June 6, 2013
Formation Metals Enters Binding Letter Agreement to Sell Refinery for US$9.0 Million Cash
Vancouver, B.C., June 6, 2013, Formation Metals Inc. (FCO-TSX) (“Formation” or “the Company”) announced today that it has entered into a binding Letter Agreement to sell, for US$9.0 million in cash, 100% of 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”). The sale of the Complex is not expected to have a significant impact on the future development of the Idaho Cobalt Project (“ICP”).
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“This was a strategic decision that will provide significant additional cash to the Company’s treasury” stated Mari-Ann Green, Chairman and CEO of Formation Metals Inc. She continued, “Apart from helping to ensure the financial health of the Company by relieving it of all debt, the sale of this non-core asset also provides us with additional funds to seek opportunities to enhance shareholder value.”
Internal studies conducted last year concluded 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 within the general vicinity where the Company holds an additional 16 acres of industrial zoned private land. In connection with the sale, the Company will retain all cobalt related data, engineering drawings and plans and intellectual property, along with the cobalt electrowinning cells, which will be moved to the new location.
Over the past several months the Company has been concentrating on building a sound business plan for the Complex by obtaining expressions of interest letters, contracts, and by testing various materials from customers and potential customers. The Company has determined that the successful development of that business will require substantial capital expenditures, sufficient working capital, a hedging program and the ability to provide provisional payments. Current unprecedented market turmoil has made it unlikely that Formation will obtain these capital requirements in the near future.
The Letter Agreement provides for payment to Formation of a one third share of the profits in the event Waterton sells its interest in the Complex within 18 months and provides for the Company to re-pay its existing US$5.0 million senior secured convertible promissory note.
The sale is subject to, among other things, confirmatory due diligence, the execution of a definitive acquisition agreement by June 20, 2013, unless mutually extended, and any required regulatory approvals. In addition, the Letter Agreement includes an exclusivity provision in respect of the Company until its termination and calls for the Company to pay Waterton a break fee of US$1.0 million and a portion of its costs in certain circumstances. The transaction is expected to close June 20th, 2013.
Cormark Securities Inc. has been engaged to provide a fairness opinion on the transaction. Waterton’s financial advisor is BMO Capital Markets.
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.
Waterton Global Resource Management invests in producing and late-stage development assets in politically stable geographies, through joint ventures, partnerships and acquisitions. Waterton Global has assembled a multi-disciplinary technical team with extensive expertise evaluating, developing and operating precious metals mining projects throughout the world.
Formation Metals Inc.
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: email@example.com — Web: formationmetals.com
This news release contains “forward-looking statements” within the meaning of applicable Canadian securities legislation, including statements regarding the completion of the sale of the Complex (the “Sale”). Generally, forward-looking statements can be identified by the use of forward- looking terminology. These forward-looking statements are based on factors and assumptions of management, including that the conditions to completion of the Sale will be satisfied or waived, that the closing of the Sale will complete as contemplated in the Letter Agreement and at the time anticipated by management and that the exploration, development and other plans of the Company will not change. 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, including the risk that the conditions to completion of the Sale will not be satisfied or waived, that the closing of the Sale will not complete on the terms currently contemplated, at the time anticipated by management or at all and that the exploration, development and other plans of the Company will change. 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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