Waterton Global Value, L.P. to provide bridge loan and financing
Armistice considers proposed new gold facility to be best fit for
McGarry Mine gold project
Armistice is moving forward with pre-production work on McGarry Mine
gold project toward starting production in 2011 fourth quarter
TORONTO, Feb. 22 /CNW/ - Armistice Resources Corp. (TSX: AZ), which
expects to begin gold production in the 2011 fourth quarter from its
McGarry Mine in the Kirkland Lake area of northeastern Ontario, today
announced that it has closed a $3 million bridge loan and executed a
term sheet for a $15 million Senior Secured Gold Stream Debt Facility
with Waterton Global Value, L.P. (Waterton).
Under the terms of the bridge loan, Armistice has the right to pre-pay
the bridge loan without penalty. Interest on the bridge loan is 12%
per annum, compounded monthly (effective annual rate of 12.68%).
Armistice paid Waterton a $30,000 structuring fee and a bonus payment
of $300,000, to be payable, subject to regulatory approvals, by the
issuance to Waterton of 754,330 common shares of Armistice. This bonus
payment will be subject to a maximum statutory hold period of four
months and one day from the date of issue.
Under the terms of the proposed gold facility, Armistice will be able to
access the $15 million of funds in three tranches. The first tranche
of $7 million is to be provided by Waterton immediately on the initial
closing date of the facility agreement, expected to take place within
60 days. The second tranche of $4 million will be accessible five
months after the initial closing date, subject to Armistice's
satisfaction of certain development and processing targets. The third
tranche of $4 million will be available nine months following the
initial closing date, again subject to Armistice's satisfaction of
certain development and processing targets.
Armistice has agreed to apply a portion of the first tranche drawn under
the Gold Stream Debt Facility to repay in full any and all amounts
outstanding under the $3,000,000 bridge loan provided by Waterton.
As the result of the agreements with Waterton, Armistice will not be
proceeding with the previously announced arrangements with Sprott
Resources Lending Partnership (SRLP) for a proposed $3 million bridge
loan and $11 million project loan facility. Armistice expects to pay
SRLP a fee of $30,000 for the termination of the SRLP bridge loan
agreement in addition to any legal fees and expenses incurred by SRLP.
"We appreciated SRLP's interest in Armistice. However, in the interest
of our shareholders, we felt compelled to consider other funding
proposals that might be a better fit. The facility proposed by
Waterton will provide Armistice with access to the additional capital
which we need for the McGarry project," Mr. Morgan said.
Terms of the Gold Facility
Under the terms of the facility, any tranche drawn shall be repaid by
Armistice to Waterton in monthly cash instalments on the last business
day of each calendar month. Such payments will commence on the last
business day of the tenth month after the initial closing date and will
end on the last business day of the twenty-first month after the
initial closing date or twenty-third month after the initial closing
date, as applicable under the agreement.
The monthly payments shall be made by Armistice in cash based on
notional gold ounces. The amount of cash in lieu of the actual
delivery of gold ounces is to be determined based on a formula
described in the agreement. The key factors in determining the cash to
be paid are based on a "Reference Gold Price". The Reference Gold
Price shall be determined on each monthly repayment date and shall be
the higher of (i) the 30-day average settlement price of gold on the London Bullion
Market Association, PM Fix (Bloomberg: GoldLNPM Index), or (ii) the
prior-day settlement price of gold on the London Bullion Market
Association, PM Fix (Bloomberg: GoldLNPM Index).
If the Reference Gold Price is less than US$1,050 per ounce, the gold
price shall be such Reference Gold Price. If the Reference Gold Price
is equal to or greater than US$1,050 per ounce and less than US$1,300
per ounce, the Gold Price shall be US$1,050. If the Reference Gold
Price is equal to or greater than US$1,300 per ounce, the Gold Price
shall be (i) US$1,050, plus (ii) 0.85 times the difference between the Reference Gold Price and
$1300 per ounce.
At any time, Armistice may prepay the facility in whole or in part on
five business days prior notice based on provisions in the agreement.
Armistice guarantees a minimum return of 5% per annum on any tranche
drawn down, excluding for this calculation the value of bonus shares to
be paid to Waterton. The minimum rate of return shall be calculated on
the final maturity date or any prepayment date of the facility.
A structuring fee equal to 2% of the aggregate amount of the facility
shall be payable by Armistice to Waterton in cash upon the signing of
the agreement. Armistice also shall make a non-refundable bonus
payment to Waterton in the amount of (i) $1,200,000, if the first
tranche is funded by Waterton within 60 days of the date of the term
sheet, or (ii) $1,500,000 if the first tranche is funded by Waterton
after such date. This amount shall be paid, at the option of
Armistice, in cash, or subject to applicable regulatory approvals,
common shares of Armistice (Bonus Shares). If paid in Bonus Shares,
the price of each Bonus Share shall be equal to the lesser of (i) 90%
of the average 10-day weighted average price (WAP) of Armistice's
common shares on the Toronto Stock Exchange (TSX) prior to the issuance
date of such Bonus Shares, and (ii) 90% of the average 10-day VWAP of
Armistice's common shares on the TSX prior to the date of the term
sheet. The Bonus Shares shall be subject to a four-month hold period,
as required by applicable securities laws.
Waterton shall be granted the right to purchase (the Gold Purchase
Right) all of the gold produced by Armistice from the McGarry Mine
during the Purchase Term at a price per ounce that is equal to an
Agreed Discount to the 30-day average settlement price of gold on the
London Bullion Market Association, PM Fix (Bloomberg: GoldLNPM Index),
where such price per ounce and 30-day average price shall be calculated
on the dates described in the definitive Gold Supply Agreement. The
Agreed Discount shall be (i) 1.50% if Armistice only draws the first
tranche, (ii) 2.50% if Armistice draws the first and the second
tranches, and (iii) 3.00% if Armistice draws all three tranches.
Waterton may exercise the Gold Purchase Right on any business day during
the period commencing on the first business day immediately after the
date on which Armistice repays in full all amounts outstanding under
the Gold Stream Debt Facility (the Final Repayment Date) and ending on
the date that is three years after such Final Repayment Date (the
In addition to the payments to Waterton, the company will pay a fee of
1.5% of the principal amount of the funds drawn to the firm that acted
as placement agent on the date that any tranche is drawn under the
"Armistice has been moving forward with our pre-production plans for the
McGarry Mine gold project and also for the exploration work to be done
on the adjacent Kerr-Addison property," Mr. Morgan said. "We have
begun hiring additional staff and also have ordered a diamond drill
which we expect to be delivered within the next two weeks. We are on
track to be producing gold in the 2011 fourth quarter, as previously
About Waterton Global Value L.P.
Waterton Global Value, L.P. is an affiliate of Water Global Resource
Management, and is a resource-focused investment fund launched in 2010
in Toronto. Waterton Global provides debt facilities for junior
resource companies that operate in the mining, precious metals, base
metals, and oil and natural gas sectors. Since its inception in 2000,
the Waterton fund family has become a leading investor in private and
public companies in North America, Europe, and Asia. Waterton Global
seeks to invest in companies that offer world-class potential with
strong management teams, high-quality assets, effective capital
structures, and long-term growth prospects.
About Armistice Resources Corp.
Armistice Resources, a Canadian-based exploration and development
company, expects to begin gold production in the 2011 fourth quarter
from its McGarry Mine in the Kirkland Lake area of northeastern
Ontario. The McGarry Mine is located in Virginiatown on the prolific
Larder Lake-Cadillac Break that extends 200 km east-west straddling the
Ontario and Quebec border and that has produced 95 million ounces of
gold. The McGarry Mine is adjacent to the Kerr-Addison Gold Mine that
has produced more than 11 million ounces of gold. Armistice has signed
a definitive five-year option agreement for the purchase of up to 100
percent of the mineral rights on the Kerr-Addison property. The
McGarry Mine consists of 33 contiguous patented mining claims,
including three licenses of occupation, totaling 484 hectares. The
McGarry Mine is fully permitted and all equipment and systems at the
site have been brought up to standards, including its installed mining
plant. Armistice Resources is listed on the Toronto Stock Exchange
(Symbol: AZ) and currently has 101,042,006 common shares issued and
outstanding. To find out more about Armistice Resources, please visit
the company's website at www.armistice.ca.
This news release contains forward-looking statements, including
completion of the financing facility and current expectations on the
timing of the commencement of production. These forward-looking
statements entail various risks and uncertainties that could cause
actual results to differ materially from those reflected in these
forward-looking statements. Such statements are based on current
expectations, are subject to a number of uncertainties and risks, and
actual results may differ materially from those contained in such
statements. These uncertainties and risks include, but are not limited
to, the strength of the Canadian economy; the price of gold;
operational, funding, and liquidity risks; the degree to which mineral
resource estimates are reflective of actual mineral resources; the
degree to which a pre-feasibility study gives sufficient grounds for
classifying the indicated mineral resources as probable reserves; and
the degree to which factors which would make a mineral deposit
commercially viable are present; the risks and hazards associated with
underground operations. Risks and uncertainties about Armistice
Resources' business are more fully discussed in the company's
disclosure materials, including its annual information form and MD&A,
filed with the securities regulatory authorities in Canada and
available at www.sedar.com and readers are urged to read these
materials. Armistice Resources assumes no obligation to update any
forward-looking statement or to update the reasons why actual results
could differ from such statements unless required by law.
SOURCE Armistice Resources Corp.
For further information:
Investor and Media Relations
Richard W. Wertheim
Wertheim + Company Inc.
416-594-1600 ext. 223