Formation Metals Secures Letter of Credit to Support Low Interest Bonds for Idaho Cobalt Project Construction
Vancouver, B.C., November 22, 2011 Formation Metals Inc. (FCO-TSX) ("Formation" or "the Company") announced today that it has secured a Letter of Credit in support of US$43.6 million of the US$77.7 million in proceeds the Company previously raised from the sale of Federal Stimulus Program Recovery Zone Facility Bonds (the "Bonds") (see news release dated December 31, 2010). The US$77.7 million has been held in trust in the Company's Idaho Cobalt Project ("ICP") construction account pending a letter of credit supporting the Bonds.
With the Letter of Credit in place approximately US$43.6 million can now be withdrawn from the construction account and used to reimburse Formation for certain construction expenditures at its 100% owned ICP. To date, Formation has approximately US$19.3 million in ICP construction expenditures that have been withdrawn from the construction account to replenish the Company's treasury. As the Company advances construction on the ICP and incurs additional expenditures, further withdrawals can be made from the construction account.
The Letter of Credit, provided by BMO Bank of Montreal, was secured with the Company's cash on hand. The balance of US$34.1 million from the initial US$77.7 million in Bonds remains in trust. This preserves 100% of the Bond debt financing. In the longer term, in lieu of cash security, the Company intends to use the Idaho Cobalt Project to secure a letter of credit for the full US$77.7 million.
The Boards of Directors of the Bonds' issuers, The Industrial Development Corporation of Lemhi County, and The Industrial Development Corporation of Shoshone County, Idaho, both met in special sessions late last week to approve the Amended and Restated Indentures of Trust which authorized this modified bond structure.
"This is not bank debt - this is bond debt" stated Mari-Ann Green, C.E.O. of Formation Metals Inc. She continued, "Therefore, including the interest on the letter of credit, the debt carries a floating interest rate which is currently less than 60 basis points. The bonds mature in 28 years and there is no obligation to repay the principal until maturity. In addition, they can be redeemed by the Company at par at any time."
The 100% owned Idaho Cobalt Project is a unique, fully permitted, primary cobalt deposit under construction that will be capable of producing high purity cobalt metal. Cobalt is used in a wide variety of environmental and high-tech applications that include the re-chargeable battery and aero-space sectors.
Formation Metals Inc. is dedicated to the principles of environmentally sound mining and refining practices, and believes that environmental stewardship and mining can co-exist. Formation trades on the Toronto Stock Exchange under the symbol FCO.
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