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Fortune Minerals announces US$ 36 million in financings and amended terms to acquire a 100% interest in the Revenue Silver Mine in southwest Colorado, U.S.A.

20.08.2014  |  CNW


Significant reduction in the purchase price with an accelerated payment schedule

Issued Capital: 193,578,180

LONDON, ON, Aug. 20, 2014 /CNW/ - Fortune Minerals Ltd. (TSX: FT) (OTCQX: FTMDF) ("Fortune" or the "Company") ( 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 Ltd.

Fortune Minerals Ltd.: Robin Goad, President, or Troy Nazarewicz, Investor Relations Manager,, Tel.: (519) 858-8188,; Renmark Financial Communications: Barbara Komorowski:, or Farialle Pacha:, Montreal Tel: (514) 939-3989, Toronto Tel. (416) 644-2020,
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