Atalaya Mining Regulatory News (ATYM)

AIM: EMED 

TSX: EMD

14 November 2012

EMED Arranges a US$50 Million Funding Package with Cornerstone Customer

EMED Mining Public Limited ("EMED Mining" or the "Company"), the Europe-based minerals development and exploration company, is pleased to announce that the Company and two of its subsidiaries have entered into conditional agreements with a cornerstone customer, RK Mine Finance (Master) Fund II LP ("Red Kite"), for an aggregate funding package of US$50 million.

These arrangements comprise:

(i) an investment by Red Kite of US$15 million (approximately £9,447,000) in the Company by way of a subscription for a total of 63,829,787 new ordinary shares of 0.25 pence each ("Ordinary Shares") in two separate tranches at a price of 14.8 pence per share (equivalent approximately to US$0.235) (the "Subscription") which is a 52.6% premium over the VWAP (volume weighted average price) for the 20 trading days immediately prior to the signing of the Subscription Agreement (as defined below);

(ii) the entering into a commitment letter (the "Commitment Letter") by Red Kite to conditionally agree to underwrite or arrange a standby loan facility of US$35 million in connection with the restart of commercial production at the Rio Tinto Copper Project (the "Standby Loan Facility"); and

(iii) the granting to Red Kite of limited off-take rights over the Rio Tinto Copper Project's copper production based on current reported life of mine reserves from the planned initial operations (the "Off-take Rights").

Highlights of the transactions with Red Kite

·; The Subscription will be in two separate tranches with 50,000,000 Ordinary Shares being subscribed for in the first tranche and 13,829,787 in the second tranche. Both tranches will be conditional upon the approval by the Toronto Stock Exchange ("TSX") and admission to trading on AIM of the relevant tranche ("Admission"). The subscription for the Second Tranche Shares (as defined below) is also conditional upon approval by the shareholders of the Company (the "Shareholders") at the extraordinary general meeting of the Company to be held in December 2012 (the "EGM"). Notice convening the EGM will be despatched by the Company to Shareholders shortly.

·; The Standby Loan Facility is subject to the satisfaction of certain conditions including the parties negotiating and entering into definitive documentation for the facility and inter-creditor agreements on or before 31 December 2013 and the Company obtaining all consents required to give effect to the agreed security and ranking provisions.

·; The Company's subsidiary, EMED Marketing Limited ("EMED Marketing") has granted Red Kite Off-take Rights to purchase 27% of the copper production from the Rio Tinto Copper Project based on its current reported life of mine existing reserves. The granting of the Off-take Rights is conditional upon the first tranche of the Subscription (but not the second tranche) completing by 27 November 2012 (or such later date as the parties may agree). In the event that: (i) definitive documentation in respect of the Standby Loan Facility is not entered into by 31 December 2013; (ii) the Company notifies Red Kite that it no longer requires the Standby Loan Facility; or (iii) following execution of definitive documentation for the Standby Loan Facility, Red Kite fails to make an advance in accordance with the terms of such documentation, Red Kite's entitlement automatically reduces from 27% to 13.5% of the copper production. The Off-take Rights have been structured such that copper concentrate produced at the Rio Tinto Copper Project is to be purchased by Red Kite at future market based prices.

·; Red Kite is a major international commodities group and will complement the Company's existing strong shareholder base dominated by European, North American and Australian global mining investment institutions, to support the Company's long term plans for production and development at the Rio Tinto Copper Project, starting with redevelopment of the current reserves at the Cerro Colorado Open Pit.

Further information on the transactions with Red Kite and the related agreements between the parties are set out below.

Background to and reasons for the arrangements with Red Kite

The above arrangements with Red Kite, together with the arrangements announced on 6 February 2012 with Yanggu Xiangguang Copper Co. Ltd ("XGC"), another cornerstone customer, serve a number of EMED Mining's goals. The arrangements:

·; provide additional financing for the Rio Tinto Copper Project: various financial commitments are being assembled as the Rio Tinto Copper Project develops and its capital requirements are refined. The Company has invested approximately US$100 million over the past five years in order to consolidate the ownership of all the relevant land, settle the legacy obligations and prepare the feasibility studies for the restart of commercial production. The arrangements with Goldman Sachs, XGC and Red Kite (subject in each case to entering into definitive documentation) provide the Company with potential debt financing capacity for a further US$225 million;

·; mitigate the initial product marketing risk: the Company has commitments from both XGC and Red Kite to purchase, in aggregate, between 43.5%-57% of the concentrate production (30.0% to XGC and 13.5%-27% to Red Kite) based on the current reported life of mine reserves of the first planned mine - the Cerro Colorado Open Pit. The Company has also received expressions of interest from European smelters for the remainder of the unallocated production;

·; mitigate the financing risk during the start-up phase: the proposed provision by Red Kite and XGC of standby debt facilities of, in aggregate, US$50 million will safeguard the Company in the event that the funds to be provided under the Senior Debt Facility (as defined below) are insufficient to fund the restart of commercial operations at the first mine within the Rio Tinto Copper Project;

·; support and facilitate the provision of the Senior Debt Facility: as announced on 5 March 2012, the Company has mandated Goldman Sachs to provide a senior debt facility of up to US$175 million, which is proposed to be structured as a prepaid forward sale of copper (the "Senior Debt Facility"). The copper required by Goldman Sachs could be supplied by either XGC and/or Red Kite. Goldman Sachs would provide the Company with an up-front payment of up to US$175 million in exchange for the copper, which is to be delivered in accordance with an agreed schedule over seven years, at forward market prices prevailing at the time of drawdown; and

·; benefit and support the local community: the freight arrangements provided for in the off-take agreements with XGC recognise that it is likely that the concentrate product would be smelted within Europe, and in particular, in Spain.

EMED Mining continues working towards obtaining, during this quarter, the requisite initial governmental approvals of the Rio Tinto Project's first modern mine, which is planned to be redeveloped in 2013 at the Cerro Colorado Open Pit. The Company is currently working closely with:

·; the regulatory authorities of the Andalucian Government, for their approval of the Administrative Standing of the Company's mineral rights along with conditional approvals of the environmental plans and clarification of conditions applicable to the project and bonding; and

·; Goldman Sachs, the proposed provider of the Senior Debt Facility, for its approval of detailed legal documentation and expenditure estimates, schedules and production plans.

Harry Anagnostaras-Adams, the Managing Director of EMED Mining said: "The arrangements with globally important copper-sector specialists Red Kite and XGC form an important component of EMED Mining's support for long term development at the Rio Tinto Copper Project. In essence, we have now allocated in the order of half the initial production levels only from our first planned mine to cornerstone customers who have committed to supporting our long term mission with attractive financing terms.

"EMED Mining has assembled a first-class group of customers, shareholders and financiers to support our pre-eminent team of project managers, specialist advisers and suppliers. Our focus will soon turn to recruitment and training of production supervisors and operators."

Enquiries

Canaccord Genuity Corp. acted as financial intermediary to EMED Mining in respect to the conditional agreements with Red Kite.

About RK Mine Finance

RK Mine Finance provides mining companies with project financing and metal off-take agreements for initiation or expansion of mine production and is part of the Red Kite group. Red Kite operates across the global metals industry from offices in Bermuda, Denver, Hong Kong, London, New York, Shanghai and Sydney. Investors in Red Kite funds include college endowments, foundations, family offices, pensions and other institutional investors.

Further information on the arrangements with Red Kite

Subscription

The Company and Red Kite have entered into a subscription agreement (the "Subscription Agreement") pursuant to which Red Kite has conditionally agreed to subscribe for, in aggregate, 63,829,787 new Ordinary Shares (the "Subscription Shares") at 14.8 pence (equivalent approximately to US$0.235) per Subscription Share, representing a 52.6% premium over the VWAP of the Ordinary Shares on AIM for the 20 consecutive trading days prior to the execution of the Subscription Agreement. The proceeds of the Subscription will be used for the development of the Rio Tinto Copper Project and general working capital requirements.

The Subscription will take place in two separate tranches. Application has been made for admission of 50,000,000 new Ordinary Shares (the "First Tranche Shares") to trading on AIM and Admission of such shares is expected to take place on 19 November 2012. TSX conditional approval to the Subscription has already been received by the Company. The First Tranche Shares will be issued pursuant to an existing authority to issue Ordinary Shares approved by the Shareholders at the previous annual general meeting of the Company. The remaining 13,829,787 Ordinary Shares (the "Second Tranche Shares") will be issued subject to the approval of Shareholders at the EGM. The Company will publish a circular in due course containing a notice of meeting convening the EGM at 10.00 a.m. (Spanish time) on 19 December 2012 at the Rio Tinto Mine, La Dehesa s/n, Minas de Rio Tinto, 21660 Huelva, Spain in order to seek such approval and will make a further announcement following its publication.

The issue of the Subscription Shares pursuant to the Subscription Agreement is subject to a number of other conditions including the warranties made by the Company under the Subscription Agreement remaining true and correct and Admission. These conditions are required to be satisfied (or where possible, waived) in respect of the First Tranche Shares on or before 27 November 2012 and in respect of the Second Tranche Shares on or before 7 January 2013 (such dates being the "Long Stop Date" in respect of the relevant tranche of shares). The parties may terminate the Subscription Agreement prior to and in respect of the completion of a tranche of shares which has yet to be allotted if the conditions in respect of such tranche are not satisfied by the relevant Long Stop Date. Red Kite may also terminate the Subscription Agreement prior to and in respect of the completion of a tranche of shares which has yet to be allotted where there is a material adverse effect concerning the Group. Termination of the Subscription Agreement will not affect the valid allotment of any shares which have been allotted prior to the date of termination.

Upon completion of the Subscription, Red Kite will hold approximately 5.4% of the issued capital of the Company (as enlarged by the Subscription) and approximately 5.1% of the fully-diluted share capital of the Company (as enlarged by the Subscription Shares). For so long as Red Kite has a beneficial interest in Ordinary Shares equal to or greater than 4% (after Admission of the First Tranche Shares has occurred) or equal to or greater than 5% (after Admission of the Second Tranche Shares has occurred) of the total issued share capital of the Company from time to time (excluding any shares issued pursuant to Exempt Issuances (as defined below)), Red Kite shall: (i) have a pre-emptive right to participate on a pro-rata basis on all further issuances of Ordinary Shares or securities convertible into Ordinary Shares by the Company (subject to certain exceptions such as the issuance of shares in connection with compensation arrangements, stock options and convertible securities outstanding as at the time of completion of the Subscription and issuances of shares for non-cash consideration ("Exempt Issuances"); and (ii) have the right to nominate an individual to attend meetings of the board of directors on an observer-basis only.

Red Kite has also agreed not to dispose of any interest in the Subscription Shares for a period of six months following completion of the Subscription, save in certain limited circumstances.

Standby Loan Facility

EMED Mining and Red Kite have entered into the Commitment Letter containing the indicative terms for a US$35 million Standby Loan Facility which, subject to certain conditions and the entry into definitive documents, will be made available to the Company by Red Kite in connection with the restart of operations at the Rio Tinto Copper Project. The obligations of Red Kite under the Commitment Letter are subject to certain conditions, including Admission of the First Tranche Shares by the relevant Long Stop Date, execution of definitive legal documents in respect of the Standby Loan Facility in a form satisfactory to the Company and Red Kite and compliance by the Company with the terms of the Commitment Letter. The Commitment Letter will terminate if the parties have not entered into definitive legal documents in respect of the Standby Loan Facility by 31 December 2013.

Pursuant to the terms of the Commitment Letter, repayments and the ranking of security under the Standby Loan Facility will be subordinate to the Senior Debt Facility and any hedging arrangements which are negotiated in connection with the Senior Debt Facility and will rank pari passu with the standby loan facility to be provided by XGC.

It is intended that EMED Mining may drawdown under the Standby Loan Facility in the event that the Senior Debt Facility is not sufficient to meet all or any costs directly associated with bringing the Rio Tinto Copper Project to completion and to be available concurrently with the drawdown of the Senior Debt facility.

Off-take Agreement

EMED Marketing, the Company, EMED Tartessus S.L.U. and Red Kite have also entered into an off-take agreement (the "Off-take Agreement") pursuant to which Red Kite will be entitled to purchase 27% of the copper production from the Rio Tinto Copper Project based on its current reported life of mine existing reserves as set forth in the Behre Dolbear Amended and Restated NI 43-101 Independent Technical Report dated 17 November 2010, a copy of which is available at www.emed-mining.com or under the Company's profile on SEDAR at www.sedar.com.

The Offtake Agreement is conditional upon Admission of the First Tranche Shares (but not the Second Tranche Shares) becoming effective on or before the relevant Long Stop Date, being 27 November 2012 (or such later date as the parties may agree).

Red Kite's entitlement under the Off-take Agreement automatically reduces from 27% to 13.5% in the event that: (i) definitive documentation in respect of the Standby Loan Facility is not entered into on mutually acceptable terms on or before 31 December 2013; (ii) the Company notifies Red Kite prior to entering into definitive documents that it no longer requires the Standby Loan Facility; or (iii) following execution of definitive documentation for the Standby Loan Facility, Red Kite fails to make an advance in accordance with the terms of such documents.

EMED Marketing may terminate the Off-take Agreement in certain circumstances including: (i) an unremedied material breach by Red Kite of any of its obligations under the Off-take Agreement; (ii) a failure by Red Kite to make a payment when due and payable under the Off-take Agreement within five business days of its due date; and (iii) upon the occurrence of an insolvency event of Red Kite.

Cautionary Notes

This announcement contains "forward looking information" which may include, but is not limited to, statements with respect to the completion of the Subscription, the use of proceeds, shareholder approval in respect of the issuance of the Second Tranche Shares, TSX approval of the transactions, admission of the Subscription Shares to trading on AIM, the execution of definitive documentation in respect of the Standby Loan Facility and the ability of the Company to fulfill its obligations under the Off-take Agreement. "Forward looking information" may also include statements with respect to the future financial or operating performance of the Company, its subsidiaries and its projects, the future price of metals, the estimation of ore reserves and resources, the conversion of estimated resources into reserves, the realisation of ore reserve estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of the development of new deposits, costs and timing of future exploration, requirements for additional capital, government regulation of mining operations, environmental risks, reclamation expenses, title disputes or claims, limitations of insurance coverage and the timing and possible outcome of pending litigation and regulatory matters. Often, but not always, forward looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations (including negative variations) of such words and phrases, or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Accordingly, readers should not place undue reliance on forward looking statements.

Forward looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current exploration activities; actual results of reclamation activities; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of metals; the future costs of capital to the Company; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, terrorist attacks, insurrection or war; delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed in the section entitled "Risk Factors" in the Company's annual information form.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward looking statements contained herein are made as of the date of this announcement and the Company disclaims any obligation to update any forward looking statements, whether as a result of new information, future events or results or otherwise. There can be no assurance that forward looking 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