VANCOUVER, BRITISH COLUMBIA–(Marketwired – April 2, 2014) – Baja Mining
Corp. (the “Company” or “Baja”) (TSX VENTURE:BAJ)(OTCQB:BAJFF) announces that it
is joining Korea Resources Corporation (“KORES”) and the other members of the
Korean Consortium in converting all of the outstanding shareholder loans of
Minera y Metalúrgica del Boleo S.A. P.I. de CV. (“MMB”) into equity of MMB (the
“Conversion”). The Conversion is intended to assist MMB in obtaining further
financing for the Boleo Project and in its efforts to restructure its existing
project financing. Baja and KORES have also agreed in principle on certain terms
to be included in a new MMB shareholders agreement (the “New Shareholders
Agreement”) proposed to replace the current MMB shareholders agreement (the
“2010 Shareholders Agreement”).
The Conversion
Pursuant to the Conversion:
-- Baja has agreed to convert its US$94 million of shareholder loans into
MMB equity and the restructure of the accrued and unpaid interest on such
loans amounting to US$28 million into a separate promissory note with an
interest rate of 4% per annum;
-- KORES and the other members of the Korean Consortium have also agreed to
the Conversion in respect of their shareholder loans and the restructure
of the accrued and unpaid interest; and
-- In connection with the Conversion, KORES has agreed that the interest
rate applicable to the KORES-MMB loan facility of US$419 million, which
replaced the US EXIM facility novated and assumed by KORES in November
2012, is reduced from 13% to 4% per annum effective from December 31,
2013. Agreement regarding New Shareholders Agreement
The Company is pleased to announce that it has agreed in principal with KORES
on certain terms to be included in the proposed New Shareholders Agreement.
Manganese production decision and payments:
Under the 2008 Share Purchase Agreement between Baja and Korean Consortium,
Baja is required to repay a US$10 million purchase consideration deposit to the
Korean Consortium if a decision is made not to produce manganese at the Boleo
Project by the final economic completion date (the “Manganese Decision Date”).
The Korean Consortium is required to pay Baja US$13 million if a decision is
made to produce manganese at the Boleo Project by the Manganese Decision Date.
No decision respecting the production of manganese is expected to be made by the
Manganese Decision Date in accordance with the process outlined in the2008 Share
Purchase Agreement.
Baja and KORES have agreed that the New Shareholders Agreement will provide
once the Boleo Project has started paying cash dividends and the MMB board has
decided in good faith not to proceed with the development of manganese at the
Boleo Project, Baja will pay the Korean Consortium the US$10 million out of cash
flows paid to Baja from the Boleo Project. This defers the possibility of Baja
having to make this payment and ensures that it will have the funds it will need
to make the refund payment if it is required. If the MMB board decides in good
faith to proceed with the development of manganese at the Boleo Project, the
Korean Consortium will pay Baja the US$13 million out of cash flows paid to the
Korean Consortium from the Boleo Project.
Distribution policy:
Baja and KORES have agreed in principle to include in the New Shareholders
Agreement a distribution policy that excess cash flows from the Boleo Project
will be distributed to MMB’s shareholders after certain priority debt service
and principal repayments have been made.
Future cash calls:
Baja is not required to make any equity contribution unless the total Boleo
Project funding cost is greater than US$1,751,190,000. Baja and KORES have
agreed that the New Shareholders Agreement will provide that:
-- If Baja is asked to make a contribution pursuant to a future cash call in
connection with new funding greater than US$1,751,190,000 and Baja does
not make its proportionate contribution, the non-defaulting MMB
shareholders will have the right to contribute on behalf of Baja. If the
contribution is made by way of loan, the non-defaulting shareholder who
lends instead of Baja may convert such loan into MMB equity and Baja will
be diluted based on a dilution formula agreed between KORES and Baja;
-- For illustrative purposes, if there is a US$100 million cash call funded
entirely by equity contributions, should Baja not contribute in
proportion to its current 10% shareholding in MMB, Baja's 10% interest
would be diluted to approximately 8.9%;
-- In respect of a cash call where some portion of the cash call
attributable to other MMB shareholders is satisfied by a loan rather than
an equity contribution to MMB, the specifics of dilution remain under
discussion, but in any event will be no more severe to Baja than that for
an all equity cash call. Despite having reached agreement with KORES on the above points, a variety of
other issues remain to be agreed in the New Shareholders Agreement. The Company
expects to continue to negotiate these remaining terms with KORES. The agreement
of the Korean Consortium is also required for any amendments to the 2008 Share
Purchase Agreement and the 2010 Shareholders Agreement in addition to the
agreement of KORES. Baja will provide an update on the status of the New
Shareholders Agreement in due course.
CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS: This press release
contains forward-looking statements or forward-looking information
(forward-looking statements). These statements can be identified by expressions
of belief, expectation or intention, as well as those statements that are not
historical fact. Forward-looking statements involve a number of risks,
uncertainties and assumptions that could cause actual results or events to
differ materially from those expressed or implied by the forward-looking
statements. Forward-looking statements contained in this press release are based
on our current estimates, expectations and projections, which the Company
believes are reasonable as of the current date. Actual results could differ
materially from those anticipated or implied in the forward-looking statements
and as a result undue reliance should not be placed on them. Additional risks
and uncertainties can be found in the Company’s reporting documents filed on
SEDAR (www.sedar.com), including its Management Discussion and Analysis and
Annual Information Form. Forward-looking statements are given only as at the
date of this news release and the Company disclaims any obligation to update or
revise the forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Baja Mining Corp.
Tom Ogryzlo
Interim CEO
604-685-2323
www.bajamining.com
