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Donner Forfeits Interest in Bracemac-Mcleod

Donner Forfeits Interest in Bracemac-Mcleod 
MONTREAL, QUEBEC -- (Marketwired) -- 09/03/13 -- Donner Metals Ltd.
(TSX VENTURE:DON)(FRANKFURT:D4M) ("Donner" or the "Company") reports
that, as a result of an uncured default under the Metal Purchase
Agreement (the "Metal Purchase Agreement") dated July 12, 2011,
entered into by Donner, Sandstorm Metals & Energy Ltd. ("Sandstorm
Metals Parent"), Sandstorm Metals & Energy (Canada) Ltd. ("Sandstorm
Metals") and Sandstorm Gold Ltd. ("Sandstorm Gold"), Donner forfeited
its interest in the Bracemac-McLeod mine and mine property area
("Bracemac-McLeod") located in Matagami, Quebec and operated by a
subsidiary of Glencore Xstrata plc ("Glencore").  
In summary, Donner, Sandstorm Metals and Sandstorm Gold and Glencore
have agreed the following:  


 
--  Glencore has issued a 3% net smelter returns royalty ("NSR") to
    Sandstorm Metals on 100% of production from Bracemac-McLeod, in
    consideration for the interest in Bracemac-McLeod acquired by Sandstorm
    Metals from Donner and for an option to acquire certain Donner shares
    and warrants, as described below. 
--  Sandstorm Metals and Sandstorm Gold have relinquished their copper
    stream and their gold stream respectively. 
--  Sandstorm Metals will issue 1.33 million shares of Sandstorm Metals to
    Donner and Donner has provided each of Glencore and Sandstorm Metals
    with an irrevocable and unconditional release and discharge of any claim
    by Donner against Glencore or Sandstorm Metals and Donner agreed to an
    orderly execution of the agreement. 
--  Donner will receive a 1% NSR from Sandstorm Metals and Sandstorm Gold
    from any proceeds from the 3% NSR that exceed CDN$49 million. 

 
As previously disclosed on August 13, 2013, Donner failed to pay
amounts owing under the Development and Operating Agreement (the
"Development Agreement") dated as of July 12, 2011 entered into by
and between Glencore and Donner with respect to Donner's share of the
approved and budgeted monthly expenditures with respect to
Bracemac-McLeod.  
By letter dated August 30, 2013, Sandstorm Metals advised Donner
that, as of August 15, 2013, Donner is in default of the Metal
Purchase Agreement and that there has occurred a Donner event of
default under the Metal Purchase Agreement.  
As required by the Intercreditor Agreement dated as of July 12, 2011
entered into by Donner, Sandstorm Metals and Glencore (the
"Intercreditor Agreement"), on August 30, 2013, Sandstorm Metals
delivered to Glencore a notice of Donner's default under Metal
Purchase Agreement.  
Donner does not have the cash available to pay the cash call that was
payable on August 12, 2013.  
Each of the Development Agreement and the Metal Purchase Agreement
sets out the respective rights and obligations of Glencore and
Sandstorm Metals should there be a default or an occurrence of an
event of default by Donner under the Development Agreement or the
Metal Purchase Agreement, as the case may be. In both cases, the
exercise by Glencore or Sandstorm Metals of its rights under the
Development Agreement or the Metal Purchase Agreement, as the case
may be, in the case of a default or the occurrence of an event of
default by Donner, is subject to the provisions of the Intercreditor
Agreement.  
The Intercreditor Agreement requires each of Glencore and Sandstorm
Metals to deliver to the other a default notice in the event of the
occurrence or existence of an event of default pursuant to their
respective agreements. Under the Intercreditor Agreement, Donner and
Sandstorm Metals have granted Glencore an irrevocable right and
option to acquire Donner's interest in the Bracemac-McLeod mine and
project and all rights or title related thereto each time Glencore
receives a copy of a default notice.  
Upon, the earlier of: (i) Sandstorm Metals becoming aware that
Glencore will not exercise its option, and (ii) the expiry of the
period during which Glencore has the right to exercise its option
(i.e., on the 15th day after the receipt of a default notice),
Sandstorm Metals will have the right to cure any event of default of
Donner under the Development Agreement.  
The Intercreditor Agreement has attached thereto the form of
assignment and assumption agreement (the "Assignment and Assumption
Agreement") to be executed and delivered by Donner, Glencore and the
assignee of Donner's interest in Bracemac-McLeod and all rights or
title related thereto if, among other things, Glencore does not
exercise its option and Sandstorm Metals chooses to purchase Donner's
interest in Bracemac-McLeod and all rights or title related thereto.  
In order to memorialize the assumption by Sandstorm Metals of
Donner's interest in Bracemac-McLeod and all rights or title related
thereto, the Metal Purchase Agreement provides that Sandstorm Metals
will execute and deliver the Assignment and Assumption Agreement and
will then forward the same to Donner who shall immediately execute
and deliver the Assignment and Assumption Agreement. The Metal
Purchase Agreement further provides that if Donner fails to
immediately execute and deliver the Assignment and Assumption
Agreement, then Sandstorm Metals will have the full and restricted
right to sign the Assignment and Assumption Agreement as attorney in
fact for and on behalf of Donner.  
As a result of the interplay between the Metal Purchase Agreement,
the Development Agreement and the Intercreditor Agreement, a default
or an occurrence of an event of default by Donner can result in the
forfeiture of Donner's interest in Bracemac-McLeod and all rights or
title related thereto to either Glencore or Sandstorm for no or
little consideration.  
On August 30, 2013, Donner and Sandstorm Metals entered into a
settlement agreement (the "Settlement Agreement") which provides,
among other things, for the manner in which Sandstorm Metals shall
exercise its rights pursuant to the Metal Purchase Agreement, the
irrevocable and unconditional mutual release and discharge by Donner,
Glencore and Sandstorm Metals of each other from any claim, Donner's
covenant not to commence any action or proceeding or to make any
claims whatsoever against Sandstorm Metals or Sandstorm Metals Parent
with respect to what was Donner's interest in Bracemac-McLeod and all
rights or title related thereto and the consideration that shall be
delivered by Sandstorm Metals to Donner in exchange therefor. See
below for a further description of the Settlement Agreement.  
Immediately after the execution and delivery of the Settlement
Agreement, Sandstorm Metals sold to Glencore what was Donner's
interest in Bracemac-McLeod and all rights or title related thereto
pursuant to an agreement of purchase and sale (the "Purchase and Sale
Agreement") executed by Sandstorm Metals, Glencore and Donner. The
consideration Sandstorm Metals received from Glencore under the
Purchase and Sale Agreement includes a 3% NSR on production from
certain mining leases (the "Sandstorm Metals' New Royalty") on the
terms and conditions set out in a royalty agreement between Glencore
and Sandstorm Metals (the "Royalty Agreement").  
In consideration of Donner's agreement to enter into a tripartite
release which includes the release to Donner of any Bracemac-McLeod
mine closure obligations, to agree to an orderly execution and
delivery of the Assignment and Assumption Agreement, including its
execution of the Settlement Agreement, of the Purchase and Sale
Agreement, Sandstorm Metals has agreed that: (i) Sandstorm Metals
will issue to Donner common shares having a value of CDN$2.0 million
at an issue price per common share equal to the closing price of the
common shares on the date prior to the issue date, subject to the
rules and requirements of the TSX Venture Exchange from treasury,
subject to a hold period equal to four months plus one day and (ii)
Sandstorm Metals will agree to pay to Donner a certain amount of the
proceeds to be received from Glencore under the Royalty Agreement
pursuant to the Sandstorm Metals' New Royalty; in each case, all on
and subject to the terms and conditions contained in the Settlement
Agreement.  
In deciding to cooperate with the orderly execution and delivery of
the Assignment and Assumption Agreement, the Board of Directors of
Donner took into account, among other things, the recommendation of
the Special Committee of independent directors formed to, amongst
others, explore, analyze and assess the effect, desirability and
consequences of a full range of strategic options, including, but not
limited to, acquisitions, alliances with strategic partners, resale
arrangements, merger or other business combination transactions
involving the Corporation and a third party, the sale of all or
substantially all of the Corporation's assets, the sale of the
Corporation, the sale of some of the Corporation's assets, a
recapitalization of the Corporation, proceeding in bankruptcy,
reorganization or arrangement for the appointment of a receiver or
trustee or any other proceeding under any law for the relief of
creditors, each with the objective of enhancing value for all
stakeholders of the Corporation.  
The Board of Directors of Donner also considered the impacts that the
exercise of contractual recourses by either one or both of Glencore
and Sandstorm Metal under its respective agreement would have had on
the business, operations, prospects, financial condition of, or
capital of Donner, including the very real possibility that Donner
would lose its interest in Bracemac-McLeod without receiving any or
little consideration therefor. The Board of Directors of Donner
determined that, in the circumstances, it was in the best interest of
Donner to cooperate with the orderly execution and delivery of the
Assignment and Assumption Agreement as it was the sole scenario that
provided some value to Donner and a viable possibility to develop a
restructuring plan.  
Donner continues to hold interests in the remaining five Matagami
joint ventures, where exploration continues. Going forward, Donner
will evaluate various options to seek maximum value from those
interests. Donner is also committed to manage its obligations to the
Quebec lenders. 
The Settlement Agreement  
Pursuant to the Settlement Agreement, Donner has agreed to execute
and deliver to, and with, Sandstorm Metals and/or Glencore, the
Settlement Agreement, the Assignment and Assumption Agreement, the
tripartite release and the Purchase and Sale Agreement.  
Sandstorm Metals and Donner agreed that effective upon August 30,
2013, without any further or other act or formality by either of
them, and from then on, each of the Metal Purchase Agreement and the
Security Agreement is deemed to be terminated and extinguished and
the parties irrevocably and unconditionally released and discharged
each other and their respective successors and assigns from any and
all claims (with respect to Sandstorm Metals, including Sandstorm
Metals Parent) which they have now or may have in the future against
each other with respect to the Metal Purchase Agreement and the
Security Agreement, other than claims involving fraud, bad faith,
breach of fiduciary duty or willful misconduct.  
Donner also covenanted and agreed not to commence any action or
proceeding or to make any claims whatsoever against Sandstorm Metals
or Sandstorm Metals Parent with respect to the Affected Assets or the
Participating Interest.  
Sandstorm Metals will issue to Donner 1.33 million common shares of
Sandstorm Metals.  
Sandstorm Metals agreed, that from and after the date upon which
Sandstorm Metals has received an aggregate of the net sum of CDN$49
million from the Sandstorm Metals' New Royalty under the Royalty
Agreement (the "Recoupment Date"), Sandstorm Metals shall pay to
Donner, a 1% NSR royalty (the "Sandstorm Metals To Donner Royalty")
on sales of ore produced from the mining leases of Bracemac-McLeod
that is subject to the Sandstorm Metals' New Royalty under the
Royalty Agreement. The Sandstorm Metals To Donner Royalty shall only
be payable and paid by Sandstorm Metals to Donner to the extent that,
and as and when Sandstorm Metals shall receive royalty payments in
respect of the Sandstorm Metals' New Royalty under the Royalty
Agreement.  
In order to enable Donner to verify whether or not Sandstorm Metals
has received an aggregate of the net sum of CDN$49 million from the
Sandstorm Metals' New Royalty under the Royalty Agreement and to
enable Donner to verify the receipt by Sandstorm Metals of royalty
payments in respect of the Sandstorm Metals' New Royalty under the
Royalty Agreement: (i) until the Recoupment Date, within 45 days
after the end of each calendar year, Sandstorm Metals shall forward
to Donner, all Royalty Statements (if any), received from Glencore
during the said calendar year; and (ii) from and after the Recoupment
Date, upon delivery of 10 business days advance notice, on a twice
yearly basis, Donner or its authorized representatives shall be
entitled, during normal business hours of Sandstorm Metals, in a
manner that does not unreasonably interfere with Sandstorm Metal's
business, to review and examine information Sandstorm Metals has
obtained from Glencore under the Royalty Agreement.  
In the event that: (i) any action shall be commenced against
Sandstorm Metals with respect to the transaction contemplated by the
Settlement Agreement for which a final and unappealable judgment is
obtained that is adverse to the interests of Sandstorm Metals; or
(ii) Donner shall become subject to an insolvency event (as defined
in the Settlement Agreement), regardless of whether or not the
payments from Sandstorm Metals have commenced, then in each or either
of such instances, the obligation of Sandstorm Metals to pay to
Donner the Sandstorm Metals To Donner Royalty shall terminate and be
extinguished.  
The Settlement also provides that Sandstorm Metals shall have the
right to set off against any payments of the Sandstorm Metals To
Donner Royalty any amounts that may become due and owing to Sandstorm
Metals from Donner as a result of the indemnification provisions set
out in the Settlement Agreement. Moreover if the applicable
indemnification results from a breach by Donner of its representation
and warranty with respect to its title in Donner's interest in
Bracemac-McLeod and all rights or title related thereto, the
obligation of Sandstorm Metals to pay to Donner the Sandstorm Metals
To Donner Royalty shall terminate and be extinguished. Additionally,
if Sandstorm Metals shall owe money to Glencore as a result of the
indemnification provisions of the Purchase and Sale Agreement and
Glencore is entitled to the recoupment of payments previously made to
Sandstorm Metals by Glencore under the Royalty Agreement, then to the
extent that Donner has received its pro rata share of any such
payments that must be repaid by Sandstorm Metals to Glencore, Donner
shall be obligated to repay to Sandstorm Metals the full pro rata
share of such payments that Donner received. 
Glencore Option to Acquire Donner Shares and Warrants  
In connection with Glencore's issuance of a 3% NSR to Sandstorm
Metals from Bracemac-McLeod, Glencore acquired from Sandstorm Metals
an option to acquire 40,360,330 Donner common shares and 26,500,000
warrants exercisable for the same number of Donner common shares. The
option is exercisable for $2 million and the warrants are exercisable
for $0.10 per share. Assuming Glencore's exercise in full of its
option and the warrants, Glencore would own approximately 19.5% of
Donner's outstanding shares calculated on a partially diluted basis.  
Forward-Looking Information  
This news release contains forward-looking information within the
meaning of applicable Canadian securities laws. All information other
than historical fact is forward-looking information. Forward-looking
information relates to future events or future performance and is
based on Donner's current internal expectations, estimates,
projections, assumptions and beliefs. Forward-looking information is
often, but not always, identified by the use of words such as
"expect", "project", "proposed", "intend", "seek", "anticipate",
"budget", "plan", "continue", "estimate", "forecast", "may", "will",
"predict", "potential", "targeting", "could", "might", "should",
"believe" and similar expressions.  
Although management considers the assumptions and estimates,
reflected in forward-looking information, to be reasonable, based on
information currently available, there can be no assurance that such
information will prove to be correct. As a consequence, actual
results may differ materially from those anticipated.  
In particular, this news release contains forward-looking information
relating to, but not limited to, statements with respect to
management's assessment of future plans regarding the remaining five
Matagami joint ventures or the various options to seek maximum value
from those interests and with respect to Donner's commitment to
manage its obligations to the Quebec lenders.  
Undue reliance should not be placed on forward-looking information
which is inherently uncertain, and subject to known and unknown risks
and uncertainties (both general and specific) and other factors that
contribute to the possibility that the future events or circumstances
contemplated by the forward-looking information will not occur or
that may cause the actual results, level of activity, performance or
achievements of the Company to be materially different from those
expressed or implied by such forward-looking information. These risks
include, but are not limited to risks associated with general
economic conditions, the actual results of current exploration
activities, conclusions of economic evaluations, changes in project
parameters as plans continue to be refined, future metal prices,
financial risks and substantial capital requirements. Further
information regarding certain of these risks (as well as risks
relating generally to the Company's business) may be found under the
heading "Financial risk factors" in the Company's Management's
Discussion & Analysis. Readers are cautioned that the foregoing list
of factors that may affect future results is not exhaustive. The
forward-looking statements contained in this news release are made as
of the date hereof and Donner does not undertake any obligation to
update publicly or to revise any of the included forward-looking
statements, except as required by applicable law. The forward-looking
statements contained herein are expressly qualified by this
cautionary statement.  
Neither the TSX Venture Exchange nor its Regulation Service 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:
Donner Metals Ltd.
David Patterson
Chairman
604.683.0564
donner@bed-rock.com
www.donnermetals.com
 
 
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