Tsodilo Resources (TSD-V), First Quantum Minerals (FM-T) enter financing, option deal
April 18, 2013 - News Release
Tsodilo Resources Ltd. has entered into a partnership with First Quantum Minerals Ltd. Under the terms of a binding memorandum of understanding dated April 17, 2013, entered into between the company, its wholly owned subsidiary Gcwihaba Resources (Pty.) Ltd., First Quantum and First Quantum's wholly owned subsidiary Faloxia (Pty.) Ltd., First Quantum will make a strategic investment in Tsodilo by way of private placement of 2,272,727 units of the company. The units will be issued at a price of $1.10 per unit to raise gross proceeds of $2.5-million. Each unit will consist of one common share and one purchase warrant, each such warrant entitling the holder to purchase one common share of the company at $1.21 (U.S.) for a period of 24 months from the date of issuance of the warrant.
In addition to the initial strategic equity investment described above, First Quantum (which term for the purposes of this press release includes FQM Subco) will also acquire the right to earn up to a 70-per-cent interest in metals prospecting licences in Botswana granted to Gcwihaba insofar as they cover base, precious and platinum group metals, and rare earth minerals by meeting certain financing and other obligations as set forth below. The interests that may be earned by First Quantum specifically exclude any rights to iron held by Gcwihaba. Completion of the transactions contemplated by the MOU is subject to regulatory approval and the execution of definitive agreements.
Tsodilo's chairman and chief executive officer, James M. Bruchs, commented: "We are absolutely delighted to announce First Quantum as our strategic partner. They are a world-class mining company with great financial strength and specific expertise in exploration for African Copperbelt-type, base-metal targets gained from their mining operations in Zambia. The sequence of rocks in northwest Botswana that Tsodilo has identified in the past several years are identical in age and composition to those in the Central African Copperbelt. These rocks are in fact the southwesterly extension of the Zambian Copperbelt and clearly hold great potential for Copperbelt-style targets. Having First Quantum's experienced exploration team from Zambia moving exploration on our ground forward is as good as it gets. This joint venture will allow for aggressive exploration for world-class base-metal deposits on our licensed areas. In addition, First Quantum's equity investment will enable Tsodilo to accelerate the exploration and evaluation of our Xaudum iron formation project as well as continue our kimberlite exploration. First Quantum's involvement will allow us to deliver results from our metals projects to the market sooner than we could have without the help of our new strategic partner.
"Several years ago, International Finance Corp., a member of the World Bank Group, became an equity investor in Tsodilo. At the time, we referred to IFC as our partner of choice as their participation, professionalism, guidance and expertise, combined with the economic, political and social stability afforded by the government of Botswana, together with the assistance and support provided by the Ministry of Minerals, Energy and Water Resources and the Department of Geological Survey, created a winning atmosphere for mineral exploration and development. Now, given our large metal licence areas, it was important for us to partner with a group who understands our rocks, and who has a proven history of exploration and development success. There is no better strategic partner for us than First Quantum to further explore and develop these potential resources," concluded Mr. Bruchs.
Under the terms of the MOU, First Quantum can earn either a 51-per-cent participating interest or a 70-per-cent participating interest in designated projects within the overall licence area covered by the MOU by satisfying the following requirements:
- Financing exploration expenditures within the project area in the aggregate amount of $6-million (U.S.) within the first two years after the execution of a definitive earn-in option agreement;
- Financing an additional $9-million (U.S.) in exploration expenditures within the project area by the end of the fourth year after the execution of the earn-in option agreement;
- Completing a technical report on a designated area within the project area prepared in compliance with National Instrument 43-101 -- Standards of Disclosure for Mineral Projects of the Canadian Securities Administrators and that meets certain requirements with respect to resources as described below.
The tranche 1 financing commitment is a firm commitment by First Quantum and must be satisfied irrespective of whether First Quantum elects to pursue the other requirements to earn an interest in Gcwihaba's licences.
In the event that First Quantum satisfies the financing obligations as set forth above but a technical report has not been completed by the end of the fourth year following the execution of the earn-in option agreement, First Quantum may maintain the earn-in option for up to an additional three years by continuing to spend a minimum of $2-million per year on exploration and evaluation studies on the project area.
If the technical report delineates a major defined project (defined in the MOU to mean a designated project within the project area with respect to which the technical report delineates a measured, indicated and inferred mineral resource within the project area of not less than two million tonnes of copper), First Quantum will be deemed to have earned a 70-per-cent interest in the property that is the subject of such report. If the technical report delineates a minor defined project (defined in the MOU to mean a designated project within the project area with respect to which the technical report delineates a measured, indicated and inferred mineral resource within the project area of: (i) less than two million tonnes of copper, or (ii) a resource of another base, precious or platinum group metal, and rare earth mineral), First Quantum will be deemed to have earned a 51-per-cent interest in the property that is the subject of such report; provided, however, that it may elect to retain an option for up to five years to convert such property into a major defined project. If First Quantum makes such election, it will be responsible for all further costs and expenses associated with the minor defined project, including for operations and capital expenditures, until the earliest of: (a) the completion of a technical report for a major defined project, in which event the minor defined project will be deemed to be converted into a major defined project, and First Quantum will be deemed to have earned a vested 70-per-cent participating interest therein; (b) written notice from First Quantum to the company that First Quantum no longer wishes to retain the option to convert such minor defined project into a major defined project; and (c) five years after the date of the original vesting of a 51-per-cent interest in the minor defined project. If First Quantum fails to satisfy the requirements to convert a minor defined project into a major defined project, it will retain a vested 51-per-cent participating interest in the minor defined project.
Upon First Quantum's participating interest in a defined project being crystallized at either 51 per cent or 70 per cent, Gcwihaba and First Quantum will enter into a joint venture agreement for such project. Under the terms of each such joint venture agreement, Gcwihaba's participating interest in each joint venture will be carried until the commencement of construction of a mine for the project. Accordingly, all costs and expenses associated with the defined project until such time, including for operations and capital expenditures, will be financed by First Quantum.
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