Monday, June 8, 2015

Minera IRL Announces US$70 Million Bridge Loan and Mandate Letter for Up to US$240 Million for Ollachea Project Financing

LIMA, PERU--(Marketwired - Jun 8, 2015) - Minera IRL Limited ("Minera IRL", or the "Company") (IRL.TO)(MIRL.L)(MIRL.L), announces that it has arranged a US$70 million secured finance facility (the "Bridge Loan") structured by the Peruvian state-owned development and promotion bank, Corporación Financiera de Desarrollo S.A. ("COFIDE") and syndicated through Goldman Sachs Bank USA. The Bridge Loan is expected to be the first step towards a senior project credit finance facility of up to US$240 million, described in a Mandate Letter signed by COFIDE and Minera IRL ("Senior Project Debt Facility"). The Senior Project Debt Facility will be structured by COFIDE, in conjunction with Minera IRL, to build the Company's Ollachea gold project in the Puno Region, southern Peru ("Ollachea", or the "Ollachea Gold Project"). The Company has agreed to COFIDE's participation on the Minera IRL board of directors, subject to the required approvals.

Highlights:

  • The key terms of the Bridge Loan:
    • Interest rate: LIBOR plus 6.17%, payable quarterly in arrears
    • Term: 24 months
    • Structuring and Disbursement Commission of 2.25% along with a US$300,000 upfront fee, paid on the disbursement of the Bridge Loan
    • The Bridge Loan is expected to be repaid from the follow-on Senior Project Debt Facility, but is repayable at any point, subject to a 0.75% fee
  • The Company is applying the Bridge Loan funds towards consolidating debt and will apply net proceeds towards advancing the development of Ollachea as well as funding a limited resource expansion drilling campaign. Use of proceeds are expected to include:
    • Repayment of the Macquarie Bank debt facility
    • Final property payment to Rio Tinto
    • Commencing the detailed engineering and design of the Ollachea plant
    • Pre-construction project development work
    • Resource expansion drilling at the Minapampa Far East Zone at Ollachea
    • Continue its commitment to social and environmental programs
    • Financing and advisory expenses
    • General corporate expenses and working capital
  • The Company has signed a Mandate Letter with COFIDE to structure a Senior Project Debt Facility for up to US$240 million which includes retirement of the Bridge Loan.
  • Minera IRL expects to seek equity participants to reduce the amount of debt and leverage on the project to what the Company determines to be an acceptable level, and will include input from COFIDE and potential debt and equity providers.
  • It is expected that one or more financial institutions will be invited to participate in the Senior Project Debt Facility.
  • Although there can be no guarantee on the timing and terms, it is the intent of COFIDE and Minera IRL to have the Senior Project Debt Facility in place prior to the end of 2015.
  • The Bridge Loan is secured by the Ollachea Gold Project's assets, mining reserves, mining concessions and rights, guarantees from Minera IRL S.A., and a pledge of the shares of the Company's subsidiary Compañía Minera Kuri Kullu S.A., which owns 100% of the Ollachea Gold Project.
  • Specifics of the Macquarie debt repayment and Rio Tinto property payment include:
    • Repayment of US$30 million Macquarie Bank debt facility (plus accrued interest) and release of associated security.
    • Payment of US$12.9 million of the US$15.1 million outstanding to Rio Tinto, under the Ollachea Mining Rights Transfer Contract, and release of associated security. The remaining US$2.2 million outstanding has been be converted into an unsecured promissory note, accruing interest at a rate of 7% per annum, payable by 31 December 2015, either in cash or ordinary shares of Minera IRL, at the discretion of the Company (the "Agreement Regarding Payment").

Transaction Considerations

In addition to the Structuring and Disbursement commissions outlined above, Minera IRL has committed payments totalling US$2.6 million for services relating to legal assessment, technical and financial advisory. Likewise, the Company has granted 11.6 million options (exercisable for a year following the commencement of commercial production from the Ollachea Gold Project at an exercise price of C$0.20) and a 0.9% net smelter return over the Ollachea Gold Project. The Company has a right of first refusal on the sale of the royalty and can repurchase the royalty, at its option, up until the date that Minera announces final commissioning of the project.

Related Party Transaction

Under the AIM Rules, Rio Tinto is deemed to be a related party of Minera IRL due to its substantial shareholdings in the Company. As such, the Agreement Regarding Payment is deemed to be a related party transaction under the AIM Rules. The directors of Minera IRL consider, having consulted with the Company's Nominated Adviser, Canaccord Genuity Limited, that the terms of the Agreement Regarding Payment is fair and reasonable insofar as shareholders are concerned.

Commenting on the Ollachea financing package, Daryl Hodges, Minera IRL's Executive Chairman, stated, "This transaction is an important first step for Minera IRL and is the culmination of efforts of the Minera IRL team, working closely with COFIDE and its advisors. Minera IRL can now focus on taking final steps toward financing its flagship project to production. With support from COFIDE, the Company is in a much better position to arrange financing for Ollachea, build the project, deliver on its commitments to the local community to create jobs, wealth for the benefit of the region, and create new opportunity for its shareholders. We cannot neglect to mention that this was the dream of Courtney Chamberlain, whose untimely passing was felt by all."

Dr. Diego Benavides, Minera IRL's Interim CEO and Executive President of Minera IRL S.A., continued, "The financial backing from COFIDE is the result of over 18 months of discussions, comprehensive project evaluation, and due diligence by independent consultants. The support of COFIDE is an endorsement of the technical quality of our Ollachea Gold Project and its importance to the Ollachea Community and the Puno region. We now have the opportunity to focus on working with the Ollachea community, our true long-term partners, in developing an outstanding modern mining operation providing key economic benefits to the Puno region and, indeed, to Peru."

Mr. Jorge Ramos, General Manager of COFIDE, commented, "We are very pleased to be able to offer this financing package to Minera IRL. Ollachea represents an economically robust gold project and this is an excellent opportunity for COFIDE's first mine project financing. We have confidence that the Minera IRL team will ensure that the Ollachea Gold Project will be a great success, which will have important benefits for the Ollachea community and Peru."

Mr. Juan Luis Valeriano, President of the Community of Ollachea, stated, "After eight years of working in partnership with Minera IRL, indeed sharing a close friendship, we are glad that COFIDE, an institution of the Peruvian Government, is providing the financing for the development of the Ollachea mine. The new mine will provide long-term benefits to our local economy, especially towards job creation, social projects, and spin-off business opportunities for many of our citizens. Ollachea will also be Peru's first 'Partner Community' with a mining company with the community holding a 5% shareholding in the project."