Oracle Mining closes placement with MF2

2012-11-21 17:09 PT - News Release


Mr. Paul Eagland reports


Oracle Mining Corp. has completed a private placement of 9.8 million units of the company with MF2 Investment Co. 1 LP, an affiliate of RK Mine Finance (Master) Fund II LP (RKMF). Each unit consists of one common share of the company and one-half one common share purchase warrant at a subscription price of 85 cents per unit. Each warrant entitles MF2 to acquire a common share at a price of $1.02 per common share for a period of 36 months from the date of issue.

In connection with the private placement, the company, Oracle Ridge Mining LLC, a wholly owned subsidiary of the company, and MF2 amended the previously announced investment agreement among the parties dated Nov. 2, 2012. Pursuant to the amended investment agreement, MF2 purchased the units pursuant to the private placement rather than as the lead order under the company's offering by way of short-form prospectus dated Nov. 9, 2012.

As a result of the private placement, MF2 has become an insider of the company, owning approximately 19.99 per cent of the issued and outstanding common shares. Based on the issued and outstanding common shares prior to giving effect to the private placement: (i) the 9.8 million common shares acquired by MF2 represented approximately 24.9 per cent of the common shares; (ii) the 4.9 million warrants, on exercise, represented approximately 12.5 per cent of the common shares; and (iii) on a postexercise basis, MF2's ownership would increase to 14.7 million common shares, which would have represented approximately 38 per cent of the common shares previously outstanding.

The Toronto Stock Exchange has conditionally approved the private placement, and the company expects to receive final acceptance from the TSX upon satisfaction of customary postclosing filing requirements. Pursuant to Section 604(d) of the TSX company manual, the company obtained written evidence from holders of more than 50 per cent of the common shares that they are in favour of the private placement because: (i) the private placement may result in the issuance of an excess of 25 per cent of the issued and outstanding common shares prior to giving effect to the private placement; and (ii) the maximum issuable securities represent approximately 27 per cent of the currently issued and outstanding common shares on a partially diluted basis on completion of the private placement, which, in accordance with the rules and policies of the TSX, could materially affect control of the company.

In accordance with the terms of the investment agreement, MF2 has also purchased a 3-per-cent net smelter return royalty (NSR) on the future sale of any metals and minerals derived from the Oracle Ridge copper mine in Arizona, United States, for a gross purchase price of $10-million (U.S.). These proceeds are being held in escrow pending the registration of certain documentation in connection with the NSR. In addition, Oracle Ridge and MF2 entered into an off-take agreement that provides that MF2 will purchase 100 per cent of the Oracle Ridge copper mine's future annual copper concentrate production for the life of the mine. The price payable for the material is to be based on prices set by the London Metal Exchange as published by the London Metal Bulletin.

Pursuant to the terms of the investment agreement, the company appointed Douglas Silver to the Oracle Mining board of directors as MF2's nominee.

"RKMF is a top-tier mining finance house, and we are pleased to have RKMF's support as an investor and concentrate buyer but also as a partner as we advance the Oracle Ridge copper mine," said Paul Eagland, Oracle Mining's chairman. "Oracle Mining appreciates the great efforts that have gone in to completing our transactions with RKMF, and gives a warm welcome to Mr. Douglas Silver as he joins the Oracle Mining board."

Oracle Mining shall use the net proceeds from the private placement and the sale of the NSR toward the continued development of its Oracle Ridge copper mine and for related working capital requirements.

All securities distributed pursuant to the private placement will be subject to a hold period of four months following closing in accordance with applicable Canadian securities laws and such other further restrictions as may apply under foreign securities laws. In accordance with the rules and policies of the TSX, the warrants are not exercisable until five business days after the date of this news release.

In accordance with the terms of the company's rights plan, the board has suspended the application thereof with respect to the private placement.

The company also announced that it intends to proceed with the prospectus offering depending upon market conditions. The prospectus offering is currently expected to close on or about Nov. 30, 2012.