Colorado Goldfields says pleased with equity line; PolyMet receives $50 million investment from Glencore

By Kenneth Lim

Boston, Sept. 4 - Colorado Goldfields Inc. said its recently announced $5 million equity facility was a key piece of financing for the junior mining company.

Meanwhile, PolyMet Mining Corp. announced a placement of up to $50 million in convertibles to Glencore AG as part of a strategic alliance.

Colorado Goldfields pleased with deal

Colorado Goldfields said its new equity credit line provides important capital as the company carries out its business plan.

The company entered into a $5 million standby equity distribution agreement, under which an investor will purchase shares at the company's option over the next two years. The agreement was reached with Yorkville Advisors, LLC as the investment adviser to YA Global Investments, LP.

Colorado Goldfields can draw down the equity credit line in tranches of up to $250,000 at its option every five trading days, according to a company news release.

For each share of common stock purchased under the agreement, the purchase price will be 95% of the stock's lowest volume-weighted average price during the five consecutive trading days after the notice date.

Based in Lakewood, Colo., Colorado Goldfields is a junior exploration and mining company primarily exploring for gold and silver.

"It's very significant," Colorado Goldfield chief financial officer Stephen Guyer told Prospect News. "What it represents is our ability to execute fully and aggressively the business plan that we put together."

Guyer said the deal was initiated through his "personal networking with people and personal introductions." Yorkville has also provided similar facilities to other companies in the natural resources sector, including Fortescue Metals Group in Australia, United Fiber Systems in Singapore and Petra Diamonds in London.

Colorado Goldfields chose to raise capital through the equity line because it was "optimal," Guyer said.

"Answering the why question is tough, and part of that is answered by the market itself," he said. "There are times and generally conditions in the market where certain kinds of investment funds are readily available, and there are times when they're not."

"We are a young company," he added. "We are pre-revenue, and that eliminates a lot of what people might call more traditional financing right away. Commercial banks are not interested most of the time in pre-revenue companies. And if you look at asset-backed lending, although that might be better for the capital structure, the flow aspect of what those kinds of lenders expect is not yet present with us."

Guyer said he was pleased with the pricing of the deal.

"I thought it was very good," he said. "In my experience working with young companies, this is a very favorable deal."

Colorado Goldfields could eventually require two more key rounds of financing, he said. The company is currently in the process of getting a report on its fields that comply with the National Instrument 43-101 requirements, and the completion of that report will be an important milestone, he said.

"There will be at least another one, maybe two rounds of additional funding," Guyer said. "By the time those are required, the nature of my company will have changed such that it will be wide open in terms of what kind of capital we need."

PolyMet raises from Glencore

PolyMet Mining is placing a combined $50 million of floating-rate senior secured convertible debentures due Aug. 31, 2011 to Glencore. The coupon will be 12-month Libor plus 400 basis points.

An initial $25 million is immediately available to PolyMet, with the remaining $25 million to be available upon the publication of the final environmental impact statement relating to PolyMet's projects in Minnesota.

The initial conversion price of the debentures will be $4 per share. PolyMet common stock (TSX: POM) closed at C$3.08 on Thursday.

The debentures may be called subject to a hurdle at 50% of the conversion price.

PolyMet will also issue to Glencore warrants due Aug. 31, 2011 to buy 6.25 million PolyMet shares. The strike price will be $5 if exercised before PolyMet's project starts production and $6 if exercised after production.

The placement was part of a strategic deal between the two companies. Under the alliance, Glencore will buy PolyMet's production for at least five years. Glencore will also appoint a technical advisor to PolyMet's technical steering committee.

"These strategic agreements with Glencore are major milestones in the development of PolyMet and are the culmination of about eighteen months of discussion and getting to understand one another," PolyMet executive chairman William Murray said in a statement. "Glencore's investment of $50 million into PolyMet is a statement of confidence in our team's ability to execute our plans."

PolyMet president and chief executive Joe Scipioni also added: "Glencore's technical team has considerable experience with advanced metallurgical processes and we welcome their input to our project. It is very gratifying to see Glencore, a worldwide leader in non-ferrous metal processing and marketing, making a significant investment of time, talent, and money into PolyMet. These transactions with Glencore ensure that we can market our products effectively and are well financed through completion of critical project engineering and procurement"

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