Falco Enters Into Agreements With Glencore
Falco Resources Ltd. (TSX.V: FPC) (“Falco” or the “Corporation”) is pleased to announce that it has entered into agreements with Glencore Canada Corporation and its affiliated companies (“Glencore”) related to its flagship Horne 5 Project, located in Rouyn-Noranda, Québec. The agreements include a $10 million senior secured convertible debenture (the “Convertible Debenture”) bridge financing to fund the continued advancement of the Horne 5 Project and life of mine copper and zinc concentrate offtake agreements (the “Offtake Agreements”) .
Luc Lessard, President and Chief Executive Officer of Falco
noted: “The Horne 5 Project will benefit from Glencore’s renowned expertise in
processing base metal concentrates and metals marketing. The processing of
Horne 5 copper concentrate at Glencore’s Horne Smelter will also add to the
local economic benefits generated by the Horne 5 Project. The bridge financing
provided by Glencore clearly supports the advancement of the work plan in order
to continue to reduce risks, resolve challenges and identify additional
synergies, all with the goal of working towards a Principal Operating License
and Indemnity Agreement and commencing dewatering. The concentrate agreements,
the potential equity ownership, and the 2% net smelter return royalty interest
held indirectly through BaseCore LLP provide strong alignment between Glencore
and Falco, along with our other major partners.”
Marc Bédard, Glencore Global Head of Copper Metallurgical
Operations, stated: “We are pleased to enter into these agreements in order to
further align our interests with Falco. While there remains significant work to
be done and challenges to be addressed, Glencore Canada is committed to working
with all stakeholders towards creating the winning conditions necessary for the
further development of the Horne 5 Project and of the fully integrated copper
industry in Quebec, an industry vital to the transition towards the
electrification of transportation.”
Convertible Debenture Financing
Glencore has agreed to underwrite a $10 million Senior
Secured Convertible Debenture bridge financing to fund on-going Horne 5 Project
operations. Funds will be used primarily for technical work, studies and
modelling necessary to continue to reduce project risks (including risks to
Glencore’s Horne Smelter), resolve technical and other challenges and identify
additional synergies, all with a goal of working towards a principal operating
license and indemnity agreement between Falco and Glencore.
The Convertible Debenture has an initial term to maturity of
12 months (the “Maturity Date”) and will bear interest at a rate of 7% per
annum, compounded quarterly. Accrued interest will be capitalized quarterly by
adding the interest to the principal of the Convertible Debenture, unless the
Corporation elects at its sole discretion to settle in cash any accrued
interest. To the extent that Falco and Glencore agree that progress continues
to be made towards the negotiation of a Principal Operating License and Indemnity
Agreement and additional time is necessary, Falco has the right to extend the
Maturity Date by an additional six months.
The Convertible Debenture can be converted into common
shares (the “Shares”) of the Corporation within 10 days of the Maturity Date or
on the Maturity Date at Glencore’s sole option at a conversion price of $0.41
per Share. The Convertible Debenture (and the Shares the Convertible Debenture
may be converted into) are subject to a hold period of four months from the
date of issuance of the Convertible Debenture, expiring on February 27, 2021,
in accordance with applicable Canadian securities laws.
Falco also issued to Glencore on the date hereof 12,195,122
common share purchase warrants of the Corporation. Each warrant shall be exercisable
for one Share at an exercise price of $0.51 up to 12 months from the date of
issuance of the warrants. The terms of the warrants provide for a cashless
exercise feature, under which the number of Shares to be issued will be based
on the number of Shares for which warrants are exercised multiplied by the
difference between the market price of a common Share and the exercise price
divided by the market price at the time of the exercise. Glencore may utilize
the cashless exercise feature in its sole discretion. The warrants (and the
underlying Shares) are subject to a hold period of four months from the date of
issuance of the warrants, expiring on February 27, 2021, in accordance with
applicable Canadian securities laws.
The Convertible Debenture will be secured by first ranking
security on all assets owned by Falco. Glencore will release the security upon
the settlement of the Convertible Debenture and the repayment of interest.
So long as Glencore owns (or is deemed to own) a minimum
equity interest of 5% in the Corporation, it will have the right to maintain
its pro-rata interest in Falco by participating in equity financings and other
dilutive instruments.
Offtake Agreements
Under the terms of the Offtake Agreements, Glencore will
purchase from Falco the copper and zinc concentrate produced during the life of
mine of the Horne 5 Project, which is currently estimated at 15 years. Terms
were negotiated on an arms’ length basis and are comparable to the assumptions
included in Falco’s October 5, 2017 Feasibility Study.
The copper concentrate will be processed at Glencore’s Horne
Smelter located adjacent to the Horne 5 Project.
Upcoming Work Plan
In order to further investigate and mitigate geotechnical
and other technical risks, and to identify additional synergies, Falco has
collaborated with Glencore to develop a work plan for additional geotechnical
work and analysis of the risks associated with the development of the Horne 5
Project (“Work Plan”). Falco and Glencore have agreed to a detailed Work Plan,
to be managed by Falco, which will include additional technical work, modelling
and studies towards the further identification, mitigation and allocation of
risks, all with the goal of working towards a Principal Operating License and
Indemnity Agreement.
Management is currently updating the project financials,
economic analysis, and the timeline of the Horne 5 Project development.
Falco will continue its efforts to complete the necessary
work to respond to the Government inquiries on the initial filing of the
Environmental Impact Study, and to initiate the public consultation process
(BAPE hearings) in mid-to-late 2021.
The Corporation will also be working with its financial
advisors to secure the necessary financing to fund the Horne 5 development.
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