RE: RE: RE: How Negotiations Went The following press release was sent to me today from AXI and corresponds to information provided the media. Please note the points raised:
TORONTO, ONTARIO--(Marketwire - Aug. 21, 2012) - Advanced Explorations Inc. ("AEI" or the "Company") is pleased to announce that it has entered into an agreement with XinXing Ductile Iron Pipes Co., Ltd. ("XDIP") for the further exploration and development of the Company's Tuktu 2 project (the "Agreement"). Under the Agreement, XDIP will have the right to earn 50% of AEI's interest in the Tuktu 2 project by providing investments totalling $20,000,000 in three stages, with an initial $5,000,000 payment to AEI secured by a two-year, non-interest bearing convertible debenture.
The important point stated is that XDIP will have the right to earn, it does not say XDIP will get 50% interest.
AEI will use these funds to initiate a drill program on Tuktu 2 sufficient to investigate its direct-ship ore ("DSO") potential. Should the results of the program warrant further exploration, XDIP has agreed to make additional future investments of $5 million and $10 million toward the Tuktu 2 project. The Tuktu 2 exploration work will focus on further delineating the scope and scale of any DSO resources, with the ultimate goal of completing a Tuktu 2 feasibility study. Under the Agreement, upon completion of XDIP's investment commitments and upon review of the advancement of a Tuktu 2 feasibility study, the Agreement contemplates the formation of a joint venture for the specific purpose of developing the potential Tuktu 2 iron ore asset ("Tuktu DSO JV").
John Gingerich, president & CEO, commented:
"The Tuktu 2 agreement provides the opportunity to fast track exploration and rapidly assess the project's economic potential and if warranted, move quickly towards a development scenario that could then be aligned with the development of the Roche Bay iron project south of Tuktu. Our Roche Bay agreement with XDIP does not include the Tuktu area, and this Agreement provides an important step to an integrated vision. We are very pleased that our partner shares our vision of a broader regional development scenario."
Additional terms of the agreement are as follows:
- AEI will grant XDIP preferred off-take rights in proportion to their earned interest in the Tuktu DSO JV.
- Although this Agreement contemplates a 50:50 joint venture, the proportionate interest of the parties in the Tuktu DSO JV entity is subject to adjustment based on identified minimum resource thresholds (measured and indicated). If upon completing a feasibility study the reserve base is less than 35 million tonnes of DSO then XDIP will acquire an additional 10% interest (60% in aggregate); however, if the reserve base exceeds 45 million tonnes of DSO then XDIP's earn-in will be limited to a 40% interest in the joint venture entity.
- The first $5,000,000 investment will be immediately secured by a two-year, non-interest bearing convertible debenture as issued by the Company to XDIP. Such a debenture will be convertible either directly into common shares in the capital of the Company up to a maximum shareholdings by XDIP of 19%, or convertible into shares of the Tuktu DSO JV relative to the minimum resource threshold as specified above. The debenture will be convertible into shares of the Company with the conversion price being the greater of either: (a) a 10% discount of the weighted average trading price of the ten days before and after XDIP submitting their intent to convert, or (b) the amount equal to
.25 per share.
AEI's current Tuktu 1 deposit, which is comprised of 465 million tonnes of iron ore at 31.1% iron in the inferred category, as well as all other claims included in the Tuktu Project area may be the subject of further discussions between the parties at formation of the Tuktu DSO JV but are currently not part of this agreement.
The Agreement has been approved by the boards of both parties but is subject to approval by the TSX Venture Exchange.