Donner Metals Ltd.: Sandstorm Provides US$25 Million Senior Financing
VANCOUVER, BRITISH COLUMBIA -- (Marketwire) -- 07/13/11 -- Mr. David Patterson, Chairman of Donner Metals Ltd. (TSX VENTURE: DON)(FRANKFURT: D4M), reports that the Company has entered into a Metal Purchase Agreement with Sandstorm Metals & Energy Ltd. (TSX VENTURE: SND) ('Sandstorm,'). Under the terms of the Metal Purchase Agreement, Donner will receive an upfront purchase deposit from Sandstorm in the amount of US$17.75 million on a date expected to be on or before July 18, 2011 and a second purchase deposit of US$5 million, subject to certain Donner funding conditions, on or before June 30, 2012. In addition Sandstorm is subscribing for 6,200,000 common shares (approximately 4.0% post issuance) of Donner at a deemed price of CDN$0.35 per share, for gross proceeds of CDN$2,250,000.
The Metal Purchase Agreement provides for the sale of metal by Donner to Sandstorm equal to 17.5% of the copper and precious metals (gold and silver) from the Bracemac-McLeod mine. Donner will receive US$0.80 per pound of delivered copper if the spot price of copper per pound as quoted on the London Metal Exchange is above US$2.75 per pound, otherwise, the lesser of US$0.55 and the prevailing spot price of copper per pound. Once Sandstorm has purchased 14.8 million pounds of copper, Donner will receive US$1.05 per pound of delivered copper, if the spot price of copper per pound is above US$2.75 per pound, otherwise, the lesser of US$0.80 and the prevailing spot price of copper per pound. Donner will receive for gold or gold equivalent ounces the lesser of US$350 per ounce and the prevailing spot price for gold per ounce as quoted by the London Bullion Market Association.
Donner has the option for 24 months to purchase back from Sandstorm half of the metal to be sold to Sandstorm for US$17.5 million. Pursuant to the Metal Purchase Agreement, Donner has also agreed to issue to Sandstorm US $1.4 million worth of common shares on the date of the second purchase deposit.
The US$25 million received from Sandstorm will be used for the development of the Bracemac-McLeod mine (Donner Metals Ltd. 35% / Xstrata Canada Corporation 65%) in Matagami, Quebec. Development of the mine began in April 2010 and production into the nearby wholly-owned Xstrata mill is expected to begin in early 2013. The mine is expected to produce an average of 2,500 tonnes per day for four years on the basis of proven and probable mining reserves of 3.7 million tonnes grading 9.6% zinc, 1.3% copper, 28.3 g/t silver and 0.4 g/t gold. Potential to expand the mine life is possible on the basis of inferred mineral resources of 2.63 million tonnes at 8.8% zinc, 1.3% copper, 38.8 g/t silver, 1.1 g/t gold and excellent exploration potential immediately surrounding both mining reserves and mineral resources.
Mr. David Patterson, Chairman of Donner Metals, said, 'The metal purchase agreement presents Donner with a unique opportunity to finance the development of the Bracemac-McLeod mine in a way that is least dilutive to shareholders. Detailed comparisons of financing options consistently ranked the metal purchase agreement as the best available option.' Patterson also spoke about the ongoing development of the Bracemac-McLeod mine, saying, 'Rapid development continues and the underground ramp has now reached over 1,400 metres of lateral development; this rate of progress is a tribute to Xstrata's experienced development team.'
Mr. Nolan Watson, President & CEO of Sandstorm Metals & Energy, said, 'We see great potential in the Bracemac-McLeod mine and are excited that initial production is near-term.'
Euroscandic International Group ('Euroscandic') acted as Donner's advisor for the financing of the Bracemac-McLeod mine, and the decision to pursue the metal purchase agreement with Sandstorm. Euroscandic is an independent company specialized in the natural resources and raw materials sectors, offering investment banking and corporate advisory services.
The Metals Purchase Agreement and share issuances to Sandstorm are subject to the approval of the TSXV.
Additional information is available at www.donnermetals.com.
ON BEHALF OF THE BOARD OF DONNER METALS LTD.
David Patterson, Chairman
Cautionary Statement:
Certain phrases in this news release are 'forward-looking statements'. Forward-looking statements are identified by wording such as 'will' and 'is expected'. Such statements are applicable specifically to the possible future commencement of, and timing of commencement of, production from the Bracemac-McLeod Deposit. With respect to future production, and the commencement thereof, from the Bracemac-McLeod deposit, the forward looking statement using the wording 'is expected' is in the context of the feasibility study completed by Xstrata Canada Corporation - Xstrata Zinc Canada Division and Genivar Limited Partnership in 2010. 'Forward-looking statements' involve known and unknown risks, uncertainties and other factors, such as risks typical in the construction of a mine, Donner funding its share of the cost of the Bracemac-McLeod mine and negative changes to the forecast assumptions under the feasibility study, which may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Further discussion of 'forward looking statements' and 'future oriented financial information' and the risks inherent to mineral exploration and development, in relation to Donner's activities, can be found on the Company's website at www.donnermetals.com. The reader is cautioned not to place any undue reliance on any forward-looking statement.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this news release.
Contacts:
Donner Metals Ltd.
Andrea Magee
(604) 683-0564 or Toll Free: 1-800-909-8311
(604) 602-9311 (FAX)
donner@bed-rock.com
www.donnermetals.com