Liberty UpdateLiberty Provides Additional Details of Financial Transaction Page 1/8
FSC / Press Release
Liberty Provides Additional Details of Financial Transaction
Edmonton, Alberta CANADA, April 24, 2009 /FSC/ - Liberty Mines Inc. (LBE - TSX),
("Liberty or the Corporation") wishes to advise that further to its press
release dated April 14, 2009, wherein it announced that it has arranged a CDN$30
million equity financing with Jilin Jien Nickel Industry Co., Ltd. ("JJNICL") of
China, that the Company has also agreed to convert the existing debt in the
Corporation held by JJNICL into a convertible loan. As described in a press
release dated May 8, 2008, JJNICL had previously advanced US$15 million to the
Corporation as a prepayment for nickel in concentrate to be delivered to JJNICL.
This advance bears interest at the rate of 9.71% per annum. The loan will be
due two years following the closing of the private placement and can be repaid
in either cash or the delivery of nickel in concentrate. However, any amount of
the loan outstanding on the due date may be settled, at the option of JJNICL, in
consideration for the issuance of common shares priced at $0.11 per share. The
outstanding balance of the loan on April 30, 2009 will be approximately
US$15,826,534 million, including interest. In the unlikely event that no
payments are made on the loan in the next two years, the maximum liability would
be approximately US$18,315,360 million which, at a current exchange rate,
represents CDN$22,508,738. If this entire amount was converted at $0.11 per
share, the maximum number of shares issuable would be 204,624,895 shares. In
the unlikely event that no payments are made on the loan in the next two years,
the maximum liability would be approximately US$18,315,360 million which, at a
current exchange rate, represents CDN$22,508,738. If this entire amount was
converted at $0.11 per share, the maximum number of shares issuable would be
204,624,895 shares. If all of the preferred shares were converted, JJNICL would
own 76.8% of the common shares of the Corporation. In addition, if the maximum
number of shares issuable on the conversion of the loan were issued, JJNICL
would own 87.2%. The additional 477,352,168 common shares issued from a full
conversion and loan conversion would represent a 580% dilution of the currently
outstanding common shares.
However, the Company fully expects that the loan will be significantly reduced
if not repaid entirely prior to its due date and that the additional 204.6,
million shares will not be issued. The maximum dilution of the currently
outstanding common shares would then be 331%. As previously disclosed, there is
no insider component to this transaction. Upon closing of the transaction,
JJNICL will own 51% of the common shares of Liberty which represents a change of
control of the Corporation.
The redemption value of the preferred shares also needs to be restated. The
preferred shares are redeemable by the Corporation at any time at a price equal
to $0.11 per share plus accrued and unpaid dividends; payable in cash or nickel
in concentrate.
As announced on February 19, 2009, Liberty currently does not have sufficient
funds to meet its near term financial obligations. Furthermore, the Corporation
was cease traded for failing to file its financial statements by March 31, 2009
as a result of not being able to pay its audit fees. As a result of the
foregoing, the Company has applied to the TSX under the provisions of Section
604(e) of the TSX Company Manual for an exemption from its requirement for
shareholder approval for this transaction on the basis that the company is in
financial difficulty. The TSX has advised the Corporation that, as a result of
this application and in accordance with standard TSX procedures, it will review
the eligibility of the Corporation for continued listing on the TSX. Liberty
will also apply to the Alberta Securities Commission for a partial revocation of
the cease trade order to enable the securities part of the transaction to be
completed. The Corporation is confident that upon completion of the financing
described above, it will be in compliance with TSX's ongoing listing
requirements.
A Special Committee of independent directors of the Corporation was established
to review all financing opportunities and appointed an investment advisor as
described in the November 11, 2008 press release. Fourteen companies were
contacted by the investment advisor to try to obtain expressions of interest for
a financing, merger, sale or other business combination. Management worked since
July 2008 to try to arrange a financing through many financial firms throughout
North America and Europe. This was the only financing package obtained that
resolved the loan payout and payables owing described above; and which resolved
the prepayment for nickel in concentrate owing to JJNICL. The Special Committee
determined that the financing is reasonable under the circumstances and is
designed to improve the Corporation's financial situation.
After closing the transaction, Liberty will focus on completing the development
of the ramp to the lower level of the McWatters nickel mine as soon as is
feasible. During the approximate 3 months required to complete that development,
the third ball mill at the Redstone nickel concentrator is planned to be
commissioned which will enable up to 1800 tonnes per day of mineralization to be
concentrated.
In the September 30, 2008 MD&A, the recovery of nickel by flotation at the
Redstone concentrator of the McWatters upper disseminated mineralization was
reported from the initial bulk sampling program. During October 2008, the
floatation characteristics of the McWatters disseminated mineralization were
confirmed. Results from the Redstone concentrator indicated an 82% recovery
from a total bulk sample of 15,361 tonnes grading 0.51% nickel. The recovery was
actually skewed downward as a result of some talcy development material being
mistakenly mixed with the bulk sample. Generally, disseminated material
containing 0.5% to 0.6% nickel was floated with an outstanding 87.1% to 88%
recovery from the heazlewoodite mineralization unique to the McWatters deposit.
Tests were done with material grading 0.4% nickel and yielded a 78%-82%
recovery.
The 43-101 technical report dated December 16, 2008 for the McWatters deposit
shows the existence of an indicated resource of 1,703,289 tonnes grading 0.49%
nickel. Upon completion of the financing, a study will be underway to develop a
plan to mine up to an additional 1,000,000 tonnes of mineralization at
McWatters. A preliminary estimate and updated reserve calculation for the
McWatters mine will be completed as soon as possible to investigate that
scenario.