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NORTHERN GRAPHITE CLOSES ACUISITION OF TWO GRAPHITE MINES
FINACING SUMMARY
The acquisition was funded through a combination of equity, debt and the sale of a royalty and stream on the assets being acquired, and issuing securities of the Company to Imerys as partial payment for the acquisition.
The Company has obtained a senior secured loan from Sprott in the amount of US$12 million, made at a 2% discount, which matures in 48 months. The loan bears interest at 9% plus the greater of the three month SOFR or 1%. At Northern's option, interest payable during the initial 12 months can be capitalized and added to the principal. As partial consideration for providing the loan, the Company has issued 4,800,000 warrants to Sprott, each of which is exercisable to purchase one common share of Northern at an exercise price of CDN$1.01 for a period of two years. The warrants and underlying common shares are subject to four month resale restrictions under Canadian securities laws expiring on August 30, 2022.
A 9% royalty on graphite concentrate sales revenue from LDI has been granted to Sprott for gross proceeds of US$4 million. As partial consideration for purchasing the royalty, the Company has issued 1,200,000 warrants to Sprott, each of which is exercisable to purchase one common share of Northern at an exercise price of CDN$1.01 for a period of two years. Sprott has also been granted a right of first refusal with respect to any proposed grant of a stream, royalty or similar transaction on the Company's Bissett Creek project. The warrants and underlying common shares are subject to four month resale restrictions under Canadian securities laws expiring on August 30, 2022.
In exchange for an upfront deposit of US$20 million, the Company has entered into a commodity purchase (stream) agreement with Sprott for 11.25% of the graphite produced by the Namibian project until 350,000 tonnes of contained graphite in concentrate have been produced and delivered, at which time, at the option of Sprott, the stream may convert into a 1% royalty for the remaining life of the Okanjande deposit. The stream is secured by the same security package as the secured loan. Sprott has also been granted a right of first refusal with respect to any proposed grant of a stream, royalty or similar transaction on the Okanjande deposit. As partial consideration for entering into the stream, the Company has issued 4,500,000 warrants to Sprott, each of which is exercisable to purchase one common share of Northern at an exercise price of CDN$1.01 for a period of two years. The warrants and underlying common shares are subject to four month resale restrictions under Canadian securities laws expiring on August 30, 2022. The Company will have the option, subject to any consents or approvals required under the secured loan, to reduce the stream percentage by up to 50% upon payment of US$15.25 million in 2024 or US$17.5 million in 2025. This option will be exercisable in whole or in part on a pro rata basis.
The Company also completed a brokered private placement of 30,762,500 subscription receipts issued at a price of CDN$0.75 for gross proceeds of approximately CDN$23.1 million through a syndicate of agents led by Sprott Capital Partners LP. In addition to the previously announced initial closing of the private placement (February 10, 2022) in which the Company issued 25,762,500 subscription receipts for gross proceeds of approximately CDN$19.3 million, the Company completed a final closing of the private placement on April 27, 2022 in which Sprott purchased 5,000,000 subscription receipts for gross proceeds of CDN$3.75 million. With the closing of the LDI and Okanjande acquisitions, each subscription receipt automatically converted into one unit of Northern, with each unit being comprised of one common share and one-half of one share purchase warrant of Northern. Each whole warrant is exercisable to purchase one common share of Northern at an exercise price of CDN$1.10 per Common Share for a period of 24 months. The common shares, warrants and common shares issuable on exercise of the warrants are subject to four month resale restrictions under Canadian securities laws expiring on June 11, 2022 in respect of securities issued in connection with the first closing of the private placement and August 28, 2022 with respect to the second private placement.
In connection with the final closing of the private placement, the agents received a cash fee from the Company equal to 6% of the aggregate gross proceeds of the closing and a number of compensation warrants equal to 6% of the number of subscription receipts issued under the closing. Each agent's warrant is exercisable for one common share at an exercise price of CND$0.75 per share for a period of two years. The private placement remains subject to the final approval of the TSX Venture Exchange. A finder's fee is payable in connection with the acquisition to an arm's length investment advisory firm based in London, United Kingdom, in the amount of 1.5% of the acquisition cost.