Nov 29 2010
Novadx Ventures Corp. (TSX VENTURE:NDX) has announced that it, together with its wholly owned subsidiary, MCoal Corporation, has entered into a Coal Production Payment Agreement and an Additional Coal Purchase Agreement with Sandstorm Metals and Energy Ltd. (TSX VENTURE:SND) to sell a production interest in three coal streams in return for a US$38 million advance payment and subsequent additional payments to be received on shipment of coal.
The proceeds of the advance payment will be used by Novadx and MCoal to:
• acquire all assets of Tiacme, LLC in consideration of US$2.5 million in cash and 6,250,000 shares of Novadx. Tiacme, LLC's sole asset is the Rex No. 1 Mine. This transaction was previously announced on June 3, 2010. Novadx and MCoal have entered into letter agreements to acquire the Tiacme assets which replace the letter of intent announced on June 3, 2010.
• acquire the operating Flatwoods Mine and other permitted mine assets from Ikerd Mining LLC (the "Ikerd Mines") and related transportation and coal processing assets of Ikerd Transportation, LLC and Ikerd Terminal Company, LLC in consideration of an aggregate US$16 million in cash, 5,000,000 shares of Novadx, and US$1 million in cash on each of the first and second anniversary of the transaction. This transaction was previously announced on July 6, 2010. Novadx and MCoal have entered into letter agreements with the Ikerd group of companies to acquire the operating assets which replace the letters of intent announced on July 6, 2010.
• fund the procurement and installation of a coal washing facility at MCoal's existing Rosa Mine.
• fund working Capital.
Neil MacDonald CEO and President of Novadx said, "I am very pleased with the relationship we have forged with Sandstorm and its management. These agreements will allow us to complete the acquisitions we previously announced and provide a solid foundation on which to grow our company."
The Transaction:
Sandstorm and Novadx have entered into a purchase agreement with Novadx pursuant to which Sandstorm has agreed to purchase 25% of MCoal's production until Sandstorm has received 950,000 tons of metallurgical equivalent coal (where three tons of thermal coal equals one ton of metallurgical equivalent coal) and thereafter, 16% of the life of mine metallurgical equivalent coal produced from the Rosa Mine, the Rex No. 1 Mine and the Ikerd Mines (the "Mines") for an advance payment of US$38 million plus ongoing per ton payments of US$75 for metallurgical coal and US$55 for thermal coal.
Novadx has provided Sandstorm with a guarantee that it will receive minimum cash flows of (i) US$4 million in 2011, (ii) US$6 million in 2012, (iii) US$9 million in 2013, and (iv) US$9.5 million in each of 2014 and 2015.
Sandstorm has the right under the transaction to make an initial advance payment of US$5 million by December 29, 2010 to receive the right to purchase 8.5% of the metallurgical coal from the Rosa Mine, for the life of the mine for US$75 per ton. Sandstorm also has the right to make an additional payment of US$33 million to Novadx by February 15, 2011, to receive the right to purchase 25% of production from the Mines until Sandstorm has purchased 950,000 tons of metallurgical equivalent coal. After 950,000 tons have been delivered, Sandstorm's right to purchase coal goes from 25% to 16% of the metallurgical equivalent coal produced thereafter for the life of the Mines at a price of US$75/ton for metallurgical coal and US$55/ton for thermal coal.
The completion of the transaction remains subject to the completion of a private placement by Sandstorm receipt of all necessary regulatory and other approvals, including acceptance by the TSX Venture Exchange (the "TSXV"). For assisting in negotiation of this transaction, Surge Capital Corp. of Vancouver is entitled to be paid a 5% cash commission and up to 3,750,000 share purchase warrants entitling them to purchase common shares of Novadx at a price of $0.25 per share for a period of three years.
Novadx also announces that it intends to complete a convertible debenture offering for gross proceeds of $3 million. The convertible debentures will be unsecured, have a 4 year term, and bear interest at a rate of 10% per annum starting in the second year that the debentures remain outstanding. The debentures are convertible into common shares of Novadx at a price of $0.30 per share at any time by the debenture holders. Finder's fees, as allowed pursuant to the policies of the TSX Venture Exchange, may be payable in connection with this debenture offering. The proceeds of this debenture offering will be used to repay certain outstanding debts of the company and for working capital pending the closing of the Sandstorm transaction.
Novadx Assets:
The Rosa Mine in Alabama is a current producing auger mine expanding its operations to include some strip mine operations in addition to increased auger mining operations. The coal from the Rosa Mine is being sold to domestic users as coking coal and activated carbon applications at prices averaging US$150 per ton. Although the current mine life under 43-101 mineral reserves allows for three and a half years of operations, additional mineral resources are present in currently permitted land and adjacent properties that will be included under the Corporation's transaction with Novadx in the event that Novadx produces coal from these properties.
The Rex No. 1 Mine in Tennessee is a development asset expected to begin construction in January 2011 and begin production by mid-2011. The Rex seam is known for its high quality metallurgical coal; a high volatile A bituminous coal with very low ash, very low sulphur, and high BTU that is often used in the production of silicon metal. It is one of the largest single continuous resources of metallurgical coal located in the Central Appalachian coal belt. There is opportunity to expand the resource by increased drilling and increasing the lease area in the immediate vicinity.
The Ikerd Mines includes the Flatwoods Mine, an operating coal mine producing industrial coal, the Elk Mountain and Little Bushy Creek development projects all located in Kentucky. Most of the current production is marketed as industrial coal through the Ikerd load out station located in Somerset, Kentucky.