Jan. 10, 2011 (Filing Services Canada) -- Liberty Mines Inc. (LBE - TSX), ("Liberty" or the "Company") announced today that it has entered into a Memorandum of Understanding (the "MOU") with Jilin Jien (together with its related parties, "Jien"), its majority shareholder, that provides funding to support the Company's 2011 business plan and a comprehensive financial re-engineering proposal intended to create a better capital structure for Liberty and to substantially reduce dilution risk to its minority shareholders.
In order to fund Liberty's 2011 business plan, Jien is advancing a further $8.0 million to the Company, to be provided in tranches that begin immediately and that are intended to be complete in Q2 2011.
As part of the proposed financial re-engineering, Jien and Liberty have agreed in principal:
1. To consolidate all of Jien's outstanding debt instruments, including promissory notes, credit facility, advances and accrued interest, and the $8.0 million in new advances contemplated in the MOU, totaling approximately $49.0 million as at December 31, 2010, into two secured term loans maturing 18 months and 36 months after the closing of the proposed transaction, respectively. The interest rates on the two term loans will be 10% per annum. In the first 18 months, all interest will be capitalized to lessen the cash requirements of the Company.
2. That Jien will convert 38,098,908 Preferred Shares of Liberty to Common Shares, at the current conversion ratio of 1:1. This conversion will increase Jien's common share ownership of Liberty from 51% to 60%. Jien agrees not to convert any further Preferred Shares of Liberty.
3. That the terms of the remaining 148,895,602 Preferred Shares not converted pursuant to 2, above, shall be amended such that the right to convert to common shares will be cancelled. In consideration, Jien will be granted an option to cause Liberty to redeem the remaining Preferred Shares, such redemption, if occurring in the first 24 months following the closing of the proposed transaction, to be funded by increasing the amount of one of the two secured term loans referenced in 1, above, so as to lessen the cash requirements of the Company.
4. That Jien will be granted anti-dilution protection in that one of the two secured term loans referenced in 1, above, will be convertible to common shares of the Company, at the option of Jien, limited to the maximum number of shares required to maintain its 60% ownership in the event of a dilutive transaction, such conversion to be priced at the same price realized in the dilutive transaction.
The above transactions are subject to regulatory and shareholder approval as applicable. Closing is anticipated as soon as reasonably possible following receipt of all requisite approvals, currently expected to be in approximately mid 2011.
Liberty Interim CEO Jay Richardson referred to the Memorandum of Understanding "as a milestone in Liberty's development. The end result is a new capital structure; one that eliminates all short term debt obligations to Jien, creates long term debt that better matches our assets and cash flow, and eliminates the uncertainties of the more generous conversion opportunities that were available to Jien. We are very excited with the prospects of Liberty and this continued support from Jien opens the door for us to execute on our future plans."
Mr. Wu Shu, Jien's Chairman and a director representing Jien, said: "We are very pleased with this agreement. The re-capitalization of Liberty is consistent with our long term desire to see the Company achieve greater significance as a nickel producer and with our goal to enhance value for all the Company's shareholders."
About Liberty Mines Inc.
Liberty Mines Inc. is a producer of nickel and is focused on the exploration, development and production of nickel, copper, cobalt and platinum group metals from its properties in Ontario, Canada. It owns and operates the Redstone nickel concentrator near Timmins Ontario.
About Jilin Jien Nickel Industry Co., Ltd.
Jilin Jien is one of the largest holding subsidiaries of Jilin Horoc Nonferrous Metal Group Co., Ltd., which was founded in 1960.
Horoc and Jien own four nickel mines, one molybdenum mine, one silver mine, two smelters, seven refineries, and two chemical plants with total assets over RMB 3.0 billion. The company professionally provides all kinds of nickel, copper, cobalt salts and nonferrous metal products for plating, chemical plating, battery materials and metallurgy.
Jilin Jien is one of the biggest producers of nickel sulfate in the world, with annual output of 25,000 tons. In September 2003, Jilin Jien Nickel Industry Co., Ltd. was listed on the A-share market of the Shanghai Stock Exchange with stock code of 600432.
Contact:
Bill Woods, CFO
780 485-2299 work
780 964-8875 cell
bwoods@libertymines.com
Source: Liberty Mines Inc. (TSX: LBE) http:// www.libertymines.com
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