - Fortune Minerals Limited
(TSX: FT) (OTCQX: FTMDF) ("Fortune" or the "Company")
(www.fortuneminerals.com) announces that it has entered into an
agreement with the owners of the Revenue Silver Mine ("RSM") in
southwest Colorado, U.S.A. to
amend the terms under which it can acquire the remaining interest
in the mine with lower payment terms under an accelerated schedule.
Fortune has also executed term sheets with Lascaux Resource Capital
Fund I LP ("Lascaux") to provide US$35
million to finance the acquisition under a metal prepay
facility that is repaid with a fixed schedule of metal shipments
from the RSM plus interest over a 4-year period. The Company,
through its wholly-owned subsidiary Fortune Revenue Silver Mines
Inc. ("Fortune Revenue"), acquired an initial 12% participating
interest in the RSM in May 2014 and
has been the Operator of the mine since that time.
Robin Goad, Fortune's President
and Chief Executive Officer commented, "We are very pleased to
announce an amended agreement to complete the acquisition of the
Revenue Silver Mine under more attractive terms. The financing
structure also preserves the ability of Fortune's shareholders to
maximize their participation in future upside opportunities from
any increase in commodity prices and potential delineation of new
resources from the mine's significant exploration potential."
Pursuant to the amending agreement, Fortune Revenue can now
complete the acquisition of a 100% interest in the RSM by paying
the owners US$15.5 million, with an
obligation to pay a further US$10
million following completion of the acquisition. Under the
previous terms of the agreement, Fortune Revenue was obligated to
make an initial cash payment of US$14
million with aggregate deferred payment obligations of
US$34.5 to US$36.8 million. Fortune
Revenue will continue to have an obligation to make payments in the
aggregate amount of US$4.5 million to
the previous owner of the RSM. The target closing date for the
transaction has been extended from September
2, 2014 to October 1,
2014.
In order to finance the acquisition and operations of the RSM,
the Company has entered into two term sheets with Lascaux. The
first facility will provide an initial US$4
million bridge loan to the Company for working capital and
to complete near term capital improvements required at the mine.
The second facility will provide US$35
million and is comprised of a first tranche of US$25 million to repay the bridge loan, complete
the acquisition of the RSM, pay the amount due to the previous mine
owner, and provide additional project working capital, and a
further second tranche of US$10
million to fund the remaining deferred payment due to the
current owners. The consideration for the interest free bridge loan
will be one million common shares of Fortune. The larger
US$35 million acquisition facility
will be structured as a metal prepay facility that will have a term
of approximately four years and will bear cash interest at an
annual rate of 9.25% plus a concentrate payment. The principal
amount of the loan will be repaid from production from the RSM
based on a fixed schedule of metal shipments from the mines
estimated equivalent silver production over the four year term. The
bridge loan will be at the Fortune level, secured by a first charge
on the shares and assets of Fortune Revenue, including Fortune
Revenue's current interest in the RSM. The prepay facility will be
at the Fortune Revenue level, secured by a first charge on the
shares and assets of Fortune Revenue, including the RSM, and will
be supported by a parent guarantee from Fortune.
Completion of the Lascaux financings is subject to various
conditions, including completion of due diligence satisfactory to
Lascaux and definitive documentation. The second US$10 million tranche under the metal prepay
facility is also subject to receipt by Lascaux of a satisfactory
detailed 5-year mine plan for the RSM. In the event the second
tranche is not advanced by December 31,
2014, the deferred US$10
million payment owing to the current owners of the RSM will
be increased to US$15 million and
will be repaid over three years with interest at 13% per annum.
The Company has also completed a private placement financing
with an arm's length institutional investor to raise proceeds of
Cdn$1 million, which will be used for
working capital.
This press release does not constitute an offer to sell or a
solicitation of an offer to buy nor shall there be any sale of any
of the securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful. The securities have
not been and will not be registered under the United States
Securities Act of 1933, as amended (the "U.S. Securities Act"), or
the securities laws of any state of the
United States and may not be offered or sold within
the United States or to or for the
account or benefit of a U.S. Person or a person in the United States (as such terms are defined
in Regulation S under the U.S. Securities Act) unless registered
under the U.S. Securities Act and applicable state securities laws
or pursuant to an exemption from such registration
requirements.
About the Revenue Silver Mine:
The RSM is a fully constructed and permitted, high-grade,
underground silver mine that is in commissioning. The mine is
situated on 147 patented and unpatented mining claims, totaling
approximately 1,079.9 acres in southwest Colorado, 11 km southwest of the town of
Ouray and 490 km southwest of
Denver. The RSM is an historic
producer that operated between 1876 and 1912 by Caroline Mining Co.
and had production estimated at approximately 15 million ounces of
silver before the mill burned and the mine closed. The underground
workings have been rehabilitated and new surface facilities and an
underground mill have been constructed. The mine is ramping up to a
400 ton per day production rate, and has delivered two shipments of
concentrate to Teck Resources' Trail Smelter in British Columbia for treatment further to an
off-take agreement.
The RSM is located in the prolific Sneffels silver mining
district of Colorado where there
are many past producers. Fortune believes there is very good
potential to identify additional resources on the mine property and
in the district generally. This accretive acquisition of the RSM by
Fortune is a transformational event that positions the Company as a
silver producer with by-product credits of gold, lead and zinc and
with two significant organic growth projects, the NICO
gold-cobalt-bismuth-copper development in the Northwest Territories ("NT") and Saskatchewan and the Arctos anthracite
metallurgical coal project in British
Columbia.
About Fortune Minerals:
Fortune is a diversified North American mining and development
company. Fortune operates the Revenue Silver Mine in Colorado and is developing the vertically
integrated NICO gold-cobalt-bismuth-copper project that is
comprised of a proposed mine and mill in the NT that will produce a
bulk concentrate for shipment to a refinery in Saskatchewan for processing to high value
metal and chemical products. Fortune is also developing the Arctos
anthracite metallurgical coal project in British Columbia and owns the Sue-Dianne
copper-silver-gold deposit and other exploration projects in the
NT. Fortune is focused on outstanding performance and growth of
shareholder value through assembly and development of high quality
mineral resource projects.
About Lascaux Resource Capital:
Lascaux Resource Capital Fund I LP is an investment fund focused
exclusively on providing production based financing to mining
companies who are either on the path to production or currently
producing. The fund is managed by Lascaux Resource Capital LLC,
based in New York.
This press release contains forward-looking information and
forward-looking statements within the meaning of applicable
securities legislation. This forward-looking information includes
statements with respect to, among other things, the anticipated
completion of the acquisition of 100% of the RSM using the proceeds
from the anticipated financings from Lascaux described herein, the
possibility of increases in commodity prices, the proposed increase
in the production rate at the RSM, the possible extension of the
life of the RSM and the proposed development of the NICO and Arctos
projects. Forward-looking information is based on the opinions and
estimates of management as well as certain assumptions at the date
the information is given (including, in respect of the
forward-looking information contained in this press release,
assumptions regarding the Company's ability to complete the Lascaux
financings, to repay Lascaux from production at the RSM, to
increase production at and extend the life of the RSM and to
complete the development of the NICO and Arctos projects). However,
such forward-looking information is subject to a variety of risks
and uncertainties and other factors that could cause actual events
or results to differ materially from those projected in the
forward-looking information. These factors include the inherent
risks involved in the exploration and development of mineral
properties, the risk that the Company may not be able to complete
the Lascaux financings or the acquisition of the RSM; unexpected
technical delays and associated timing delays in the ramp-up of the
RSM and associated production of silver and other metals; the risk
that the Company may not be able to establish increased resources
at the RSM; the risk that the Company may not be able to arrange
the necessary financing to complete the NICO and Arctos projects;
the risk that operating and/or capital costs may be
materially higher than anticipated; the risk of decreases in the
prices of relevant commodities; potential loss of key personnel;
potential discrepancies between actual and estimated production;
potential discrepancies between actual and estimated mineral
resources or between actual and estimated metallurgical recoveries;
potential labour shortages; the risk of mining accidents; the
risk of changes in applicable laws or regulations; uncertainties
with respect to the timing and receipt of all necessary permits;
and other factors. In addition, the risk factors described or
referred to in Fortune's Annual Information Form for the year ended
December 31, 2013, which is available
on the SEDAR website, should be reviewed in conjunction with the
information contained in this news release. Readers are cautioned
to not place undue reliance on forward-looking information because
it is possible that predictions, forecasts, projections and other
forms of forward-looking information will not be achieved by the
Company. The forward-looking information contained herein is made
as of the date hereof and the Company assumes no responsibility to
update or revise it to reflect new events or circumstances, except
as required by law.
SOURCE Fortune Minerals Limited