Nautilus arranges bridge loans and signs new funding mandate

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Nautilus Announces Preliminary Economic Assessment Nautilus Appoints Chief Operating Officer Nautilus Minerals Officer Update bridge loans Nautilus receives additional bridge loans

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Toronto Ontario, January 8, 2018 – Nautilus Minerals Inc. (TSX:NUS, OTC:NUSMF Nasdaq Intl Designation) (the “Company” or “Nautilus”) announces that it has arranged to receive bridge loans from Deep Sea Mining Finance Ltd. (the “Lender“) and has also entered into a funding mandate agreement (the “Funding Mandate“) with M. Horn & Co. Ltd. (the “Advisor“).

Bridge Loans

The bridge loans, which the Company expects to be in the amount of up to US$7 million, will assist the Company’s immediate working capital requirements and facilitate payments required to continue the development of the Company’s seafloor production system to be first utilized at the Company’s Solwara 1 Project. The loans bear interest at 8% per annum, payable bi-annually in arrears with a one year maturity date.

The Company will be entitled to pre-pay each loan prior to maturity, by paying 108% of the
outstanding principal of the loan plus accrued and unpaid interest. Each loan will be represented by a promissory note and will initially be secured against the assets of the Company through a general security agreement. The Lender may subsequently require the loan to be guaranteed by the Company’s material operating subsidiaries and secured against the assets of such subsidiaries.

The bridge loans are expected to form part of a larger secured structured credit facility of up to US$34 million to be provided by the Lender to the Company, on terms currently being negotiated between the Lender and the Company. There can be no assurance that the Company will be successful in concluding the larger credit facility transaction or that any further funding will be secured by the Company.

In conjunction with initial advances under the bridge loans, the Company issued to the Lender 3,221,649 warrants of the Company (the “Warrants“). Each Warrant entitles the Lender to purchase one common share of the Company at a price of C$0.17 for a period of five years from the date of issuance of the Warrant.

As previously disclosed, the Lender is a recently incorporated private company in the British Virgin Islands and intended to be 50% owned by each of: (i) USM Finance Ltd, a wholly owned subsidiary of USM Holdings Ltd, an affiliate of Metalloinvest Holding (Cyprus) Limited; and (ii) Mawarid Offshore Mining Ltd., a wholly-owned subsidiary of MB Holding Company LLC.

As the Lender will be controlled by two insiders of the Company, the Lender is a “related party” of the Company and the loan transaction constitutes a “related party transaction” of the Company under MI61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101“). The transactions comprising the bridge loans and the Warrants will be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101.

The independent committee of directors of the Company, consisting of Russell Debney and John McCoach, approved, prior to Mr. Debney’s resignation, the bridge loans and the Funding Mandate.

The Company did not file a material change report more than 21 days before the expected closing of this transaction, as the details of the transaction were not finalized until immediately prior to the closing and the Company wished to close the transaction as soon as practicable for sound business reasons.

New Funding Mandate

Pursuant to the Funding Mandate, the Advisor has been appointed as the Company’s exclusive financial advisor, for a period of one year, in respect of the remaining project financing of up to US$350 million required to complete the development of the Solwara 1 Project. The Funding Mandate replaces the existing funding mandate agreement dated October 9, 2017 between the Company and the Lender.

The Advisor, a private company controlled by Mark Horn, is a corporate finance business authorized in the United Kingdom by the Financial Conduct Authority. Mr. Horn is a previous director of the Company.

Under the Funding Mandate, the Company will pay the following to the Advisor:

  • a cash fee (the “Commission“) on the aggregate consideration received by the Company in a funding transaction equal to 6% in respect of equity financings, or 5% in respect of any debt financing, trade financing or other form of funding transaction during the term of the Agreement, and for a period of twelve months following its cancellation in respect of investors introduced to the Company by the Lender. The Commission will be payable on the bridge loans and other financings provided by the Lender; and
  • a cash fee equal to 1.0% of the amount raised by the Company in a funding transaction
    arising from an unsolicited investment proposal received from a third party pursuant to the terms of the Funding Mandate.

The Lender will have a right of first refusal in respect of matching any unsolicited investment proposals.

The Funding Mandate will remain in effect for a period of one year, or until terminated earlier by: (a) mutual agreement; (b) automatically upon the closing of funding transactions of US$350 million; or (c) upon a sale of the Company.

A copy of the Funding Mandate will be available under the Company’s profile on the SEDAR website (www.sedar.com).

The Company requires significant additional funding in order to complete the build and deployment of the seafloor production system to be utilized at the Solwara 1 Project by the Company and its joint venture partner (as to 15%), the Independent State of Papua New Guinea’s nominee.

There can be no assurances that the Company will be successful in securing the necessary additional financing transactions within the required time or at all, including in connection with the Funding Mandate.

Failure to secure the necessary financing may result in the Company undergoing various
transactions including, without limitation, asset sales, joint ventures and capital restructurings.

The Company will provide further updates as circumstances warrant.

For more information please refer to www.nautilusminerals.com or contact:

Investor Relations
Nautilus Minerals Inc. (Toronto)
Email: investor@nautilusminerals.com
Tel: +1 416 551 1100