The key commercial terms of the facility are as follows:
maturity date of August 30, 2014;
interest rate of one month US dollar LIBOR Rate in effect plus 11% margin per annum;
commitment fee of 35% of interest rate payable quarterly in arrears on undrawn principal amount of facility;
front end fee of $100,000;
draws subject to customary closing conditions and the Company’s cash requirements in the ordinary course of business;
facility is subject to certain mandatory prepayment and termination provisions; and
the Company to continue to seek other funding alternatives.
Advances made under the facility will be used by the Company to fund operations and meet its ongoing obligations and future contractual commitments.
As Turquoise Hill owns approximately 56% of the Company’s outstanding common shares, its agreement to provide the facility is a related party transaction under applicable Canadian securities laws. The facility is exempt from the formal valuation and minority approval provisions of such laws.
As of May 23, 2014 the Company had cash of $2.8 million following the payment of approximately $7.9 million of interest to China Investment Corporation ("CIC") under CIC’s $250 million convertible debenture. The shareholder loan facility has been structured as permitted debt in compliance with the provisions of the CIC convertible debenture requirements.
Notwithstanding the provision of the $10 million shareholder loan facility, the Company continues to experience negative impacts on its margins and liquidity and there can be no assurance that the Company will have sufficient funding for the balance of 2014 to be able to continue as a going concern, as more fully detailed in its Management’s Discussion and Analysis for the quarter ended March 31, 2014, available on SEDAR at www.sedar.com, and, in particular, section 5 "Liquidity and Capital Resources" and section 11 "Risk Factors" thereof.
Therefore the Company is actively seeking additional sources of financing to continue operating and meet its objectives, while continuing to be focused on minimizing uncommitted capital expenditures while preserving the Company’s growth options.
