June 14, 2013
Formation Metals Considers Dundee Corporation's Allegations Without Merit
Vancouver, B.C., June 14, 2013, Formation Metals Inc. (FCO-TSX) (“Formation” or the “Company”) announced on June 6, 2013, that it had entered into a binding Letter Agreement to sell, for US$9.0 million in cash, its Sunshine Precious Metals refinery, copper refinery and certain lands at the Big Creek Hydrometallurgical Complex (the “Complex”) in Shoshone County, Idaho, to certain entities that are associated or affiliated with Waterton Global Resource Management, Inc. (“Waterton”).
On June 10, 2013, Dundee Corporation (“Dundee”) issued a press release which disclosed certain opinions of Dundee in respect of the sale of the Complex to Waterton and the upcoming Annual General and Special Meeting of the Company. On June 13, 2013, Dundee filed a Petition in the Supreme Court of British Columbia against the Company, its directors and Waterton seeking to obtain a determination that the sale by the Company of the Complex to Waterton is a sale of all or substantially all of Formation’s undertaking subject to approval of the Company’s shareholders, under the Business Corporations Act (British Columbia), to obtain injunctions restraining the Company and Waterton from proceeding with the sale pending determination of that issue and seeking leave to commence a derivative proceeding against the directors of the Company based on allegations of breach of fiduciary duty. The Court has set Dundee’s claim for an interlocutory injunction and leave to commence the derivative action for hearing on June 19, 2013.
The Company considers the allegations made by Dundee publicly and in its Petition to be without merit, to be designed to disrupt the business of the Company and to be brought for collateral purposes related to Dundee’s previously announced intention to contest the election of directors at the upcoming Annual General and Special Meeting of the Company on June 21, 2013. The claims will be vigorously opposed.
The Letter Agreement was the result of several months of negotiation with Waterton. As set out in the Company’s June 6, 2013 press release, the sale is subject to confirmatory due diligence, regulatory approval and the execution of a definitive acquisition agreement by June 20, 2013. It was also announced that Cormark Securities Inc. has been engaged to provide a fairness opinion on the transaction to the Company. The anticipated closing date for the proposed sale was determined based on the time estimated by the parties required to satisfy closing conditions, taking into account that Waterton had already performed its initial due diligence over the previous months.
As previously reported, the sale of the Complex is not expected to have an adverse impact on the future development of the Idaho Cobalt Project (“ICP”) and will in fact enhance the Company’s ability to advance the ICP. The Company concluded last year that a standalone facility would be better suited to process concentrate from the ICP rather than a retro-fit of the existing Complex. The standalone facility can be relocated nearby where the Company holds an additional 16 acres of industrial zoned private land. This also affords the opportunity for Management to consider the relocation of the standalone facility to a location closer to the ICP Minesite, and/or a railhead, which would have a positive impact on future operational expenditures for the ICP. In connection with the sale, the Company will retain all cobalt related data, engineering drawings and plans, along with the cobalt electrowinning cells, which will be moved to the new location.
The sale will also permit the Company to re-pay its existing non Waterton US$5.0 million senior secured convertible promissory note, following which it will have no debt. The proceeds from the sale will also allow the Company to make progress at the flagship Idaho Cobalt Project and to evaluate additional opportunities already within the Company and in the market at large.
Based on the factors above, the Company made the decision to enter into the Letter Agreement to divest itself of a non-core asset while substantially increasing its cash position, reducing operational and administrative expenses and eliminating its debt. Formation believes that the proposed sale is clearly in the best interests of the Company.
The proposed sale does not constitute a sale or disposal of all or substantially all of Formation’s undertaking and therefore does not require shareholder approval under the Business Corporations Act (British Columbia).
As disclosed in the Petition materials filed with the Supreme Court of British Columbia by Dundee, subsequent to the entering into of the Letter Agreement the Company received an unsolicited proposal from Sunshine Silver Mines Corporation to purchase the subsidiary of the Company that owns the Complex and certain other assets for US$12.0 million.
The special resolution of shareholders that will be proposed by the Company at the upcoming Annual General and Special Meeting to alter the Company’s Articles to remove the staggered board provisions complies with the requirements of the Toronto Stock Exchange.
Formation is a well-established mineral exploration, development and refining company who owns 100% of a fully permitted primary cobalt deposit located in Idaho which has been prepared for the commencement of underground development, pending additional mine financing. Formation has additional interests in base, precious metal and uranium projects in Canada, the United States and Mexico. Formation is dedicated to the principles of environmentally sound mining and refining practices, and believes that environmental stewardship and mining can co-exist. The Company trades on the Toronto Stock Exchange under the symbol FCO.
Formation Metals Inc.
For further information please contact:
E.R. (Rick) Honsinger, P.Geo., V.P. Corporate Communications
Formation Metals Inc., 1810 — 999 West Hastings Street, Vancouver, BC, V6C 2W2
Tel: 604-682-6229 - Email: firstname.lastname@example.org — Web: formationmetals.com
This news release contains “forward-looking statements” within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on the Company is available at www.sedar.com.
The statements contained in this news release in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.’s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to the parties as of such date. It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.
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