Mercator Minerals Announces Mineral Park Credit Facility Restructuring
with C$25 million Bought Deal Equity Financing
Mercator
Minerals Ltd. (TSX:ML) ("Mercator" or "Company") is pleased
to announce that its wholly owned subsidiary, Mineral Park Inc.
("MPI"), and the lenders for the MPI credit facility ("Credit
Facility") have agreed to amend and restructure the Credit Facility and,
in conjunction with the restructuring, the Company has entered into an
agreement with a syndicate of underwriters who have agreed to purchase, on a
bought deal private placement basis, 48,500,000 common shares of Mercator at a
price of $0.52 per common share for gross proceeds of approximately C$25
million ("Offering").
"We are pleased to have the support of our lenders who recognize Mineral
Park's operating status and long-term viability," commented D. Bruce
McLeod, Mercator's President & CEO. "The
amendment and restructuring of Mineral Park's debt, along with the proceeds
from the bought deal financing and the recently refinanced El Pilar pre-construction credit facility, provides the
Company with more appropriate debt structure that reflects its long-life assets
and provides a stronger financial foundation in moving forward. Together with
all the significant operational improvements made at Mineral Park to date, and
the exciting near-term growth potential of El Pilar,
we are well positioned to unlock the value within Mercator."
Amended Credit Facility
The Credit Facility currently includes a term loan that has $61.7 million
outstanding and a $30 million revolver loan. Lenders of the Credit Facility
have provided MPI with a credit approved term sheet for an amendment and
restructuring of the Credit Facility. Highlights of the agreed amendments include:
- Principal payment holiday for
two quarters until June 30, 2013;
- Consolidation of the existing
loans into a single $91.7 million term loan;
- Extending the scheduled
payments for one year until March 31, 2017 and restructuring the
amortization schedule so repayments are weighted to the second half of the
loan life;
- No incremental copper or
molybdenum hedging required;
- Until the date that MPI has
repaid $30 million of prepayments by way of either the cash sweep or
voluntary prepayments, (i) an increase in the
cash sweep from 25% to 50%; and (ii) a parent guarantee for all
obligations of MPI to the lenders subject to certain carve-outs for any
indebtedness, liens, asset disposals as they relate to El Pilar and/or the Pre-Construction Facility;
- Establishment of: (i) a debt service reserve account with a minimum cash
balance equal to the next six months debt service; and (ii) a $3 million
maintenance reserve account.
Revision of the Credit Facility is subject to completion of the loan and
security documentation and conditions precedent to closing, including a
requirement for the Company to raise not less than $20 million (net of fees) to
be used to reduce MPI's working capital deficit (which requirement will be
addressed by the Offering). Closing of the amended Credit Facility is expected
to occur in the next several weeks. The commitment to restructure the Credit
Facility follows an updated review by the lenders' independent engineers, SRK
Consulting (US) Inc.
On September 28, 2012, MPI made its scheduled $4.8 million term loan payment
and obtained waivers for certain loan covenant calculations and minimum cash
requirements. Since December 31, 2010, MPI has repaid a total of $47.4 million
of debt principal, $38.3 million of which was for the Credit Facilities.
Bought Deal Financing
The Offering will be conducted through a syndicate of underwriters led by
Haywood Securities Inc. and RBC Dominion Securities Inc. and including BMO
Capital Markets, Canaccord Genuity
Corp., Raymond James Ltd. and Paradigm Capital Inc. (collectively the
"Underwriters"). The Underwriters will purchase, on a bought deal
private placement basis, 48,500,000 common shares at a price of $0.52 per share
for gross proceeds of approximately $25 million. The Company has also granted
the Underwriters an option to acquire that number of shares, such option to be
exercised 24 hours prior to closing, on the same terms and conditions as the
Offering, equal to up to an additional 15% of the shares sold under the
Offering.
The Company plans to use the net proceeds of the Offering to reduce MPI's
working capital deficit and for general corporate purposes.
The Offering is scheduled to close on or about October 23, 2012 and is subject
to certain conditions including, but not limited to, the closing of the amended
and restructured Credit Facility, the receipt of all necessary approvals,
including the approval of the Toronto Stock Exchange and the securities
regulatory authorities and other usual closing conditions, including due
diligence.
The securities offered have
not been, and will not be, registered under the U.S. Securities Act of 1933, as
amended (the "U.S. Securities Act") or any U.S. state securities
laws, and may not be offered or sold in the United States or to, or for the
account or benefit of, United States per�sons absent
registration or any applicable exemption from the registration requirements of
the U.S. Securities Act and applicable U.S. state securities laws. This news
release shall not constitute an offer to sell or the solicitation of an offer
to buy securities in the United States, nor shall there
be any sale of these securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Cutfield Freeman & Co. Ltd provided strategic
advice to Mercator and assisted in the negotiation and implementation of the
financing plan.
About Mercator Minerals
Ltd.
Mercator Minerals Ltd., a
TSX listed Canadian mining company with the potential to have one of the
fastest growing base metal profiles in its peer group, is a copper, molybdenum
and silver producer with a diversified portfolio of high quality assets in the
USA and Mexico. Mercator provides investors exposure to current copper,
molybdenum and silver production from the large tonnage long life Mineral Park
Mine in Arizona, as well as mid-term exposure to potential copper production
from its El Pilar deposit in the State of Sonora in
northern Mexico and longer term exposure of molybdenum and copper through the
potential development of the El Creston deposit also in the State of Sonora in
northern Mexico.