Platinum Group Delivers Notice to Sprott for Drawdown of US $40 Million Working Capital Facility

Platinum Group Metals Ltd. reports that it has delivered notice to Sprott Resource Lending Partnership for the drawdown of a US $40 million working capital facility executed in February, 2015.

The Company has also entered into agreements with its largest shareholder Liberty Metals & Mining Holdings, LLC, a subsidiary of Liberty Mutual Insurance ("LMM") for a further US $40 million loan facility, subject to regulatory and disinterested shareholder approval and Waterberg Project partner approval.

These financings are planned to allow the Company to complete its ramp-up at the WBJV Project 1 platinum mine ("Project 1") and for general working capital. Cold commissioning of the plant is in process and platinum and palladium concentrate production is set to commence in the weeks ahead. First concentrate delivery to Anglo Platinum's Waterval smelter at Rustenburg is planned for January 2016. Underground development is ongoing.

R. Michael Jones, CEO and Co-founder of Platinum Group said, "We are pleased to finalize these arrangements and we will be looking for prompt approval by regulators and shareholders. These important financing steps avoid the equity market and allow our team to focus on the commencement of production and ramp up".

Platinum Group has delivered the construction and development of Project 1 within the updated budget and schedule. At planned steady state production in 2018 Project 1 is expected to be one of the lower cost conventional PGM mines in South Africa with an expected cash cost of approximately US $625 per 4E ounce (see July 15, 2015 press release - Project Update and Third Quarter Results).

The Company continues to work on growth at the large Waterberg Project, funded by the Japan Oil, Gas and Metals National Corporation, with continued drilling, resource modelling, mine design, metallurgy and infrastructure planning all underway. Exploration to expand and further delineate Waterberg is ongoing. Waterberg is dominantly a palladium deposit with associated platinum, gold, copper and nickel. An update on drilling and engineering at Waterberg is planned shortly.

US $40 Million Additional Loan with Production Payment

LMM and the Company have entered in to a second lien credit agreement with respect to a US $40 million loan to the Company (the "LMM Loan").

The interest rate on the LMM Loan is 9.5% over LIBOR and the Company estimates that the total amount of interest payable would be approximately US $17,723,118 (based on an undiscounted aggregate of all interest payable to December 31, 2020 based on current LIBOR). Interest payments on the LMM Loan will be accrued and capitalized until December 31, 2016, and then paid to LMM quarterly thereafter. The first 20% of principal and capitalized interest is to be repaid on December 31, 2018 and then in tranches of 10% of the principal at the end of each calendar quarter beginning on March 31, 2019 and for each of the next 7 quarters of the facility.

In consideration for the advancement of, and pursuant to, the LMM Loan, the Company has granted to LMM a production payment right, as described below. If the Company exercises its right to buy back a portion of the production payment, then the LMM Loan payback will be deferred, with 10% of the principal and capitalized interest to be repaid on each of September 30, 2019 and December 31, 2019, followed by 20% of principal and capitalized interest to be repaid on each of March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020.

Under the LMM Loan, the Company will provide a subordinated pledge of 100% of the shares of Platinum Group Metals RSA Pty Ltd. ("PTM RSA"), its wholly owned South African subsidiary. The LMM Loan will be subordinated to the Sprott Facility and scheduled to be repaid after Sprott.

The Company is in process to make an application to the South African Reserve Bank ("SARB") for the approval of a guarantee provided by PTM RSA against the cash component of the LMM Loan. This approval is required for the advance of the LMM Loan. Events of default under the Sprott Facility are also treated as events of default under the LMM Loan, and vice versa.

The drawdown of the Sprott Facility for US $40 million is contingent on the closing of LMM Loan as outlined here-in, or alternative funding being available, so that the Company has the estimated financial resources to complete its planned ramp-up of Project 1 during 2016.

Sprott, in first lien position, has agreed to amend its original terms and enter into an inter-creditor agreement to allow for the second lien position for LMM as outlined herein. The Sprott Facility is to be re-paid during 2017 (see the terms and conditions of the Sprott Facility in the Company's news release dated February 16, 2015). The Company, Sprott and LMM worked co-operatively and positively on an arms-length basis to complete the arrangements.

Pursuant to the LMM Loan, and subject to regulatory and disinterested shareholder approval, Platinum Group Metals Ltd. (Canada) has entered into a life of mine Production Payment Agreement ("PPA") with LMM granted in consideration of the LMM Loan and in exchange for agreeing to a second secured position at the interest rate provided under the LMM Loan. Under the PPA, the Company agrees to pay to LMM a production payment of 1.5% of net proceeds received on concentrate sales or other minerals from the Project 1 platinum and palladium mine (the "Production Payment").

The Company has also agreed to make an application to the SARB for approval of a guarantee provided by PTM RSA against the PPA component of the LMM Loan, but neither the LMM Loan nor the PPA is contingent upon receipt of such approval. The Company has the right, but not the obligation, to buy back 1% of the 1.5% Production Payment for US $17.5 million until January 1, 2019 and then for US $20 million until December 31, 2021.

An event of default under the PPA triggers the payment of a termination fee based on a net present value of the Production Payments to be made under the PPA at a 5% discount rate. An event of default under the Sprott Facility or the LMM Loan is also treated as an event of default under the PPA. The Company holds the right to terminate the PPA upon payment of the termination fee.

The PPA will be secured with the second lien position of the LMM Loan until it is repaid. The PPA will be acknowledged in any subsequent debt arrangement of the Company. The Company has a right to refinance the Sprott Facility or the LMM Loan, subject to certain rights granted to LMM under the PPA.

The funding of the LMM Loan, and therefore all of the financing package, is conditional upon SARB approval of the cash component of the LMM Loan and other conditions. SARB approval of the similar Sprott Facility was received in the normal course. The conditions for all of the agreements to close are planned to be completed in approximately 10 to 15 business days, but in any event before November 30, 2015.

Upon delivery of written notice of borrowing to LMM ("LMM Notice"), LMM is to be paid a drawdown fee of US $800,000 (being 2% of the LMM Loan) payable in common shares of the Company (the "LMM Shares") issued at a deemed price equal to the volume weighted average trading price of the common shares on the Toronto Stock Exchange (the "TSX") for the ten trading days immediately prior to the date of the LMM Notice, subject to a maximum of 4 million LMM Shares and applicable stock exchange requirements and approvals. The LMM Shares will be subject to a four month and one day hold period from the date of issuance under applicable securities laws in Canada and will also be subject to re-sale restrictions under applicable securities laws in the United States.

The board of directors of the Company formed an independent committee (the "IC") comprised of independent directors to undertake a comprehensive review with respect to the LMM Loan, the PPA and the LMM Shares (collectively, the "LMM Transaction") and to evaluate the fairness and commercial reasonableness of the LMM Transaction. The audit committee (the "AC" and together with the IC, the "Committees") of the Company also undertook a comprehensive review of the LMM Transaction in accordance with the terms of the Company's Audit Committee Charter which requires the AC to review and oversee all related party transactions. After careful consideration, the Committees determined that the LMM Transaction is fair and in the best interests of the Company and its shareholders at this time, the terms are commercially reasonable and the Committees unanimously recommended the approval of the LMM Transaction to the Company's board of directors, who in turn have unanimously approved the LMM Transaction.

Source: http://www.platinumgroupmetals.net/

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