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TORONTO, July 18, 2016 /CNW/ - Melior Resources Inc.
("Melior" or the "Company") (TSXV-MLR) is pleased to provide a
corporate update and to announce that it has reached agreement with
Pala Investments Limited to extend the expiry and repayment date of
the US$5 million loan facility (the
"Pala Facility") from August 28, 2016
to October 31, 2017.
Pala Facility
As at June 30, 2016, a total of
US$2,255,000 had been drawn down
under the Pala Facility. Based on the terms of the extension,
an additional US$475,000 remains
available to be drawn down by Melior prior to the expiry of the
loan on October 31, 2017. Pursuant to
the terms of the extension, during the period the loan is
outstanding, Melior has agreed to maintain a minimum cash balance
of C$200,000, pay accrued interest
monthly in arrears, and ensure material plant and equipment with
respect to its Goondicum Ilmenite Mine (the "Goondicum Mine") are
on-site, adequately insured and maintained in good condition.
In addition, during the period the loan is outstanding, in the
event Melior proposes to offer for sale any of its Capital Stock,
Pala shall be entitled to participate in such issuance on a pro
rata basis to the extent necessary to maintain its proportional
fully diluted equity interest in Melior. Pala will be entitled to
participate in any such issuance of Capital Stock at the price and
on the terms such securities are to be offered to a third
party.
Project Update
Since Melior suspended operations at its Goondicum Mine in
July 2015 as a result of a material
deterioration in the global ilmenite market, the Company has been
focused on stabilizing, and then minimizing, on-going expenditure
at the Goondicum Mine, while maintaining the assets in a fit state
ready for restart should market conditions should allow.
During this period the Company has been exploring options to
both reduce the cost structure and/or increase the revenue streams
of the Goondicum Mine in an effort to create an operating model
which would see the possible restart of the mine in today's market
environment. The efforts focused on reducing the mine's cost
structure have included integrating the latest cost of inputs into
the operating model including falling diesel prices and reducing
cost of labour as well as confirming the viability of constructing
the Eastern Access Road which would reduce haulage distances of the
final product to the Gladstone
port by approximately 40%. While these efforts have had a positive
impact on the cost structure of the business, in isolation these
impacts are not sufficient collectively to warrant a restart at
today's product pricing.
Additionally, the Company has been evaluating opportunities of
increasing the revenue streams of the business. In this
regard, the Company has initiated a processing technology program
("PTP") to evaluate the potential of upgrading a number of the
products that the Goondicum Mine produces, or has the potential to
produce, in an effort to provide a path to increased revenue and
operating margins of the mine. While these studies are at a
relatively early stage, based on initial results, the Company
believes the PTP demonstrates potential for the development of new
technology, not only allowing the upgrade of a number of
Goondicum's products to higher-value products, but also providing a
potential means of upgrading ore types across a range of
industries.
Market
Over the last two years, the global titanium feedstock market
saw a marketable decline in feedstock pricing, with over a 30%
decline in ilmenite pricing over this period, to what is
historically very low pricing levels.
However, during CY Q1 and Q2 2016 the Company has observed that
TiO2 pigment producers have been successful in increasing pigment
prices on the back of increasing demand for pigment. As a
result of this increasing demand, a number of feedstock producers
have reported increasing sales of ilmenite and quarter-on-quarter
price increases, the first time in a number of years.
While the prices still remain at historically low levels, the
Company is pleased to see evidence of upward movement in demand and
resultant pricing.
Financing
The sole source of funding of Melior since operations at the
Goondicum Mine were suspended has been the Pala Facility. As
of 30 June 2016, the total
outstanding under the facility, including accrued interest, was
US$2,445,842.
It is estimated that the remaining drawdown amount to be
provided through the Pala Facility will fund the Company through to
the end of October 2016. Melior continues to review its
options in an effort to secure alternative sources of financing so
as to ensure it has sufficient capital to meet its obligations as
they come due and to cover continuing corporate costs and costs
associated with maintaining the Goondicum Mine in a ready status,
which are estimated at approximately A$1.5
million per annum. Such source of financing may come in the
form of additional third party debt, an equity raise and/or the
sale of assets of the Company. Investors should refer to Melior's
Management's Discussion and Analysis for the three and nine months
ended March 31, 2016 (the "MD&A")
and related interim financial statements and the notes thereto for
a more comprehensive description of the financial position and
prospects of the Company.
Board
Joseph Connolly has informed the
Board that as a result of a change in his employment circumstances
he is no longer able to maintain a position as an independent
non-executive director on the Board of Melior. In this
regard, Mr. Connolly has submitted his resignation from the board
of directors of Melior, which shall be effective July 18th, 2016.
With this change, the board of directors of Melior will consist
of three members, including Charles
Entrekin, Martyn Buttenshaw
and Mark McCauley. Since
shut-down of the Goondicum Mine, all Board remuneration and fees
have been suspended. At present, Melior does not expect to fill the
vacancy left by Mr. Connolly in the near future.
Mark McCauley, CEO of Melior
commented,
"The last 12-months for Melior have been challenging.
The Company has, with Pala's financial assistance,
made efforts to maintain the Goondicum Mine in a ready state to
be able to quickly and cost-effectively restart operations should
there be a sustainable increase in the product pricing. We
are encouraged by the recent increase in titanium feedstock pricing
and, should it be sustained, see this adding significant value to
the Goondicum Mine allowing the company a range of options to see
this increase reflected in shareholder value.
We are pleased with the results of the efforts on both the
cost reduction and revenue enhancements opportunities.
Specifically, the results of the processing technology program,
though still at a very early stage, show significant
potential.
The welcome extension of the Pala loan will provide the
company with the opportunity to both continue to pursue the
development of the PTP and will provide sufficient time for the
recent positive movements in the pigment market to fully translate
into sustainable feedstock demand.
Finally, I would like to thank Joe
Connolly for his significant efforts on behalf of the
company over the last two years and wish him well with his future
endeavors."
Forward Looking Statements Disclaimer
Statements made in this news release may be forward-looking
and therefore subject to various risks and uncertainties. Such
statements can typically be identified by terminology such as
''may'', ''will'', ''could'', ''should'', ''expect'', ''plan'',
''anticipate'', ''believe'', ''intend'', ''possible'',
''continue'', "objective" or other similar expressions concerning
matters that are not historical facts. Certain material factors or
assumptions are applied in making forward-looking statements and
actual results may differ materially from those expressed or
implied in such statements. Melior does not undertake to update any
forward-looking statements; such statements speak only as at the
date made.
Going Concern Risk
As described in Melior's MD&A, the continuing operations
of the Company are dependent upon its ability to continue to raise
adequate financing, to commence profitable operations in the
future, and repay its liabilities arising from normal business
operations as they become due. Notwithstanding the extension of the
Pala Facility there remains a significant risk that the Corporation
is unable to find alternative sources of financing for on-going
working capital requirements. These material uncertainties cast
significant doubt upon the Company's ability to continue as a going
concern.
Failure to obtain sufficient financing could result in a
delay or abandonment of the Goondicum Mine and could force the
Company into reorganization, bankruptcy or insolvency proceedings.
Additional financing may not be available when needed or, if
available, the terms of such financing might not be favourable to
the Corporation and might involve substantial dilution to existing
shareholders. Failure to raise capital when needed would have a
material adverse effect on the Company's ability to pursue its
business strategy, and accordingly could negatively impact the
Company's business, financial condition and results of
operations.
Neither the 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.
SOURCE Melior Resources Inc.
