Nautilus Minerals Inc. (TSX:NUS)
(OTC:NUSMF)
(Nasdaq Intl Designation) (the
"
Company" or "
Nautilus")
announces that it continues to arrange bridge loans from Deep Sea
Mining Finance Ltd. (the "
Lender") and is
providing a corporate update on the Company's affairs.
US$1.6 Million Bridge Loan
To date the Company has received bridge loans
from the Lender totaling US$11,250,000. In conjunction with the
most recent loan of US$1.6 million, the Company has issued to the
Lender an additional 6,872,852 warrants of the Company. Each
warrant entitles the Lender to purchase one common share of the
Company at a price of C$0.23 for a period of five years from the
date of issuance of the warrant. To date the Company has issued a
total of 48,324,740 share purchase warrants to the Lender in
connection with bridge loans.
The bridge loans 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 is
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.
As previously disclosed, the Lender is a private
company owned 50% 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 is
indirectly 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 MI
61-101 Protection of Minority Security Holders in Special
Transactions ("MI 61-101"). The transactions
comprising the bridge loans and the share purchase warrants are
exempt from the formal valuation and minority shareholder approval
requirements of MI 61-101.
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.
US$34 Million Facility and Project Funding
Efforts
As previously disclosed, the bridge loans
provided by the Lender are expected to form part of a larger
secured structured credit facility of up to US$34 million (the
"Facility") to be provided by the Lender to the
Company.
The parties are in active negotiations regarding
the definitive loan agreement and the additional encumbrances to be
placed on the Company and its subsidiaries' assets to secure the
loans under the Facility. Once the Facility is in place, existing
bridge loans provided by the Lender to the Company will become
secured loans made under the Facility.
As with the existing bridge loans, the Facility
is intended to provide financial support to the Company to enable
the continued advancement of the Solwara 1 Project while the
Company seeks, with the assistance of its exclusive financial
advisor, M. Horn & Co. Ltd., the remaining project financing of
up to US$350 million required to complete the development of the
Solwara 1 Project. Efforts to secure project financing are ongoing
and the Company, through its exclusive financial advisor, is in
active discussions with various third parties and financial
advisors as the Company considers numerous financing structures and
alternatives.
Annual General Meeting (AGM)
The Company plans to hold its annual general
meeting on June 25, 2018, at the offices of its Canadian legal
counsel DuMoulin Black LLP in Vancouver, British Columbia. At the
AGM, in addition to routine annual business, the Company will be
seeking disinterested shareholder approvals of: (i) the issuance of
the maximum number of share purchase warrants to the Lender under
the bridge loans and the Facility, in each case in an amount of up
to US$34 million; and (ii) an exercise price of C$0.17 per share in
respect of such warrants (whether previously issued or to be
issued), all as required by the rules of the Toronto Stock
Exchange.
Further details of the AGM will be provided in
the notice of meeting and information circular to be delivered or
made available to shareholders on or about May 16, 2018.
Update on Vessel Default
The Company previously announced that Fujian
Mawei Shipbuilding Ltd. (the "Shipyard"), the
owner of the shipyard where the production support vessel is being
built, had notified the Company that MAC Goliath Pte. Ltd.
("MAC"), the purchaser of the vessel, had failed
to pay the third installment of the contract price (approximately
US$18 million plus interest). The vessel is to be chartered to the
Company by MAC and is an essential component of the Company's
seafloor production system.
If MAC fails to remedy the default, the Shipyard
may rescind the shipbuilding contract between the Shipyard and MAC.
In the event that the contract is rescinded, the Shipyard has the
right to either complete or not complete the vessel and to sell the
vessel by private sale either in a complete or incomplete state. In
accordance with the terms of the contract, Nautilus Minerals
Niugini Limited, a wholly-owned subsidiary of the Company, has the
option to either remedy the default on behalf of MAC and/or replace
MAC as a party to the contract by way of a novation or
assignment.
The Company continues discussions with the
Shipyard, MAC and third parties with respect to the default and
potential remedies, including in regards to one or more third
parties assuming responsibility for the completion of the vessel
and subsequent charter to the Company. While, as previously
announced, the vessel has been launched by the Shipyard, the vessel
remains docked near the Shipyard's facilities in China. Currently,
work on the vessel has halted pending the resolution of the default
situation. The Company will provide further updates as
circumstances warrant.
Solwara 1 Project Timing
As indicated, the Company requires significant
additional funding in order to complete the build and deployment of
the entire 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. 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 had previously disclosed that the
Company was planning to commence initial production activities at
the Solwara 1 Project during the third quarter of 2019, subject to
securing project financing, finalizing the ship build contract
delivery date between the Shipyard and MAC and finalizing the
vessel equipment integration methodology (due in Q2 2018). As a
result of the delays in securing the remaining project financing
and delays in resolving the MAC default situation, the timing for
initial production at the Solwara 1 Project is expected to be
delayed past Q3 2019. The Company will provide further updates as
circumstances warrant.
Stronger Board of Directors
With the appointments earlier this year of
Jonathan Whitworth and Jay Layman as independent directors of the
Company (along with the appointment of John McCoach in Q4 2017),
the Company’s board has been strengthened with a majority of
independent directors to assist the Company as it continues to
develop its business plan and work towards advancing the seafloor
mining industry.
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
The TSX does not accept responsibility
for the adequacy or accuracy of this press release.
Certain of the statements made in this news
release may contain forward-looking information within the meaning
of applicable securities laws, including statements with respect to
the Company's funding requirements, expectations to receive
additional bridge loans and enter into a credit facility, and the
continued development of the Solwara 1 Project. We have made
numerous assumptions about such statements, including assumptions
relating to the Company’s funding requirements, project funding,
and completion and operation of the Company's seafloor production
system. Even though our management believes the assumptions made
and the expectations represented by such statements are reasonable,
there can be no assurance that they will prove to be accurate.
Forward-looking information by its nature involves known and
unknown risks, uncertainties and other factors which may cause the
actual results to be materially different from any future results
expressed or implied by such forward-looking information. Please
refer to our most recently filed Annual Information Form in respect
of material assumptions and risks related to the prospects of
extracting minerals from the seafloor and other risks relating to
the Company's business and plans for development of the Solwara 1
Project. Risks related to continuing the Company's operations and
advancing the development of the Solwara 1 Project include the risk
that the Company will be unable to obtain at all or on acceptable
terms, and within the timeframes required, the remaining financings
necessary to fund completion of the build, testing and deployment
of the Company's seafloor production system; that the Company will
be unable to rectify or arrange for the rectification of the
default under the shipbuilding contract for the construction of the
production support vessel; and that agreements with third party
contractors for building slots within certain timeframes are not
secured as required. As the Company has not completed a
prefeasibility study or feasibility study in respect of the Solwara
1 Project, there can be no assurance that the Company's production
plans will, if fully funded and implemented, successfully
demonstrate that seafloor resource production is commercially
viable. Except as required by law, we do not expect to update
forward-looking statements and information as conditions change and
you are referred to the full discussion of the Company's business
contained in the Company's reports filed with the securities
regulatory authorities in Canada.
About Nautilus Minerals
Inc.
Nautilus is the first company to explore the
ocean floor for polymetallic seafloor massive sulphide deposits.
Nautilus was granted the first mining lease for such deposits at
the prospect known as Solwara 1, in the territorial waters of Papua
New Guinea, where it is aiming to produce copper, gold and silver.
The Company has also been granted its environmental permit for this
site. Nautilus also holds highly prospective exploration acreage in
the western Pacific (granted and under application), as well as in
international waters in the Central Pacific. A Canadian registered
company, Nautilus is listed on the TSX:NUS stock exchange and is
also a member of the Nasdaq International Designation program. Its
corporate office is in Brisbane, Australia. Its major shareholders
include MB Holding Company LLC, an Oman based group with interests
in mining, oil & gas, which holds a 29.3% interest and
Metalloinvest, the largest iron ore producer in Europe and the CIS,
which has a 18.5% holding (each on a non-diluted basis, excluding
loan shares outstanding under the Company’s share loan
plan).