Palladon Ventures Ltd. ("Palladon" or the "Company") (TSX VENTURE:
PLL)(FRANKFURT: PV-1) announces updates with respect to recent
financing activity, investing activity, and an update from CML
Metals Corporation.
First, as stated in its December 30, 2010 release, Palladon is
in the process of completing, subject to approval from the TSX
Venture Exchange (the "Exchange"), a non-brokered private placement
of up to CDN$6.0 million at a price of not less than CDN$0.06 per
share (the "Private Placement"), to fully fund Palladon's US$5.6
million proportionate share of a US$25.6 million equity financing
being undertaken by CML Metals Corporation ("CML"). Luxor Capital
Partners, LP informed Palladon that it has completed its US$20
million share of the equity financing.
Palladon is diligently working to complete this private
placement with Qualified Investors within the next 10 days. The per
share price is currently anticipated to be approximately CDN$.065
cents, which is consistent with the valuation of CML used in the
current capital call issued to Luxor Capital and Palladon.
Second, in a news release dated January 4, 2011, Luxor Capital
Group LP announced that it had acquired beneficial ownership of
37,608,310 common shares of Palladon Ventures Ltd. As a result,
Luxor now beneficially owns a total of 39,061,452 common shares of
Palladon, representing approximately 20.67 per cent of the issued
and outstanding common shares of Palladon. Luxor acquired the
Palladon shares by a share purchase with Jana Master Fund Ltd.,
Jana Nirvana Fund LP and Jana Nirvana Master Fund LP for a total
acquisition cost of CDN$2,444,540. The share purchase agreement
contained customary representations and warranties for a
transaction of a similar size and nature.
Finally, what follows is a letter to CML shareholders from Dale
Gilbert, CEO of CML Metals Corporation, which Palladon received on
January 12, 2011.
CML Metals Shareholder Update January 12, 2011
Dear Shareholder,
I am pleased to provide a year-end update for the calendar year
ending December 31, 2010.
2010 in Review
2010 was an important and successful year at CML Metals. In
March of 2010, the former Palladon Iron Corporation was
restructured into CML Metals, and with the restructuring my
responsibilities shifted from CEO of Palladon Ventures to CEO of
CML Metals. In the nine months since the ownership change at CML,
my team and I have made significant accomplishments toward
establishing CML as the premier producer of iron-related product in
the Western United States. Our accomplishments include each of the
following:
-- Ended the arbitration with CKI International with no additional monies
to be paid CKI unless CKI were to establish offtake agreements for CML
or introduce a financing partner to CML. The ending of the arbitration
allowed CML to enter into new offtake negotiations with other interested
parties and allowed for the sale of spot cargoes in the second half of
2010. The Company does not expect to enter into any additional contracts
with CKI in the future.
-- Negotiated and executed logistics contracts for the provision of short
and long haul rail services, rail cars, port access and contract mining
allowing CML to commence production and sale of run-of-mine (ROM)
product in September 2010.
-- Sold approximately 190,000 tons of ROM ore from September to the end of
the year to various Western and Asian purchasers for use in China. The
ROM sales generated positive cash flow excluding overhead and
expenditures related to the construction of the concentrator while also
securing important logistics partners for the eventual sale of
concentrate product.
-- Hired Samuel Engineering, a highly respected engineering/design firm, to
conduct the EPCM (Engineering, Procurement, and Construction Management)
required to design and construct the concentrator plant. During 2010
Samuel Engineering, in conjunction with CML, completed a very precise,
ground-up, Metallurgical Testwork Program that yielded a world-class
67%+ Fe (Iron) concentrate product and commenced basic and detailed
engineering on the concentrate plant based on the testing program.
Equipment procurement commenced with RFQ's being issued for most major
components, while near-final flowsheet, plant layout, building, and
earthwork plans were distributed for review and finalizing.
-- Retained JBR Environmental, an Environmental Engineering firm, to assist
in the permitting process for current and future operations. All permits
for current operations were brought up to date and put in-place with the
required agencies in conjunction with the commencement of mining
operations. As of the end of the year, with the exceptional
participation from state and local agencies, the permitting process for
the production of concentrate was in its final stages with all necessary
permits on-track and expected to be in place by End of Ql 2011.
-- Hired a COO and CFO as well as other important staff positions as the
Company prepares to ramp its labor force in anticipation of increasing
production as well as construction and eventual completion of the
concentrator.
-- Raised $22mm of equity from our existing shareholders and signed a term
sheet for a $45mm loan facility from an internationally recognized bulge
bracket bank. CML expects the combination of the equity proceeds and the
loan facility, if it is funded, to fully fund the construction of the
concentrate plant.
Financing Update
On November 23, 2010, CML signed a non-binding term sheet with
an internationally recognized bulge bracket bank outlining material
terms for a potential $45 million loan. Such loan may be funded in
two phases: a) an initial $20 million loan, which is expected to
close this month, and b) a $25 million add-on loan that is subject
to various closing conditions including a final independent
engineer's report and an offtake agreement in place for the sale of
concentrate. Although CML and the lender have not yet finalized
definitive terms or entered into definitive commitment agreements,
the parties are working diligently towards that end. As with all
loans, the loan will be subject to various customary and other
conditions precedent including final credit approvals, satisfactory
documentations and the completion of due diligence by such bank
(and the bank has not provided any guarantees that any commitments
will be forthcoming prior to satisfaction of such conditions). CML
is seeking to have full loan documentation completed by the end of
January.
In addition to the loan, CML also received $22mm in equity
funding from its existing shareholders this year. Approximately
$21.5mm of that funding came from Luxor Capital, the Company's
majority shareholder, with the balance coming from Palladon
Ventures. Palladon has the option to fund approximately $5.5mm by
January 31" which would bring the total amount of equity
contributed to CML to $27.5mm since the restructuring.
The ownership of CML is more fully described below:
A B C D
---------- ---------- ---------- ----------
Luxor 78.3% 75.8% 81.9% 76.5%
Palladon 21.7% 21.1% 15.8% 21.3%
Mgmt + Other 0.0% 3.2% 2.4% 2.2%
Where:
A = as of restructuring, March 2010 inclusive of the $2mm equity
raise into CML concurrent with the restructuring
B = after one-time stock grants to key employees and certain
third-party vendors
C = after Luxor Capital's $20mm investment in December
D = assumes Palladon fully exercises its option to acquire an
additional $5.5mm of CML stock
2011 Outlook
Production
CML has booked shipments for January and February of 2011 in
amounts totaling approximately 100,000 tons. The FOB price for
those shipments is in the low to mid $60 a ton range. At this
pricing, CML is cash flow positive, but not substantially so. The
cash flow the ROM business generates is an ancillary benefit to CML
however; the real benefit is the securing of the logistics in order
to guarantee CML access to two million tons of rail and port
capacity when the concentrator is completed. Without the ROM
business, securing these logistics would have been impossible.
Currently CML is producing at a monthly rate of 50,000 tons. The
fully-ramped concentrator production rate will approximate 167,000
tons per month, or more than triple our current rate of production.
CML expects to gradually ramp toward this production rate
throughout 2011. We expect the first step of this ramp to occur in
February/March of 2011. On January 11th CML secured additional port
and rail car capacity that will enable us to more than double
current production as early as the end of February (dependent on
the time to mobilize the rail cars and arrange a customer for the
additional tonnage).
In addition to the increasing of production, CML expects to
announce in January an offtake contract with a major offtake
partner for a portion of both its ROM and concentrate production.
The details of the offtake contract will be provided once the final
contract has been signed, subject to confidentiality requirements
on the part of our offtake partner. We are excited about this
partnership and I look forward to discussing the details further
with you shortly.
Financing
CML remains on-track to close its previously disclosed loan
facility. The holidays set us back a few weeks, but we hope to have
the loan facility in-place no later than the end of January. Our
initial capital expenditure budgets, compiled with the assistance
of Samuel Engineering, estimate a total budget for the concentrator
of $55-$65mm including contingencies. If Palladon fully exercises
its right to purchase its pro rata share of CML and the loan
facility closes, CML will have access to $72.5mm of financing plus
the ROM cash flows to fund its construction budget and deal closing
expenses.
Concentrator
With the equity from Luxor Capital in-place we have started to
move forward with Samuel on the construction of the plant. The most
important item from a plant design standpoint is the SAG mill. We
have identified a SAG mill with the help of Samuel and expect to
procure the mill in the month of January. The SAG mill was the
longest potential lead-time item for CML and an item that needed to
be procured before design and building work could be finalized.
With the SAG mill identified and hopefully secured in the coming
weeks, we remain on-target for a Q1 2012 completion date. Once
completed we expect production of 2 million tons per annum from the
concentrator.
We are very proud of our accomplishments in 2010 and we remain
excited about our prospects in 2011 and beyond. We are doing
everything in our power to control costs (operating and capital)
and advance the project as quickly as possible. Iron ore prices
remain robust, but we are mindful of their volatility and we are
taking all the steps we can to increase efficiency and
productivity.
Thank you again for your continuing support.
Dale Gilbert
CEO CML Metals Corporation
John Cutler, CEO of Palladon, commented: "We continue to be
impressed with the progress being made by CML at the Iron Mountain
Project. Not only have they established a solid logistics plan
which they are working to expand, they are also putting in place
the components necessary to capitalize on the concentrate
opportunity."
As outlined above, Palladon's near term priority is to complete
the announced Private Placement such that it can fully fund its
$5.6 mil pro rata share of the CML equity raise.
About Palladon Ventures Ltd.
Palladon Ventures Ltd. holds a significant minority interest in
CML Metals Corporation, which is focused on advancing the Iron
Mountain project, an iron ore mine located west of Cedar City,
Utah.
Disclaimer for Forward-Looking Information:
Certain statements in this release are forward-looking
statements, which reflect the expectations of management.
Forward-looking statements consist of statements that are not
purely historical, including any statements regarding beliefs,
plans, expectations or intentions regarding the future, including
but not limited to the commencement of shipping under CML's offtake
agreement and future anticipated shipping volumes thereunder,
pricing for the run-of-mine iron and the potential construction and
financing of a concentrate facility. Such statements are subject to
risks and uncertainties that may cause actual results, performance
or developments to differ materially from those contained in the
statements. No assurance can be given that any of the events
anticipated by the forward-looking statements will occur or, if
they do occur, what benefits the Company will obtain from them.
These forward-looking statements reflect management's current views
and are based on certain expectations, estimates and assumptions
which may prove to be incorrect. A number of risks and
uncertainties could cause our actual results to differ materially
from those expressed or implied by the forward-looking statements,
including: (1) a downturn in general economic conditions in North
America and internationally, (2) the inherent uncertainties and
speculative nature associated with mineral exploration and
production, (3) a decreased demand for minerals, (4) any number of
events or causes which may delay or cease exploration and
development of the Company's property interests, such as
environmental liabilities, weather, mechanical failures, safety
concerns and labor problems; (5) the risk that the Company does not
execute its business plan, (6) inability to retain key employees,
(7) inability to finance operations and growth, and (8) other
factors beyond the Company's control. These forward-looking
statements are made as of the date of this news release and, except
as required by law, the Company assumes no obligation to update
these forward-looking statements, or to update the reasons why
actual results differed from those projected in the forward-looking
statements.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Palladon Ventures Ltd. John W. Cutler 801.521.5252
604.681.4760 (FAX) info@palladonventures.com
www.palladonventures.com
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