Trading Symbol: TSX-V: IG
CALGARY, Feb. 1 /PRNewswire-FirstCall/ - Infinito Gold Ltd. (the "Company") announces that it has agreed to terms to raise, on a non-brokered private placement basis, an aggregate of up to CDN$50.5 million upon the sale of secured convertible notes (the "Notes") to Exploram Enterprises Ltd. ("Exploram") and Auro Investments Ltd. ("Auro") (collectively, the "Holders"). The Holders have agreed to a subscription of an initial aggregate principal amount of CDN$42.5 million in Notes and to subsequent drawdowns on the Note held by Exploram up to CDN$8 million, subject to certain conditions. Under such subscriptions for Notes, the Holders shall also be issued, concurrently with the issue of the Notes, one detachable common share purchase warrant (a "Warrant") for each share that can be acquired on conversion of the Notes. The proceeds of $42.5 million shall be used to retire all outstanding Notes and Debentures of the Company totaling $37,500,000, to pay interest on such outstanding debt of approximately $910,000 with the balance for working capital and corporate general and administrative expenses.
The Notes mature five years after their date of issue and are convertible at any time up to maturity into shares of the Company. The conversion price for the initial $42.5 million subscription of Notes is $0.204 per share, being the 20-day volume weighted average price of the shares of the Company for the previous 20 trading days (the "20-Day VWAP") and the conversion price for subsequent drawdowns will be the 20-Day VWAP at the date of drawdown. If, after the Notes are issued however, the Company issues shares for cash at a price below the conversion price of the Notes (a "Subsequent Issuance"), the Holders shall be entitled to concurrently convert into shares at that lower issue price an aggregate principal amount of the Notes as is equal to the amount of the Subsequent Issuance. Shares issued for cash upon the exercise of stock options, interest payments on the Notes or on conversion of principal of a Note with a lower conversion price do not trigger this right.
The Notes bear interest at 15% per year, payable quarterly, except that after March 31, 2010 the Holders have the discretion to require interest to be paid monthly. The first interest payment is due on the earlier of the first drawdown of a project development debt financing for the Company's Crucitas Project and September 30, 2009. (The Company announced in August of 2008 that it had signed an engagement letter giving BNP Paribas an exclusive mandate to act as lead arranger on the project development financing for the Crucitas Project (the "Project Development Financing"), but financing work has been suspended pending resolution of the Costa Rican legal challenge in respect of the grant of a change of land use permit for the mine announced on October 21, 2008.) Interest is payable in cash or shares of the Company, at each Holders' election, such shares to be issued at the 20-Day VWAP at the time the interest payment is due.
Each Warrant issued concurrently with the issue of Notes, or a subsequent drawdown, is exercisable for a period of five years and entitles the Holder to acquire one share of the Company at a price equal to the conversion price of the concurrent Note. Since the Company has agreed to issue one Warrant for each share that can be acquired on conversion of a Note, concurrently with the issue of the initial $42.5 million in Notes the Company shall issue 208,333,334 Warrants.
The Company's obligations under the Notes will be secured by: (i) a general security agreement over all of the Company's assets and a pledge of the shares of each of the Company's direct subsidiaries; (ii) a guarantee of the Company's obligations under the Notes by each of the Company's subsidiaries; and (iii) a pledge of the shares of any indirect subsidiary of the Company.
The Company has the right to prepay the principal amount of the Notes, in full or in part, at any time after three years from the issue date of the Notes, subject to each Holders' right to convert before prepayment. Prepayment is subject to other conditions, including that the 20-Day VWAP prior to prepayment must be 15% greater than the conversion price of the principal amount of the Note to be prepaid. The Notes will include negative covenants, positive covenants and conversion right adjustments that are standard for transactions of this nature. The Notes also contain events of default to be expected in financings under these circumstances, including a breach of the terms of the Notes, bankruptcy, insolvency or receivership proceedings, a change of control of the Company, a change of business of the Company's Costa Rican subsidiary, a failure to obtain and maintain regulatory approvals in respect to the Crucitas project, a failure to make the initial drawdown under the Project Development Financing before September 30, 2009 and a court decision that impairs or prevents the ability to construct the Crucitas project.
The Company has agreed to pay a cash structuring fee to the Holders of 3% of funds advanced at closing not utilized to retire existing debt, 3% on funds advanced in subsequent drawdowns and 1% of all funds used to retire existing debt.
Subsequent drawdowns on the Note held by Exploram to a maximum of $8,000,000 may be made at the Issuer' request in increments of between $500,000 and $2,000,000 subject to specified conditions precedent to subsequent drawdowns, including the rendering of a favorable ruling in the Costa Rican legal challenge referred to above.
The Company requires the $42.5 million to be raised in order to continue its current operations. On January 31, 2009, $5,000,000 came due to a Holder under an outstanding secured debenture of the Company and the Company did not have the funds to repay it. As a result of cross default provisions in its other outstanding debt that is not payable on demand, the Holders are entitled to demand repayment of the entire $37,500,000 principal amount of outstanding debt of the Company, plus accrued interest. The Company has not identified other sources of an adequate amount of funds to allow it to meet its obligations.
The financing is a related party transaction under MI 61-101 as each of Exploram and Auro are related parties. As such, the Company formed a Special Committee of independent directors to consider and negotiate the terms of the transaction. The Company is exempt from the formal valuation requirements of MI 61-101 as its shares are only listed on the TSX Venture Exchange and the Company is exempt from the minority shareholder approval requirement under MI 61-101 as both the Board of Directors and the independent directors each determined, in good faith, that (i) the Company is in serious financial difficulty, (ii) the transaction is designed to improve the financial position of the Company, and (iii) the terms of the transaction are reasonable in the circumstances of the Company. These determinations were based in part upon the advice of its financial advisors. Due to the potential dilution to minority shareholders under this transaction, the Special Committee also recommended that the Company make available to minority shareholders an opportunity to mitigate the dilutive impact through participation in an offering of units priced at a comparable level. Accordingly, the Company plans to approach certain of its minority shareholders to see if there is interest in such an offering on a private placement basis.
The Board of Directors has also approved an increase in the authorized capital of the Company from 250,000,000 to an unlimited number of Common Shares in order to allow it to complete this transaction. In its circumstances the Company considers it necessary to close the Note financing as soon as possible. Completion of the Note financing is subject to approval of the TSX Venture Exchange.
Upon completion of the sale of the Notes, Exploram shall advance $34 million and Auro shall advance $8.5 million. Exploram shall also be issued 166,666,667 Warrants and Auro shall be issued 41,666,667 Warrants. Exploram presently holds 61,154,490 shares of the Company and, upon conversion in full of its Notes at $0.204 per share and exercise of all of its Warrants, could acquire a further 333,333,334 shares of the Company. Auro presently holds 5,714,285 shares of the Company and, upon conversion in full of its Notes at $0.204 per share and exercise of all of its Warrants, could acquire a further 83,333,334 shares of the Company. The Company presently has 121,429,289 shares outstanding.
Caution Regarding Forward-Looking Information and Statements
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Certain statements in this press release address future events and conditions and, as such, involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the statements. These factors include, among others, the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices, the possibility of project cost overruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financing needed in the future, the possibility that all necessary governmental and regulatory approvals will not be received, and the availability of a qualified workforce and third party contractors necessary for the development and operation of a mine. The Company undertakes no obligation to update these forward-looking information or statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking information or statements.
INFINITO GOLD LTD.
John Morgan
President
"The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release."
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