SRHI Inc. Announces Foundational Agreement by MTV with its Creditors
SRHI Inc. Announces Foundational Agreement by MTV with its
Creditors
(all amounts expressed in US dollars)
Toronto, August 24, 2020 – (TSX: SRHI, SRHI.WT) – SRHI Inc. (the “Company” or “SRHI”) is pleased
to announce that creditors for Minera Tres Valles SpA (“ MTV”), the Company’s 70% owned
producing copper mine in Salamanca, Chile, have approved a Judicial Reorganization Agreement
(“JRA”) in Chile with support from 100% of the Lenders and 93% of the unsecured creditors.
“Through our restructuring efforts, MTV now has the ability to execute on the construction and
expansion of its mining operations including the Papomono Masivo incline block caving
underground mining project,” stated Michael Staresinic, President and Chief Financial Officer.
“MTV’s senior lenders, shareholders and unsecured creditors all participated in finding a solution
that is expected to drive both MTV and the Company to profitability and sustainability over the
coming years.”
In May 2020, MTV filed a Judicial Restructuring Procedure (“ JRP”) in Chile providing MTV
protection from creditors to give itself sufficient time to complete its refinancing efforts to allow
for the completion of the construction of its underground mine. The JRP is similar to creditor
protection under the Companies’ Creditors Protection Act in Canada.
Emergence from the JRP process represents the culmination of efforts that were undertaken with
MTV’s senior lenders (“ Lenders”), Vecchiola S.A. (“ Vecchiola”, a related party to MTV’s 30%
minority shareholder) and other unsecured creditors. Subject to customary documentation, and
the formalization of terms between MTV, the Lenders and the Company, the JRA provides MTV
with the following:
SRHI Inc. to Provide $10 Million
Up to $10 million secured second ranking debt to be financed from the Company’s cash
resources (the “SRHI New Loan”)
Drawn down by MTV over the next 12 months
Principal and interest subordinated to the Lenders’ existing debt under the Facility
Agreement (defined below) and New Senior Debt (defined below)
Expected payback beginning 2025
Fulfills (and will reduce, pro-rata) the Company’s $10 million corporate guarantee
provided under the facility agreement (the “ Facility Agreement”) entered into between
the Lenders, MTV and the Company in December 2019
No dilution to the Company’s 70% equity holding of MTV
Vecchiola Voluntarily Converts over $5 million to Long-term Debt
Conversion to subordinated long-term debt, of 75% of amounts owed by MTV to
Vecchiola, to be repaid only after all other amounts due to the Lenders and unsecured
creditors are fully repaid
Lenders Amend Facility Agreement Terms and Commit to Additional $6 Million
Immediate release of $7 million of cash, currently restricted by the Lenders pursuant to
the Facility Agreement, to support MTV’s operations - $2 million was already released to
support MTV during the reorganization process
Extension of the Facility Agreement’s maturity by 12 months to December 2024
Extension of the Facility Agreement’s commencement for principal repayments by 12
months to begin March 31, 2022
Extension by 18 months of the requirement to pay 50% of interest under the Facility
Agreement. Full interest payments begin March 31, 2022
Up to $6 million of new senior debt (“ New Senior Debt”) to have substantially the same
security and terms as currently contemplated in the Facility Agreement (with some
amendments)
The New Senior Debt is to be made available to MTV, if needed, after SRHI has fully
advanced the SRHI New Loan
Unsecured Creditors Convert Amounts Owed to Long-Term Debt
Approximately $19 million converted from accounts payable of MTV to long-term debt
(“New Unsecured Debt”)
Principal and interest repayment grace period – first payment to begin March 31, 2022
50% of New Unsecured Debt to be repaid in 13 quarterly payments beginning March 31,
2022
Remaining 50% of New Unsecured Debt to be repaid on June 30, 2025
Annual interest rate of New Unsecured Debt is 5%
Opportunity for accelerated prepayments
As part of the JRA, a creditors’ commission (the “ Creditors’ Commission ”) will be created to
supervise the compliance with the JRA. The Creditors’ Commission is to be composed of two
representatives of the Lenders and a third representative from the unsecured creditors, to be
determined by the creditors of MTV. Each member of the Creditors’ Commission cannot be linked
to the main business of MTV.
Under certain specific circumstances and for no longer than 5 days after the approval of the JRA,
creditors can challenge the legality of the JRA. The Company and MTV do not expect any
challenge to the legality of the JRA.
Specific to the offtake agreement between MTV and the offtake provider (one of the Lenders),
MTV and the offtake provider have agreed and executed an increase to the fixed price portion
originally agreed to in the offtake agreement from 25% to 40%. MTV has currently contracted to
sell 40% of its expected copper cathode production at $2.90 per pound from August 2020 to July
2022. This stability of cash inflow for the next 2 years provides a degree of certainty for the
business during its construction and production ramp up phases.
In addition, and subject to customary documentation, an amendment to the offtake agreement
is expected to be implemented resulting in the acceleration of payment terms for the receipt of
cash by MTV.
In noting the importance of this occasion, Luis Vega, Chief Executive Officer of MTV, stated, “This
is a defining moment for MTV and I take great pride in the participation of all stakeholders – our
employees, lenders, suppliers, customers, communities, business partnerships and supporters,
without whom this day would not have been possible. In this process, all of us have made
sacrifices to place this organization in the much stronger position it now enjoys. MTV values and
appreciates the commitment all have shown in helping us reach this point.”
MTV will now devote its attention to finalizing the necessary documentation with the Lenders
and the Company together with implementing the construction and development of the
Papopmono Masivo underground mine. Papomono Masivo is expected to be completed in the
fourth quarter of 2021 with initial ore production beginning by the third quarter of 2021.
For the remainder of 2020, MTV will be focusing on processing ore in its current inventory,
increasing its tolling business and accelerating the processing of ore supplied by third-party
miners. Beginning in 2021 and while maintaining its 2020 initiatives, MTV intends to reopen its
Don Gabriel open pit mine for approximately 1 year while simultaneously constructing the
Papomono Masivo underground mine.
About SRHI Inc.
SRHI is a publicly-listed company based in Toronto and its principal operating business is its 70%
equity interest in the producing copper mine Minera Tres Valles in Salamanca, Chile. For more
information about SRHI, please visit www.srhi.ca.
Cautionary Statement Regarding Forward-Looking Information
Certain statements in this news release, contain forward-looking information (collectively
referred to herein as the "Forward-Looking Statements") within the meaning of applicable
Canadian securities laws. The use of any of the words "expect", "anticipate", "continue",
"estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar
expressions are intended to identify Forward-Looking Statements. In particular, but without
limiting the foregoing, this news release contains Forward-Looking Statements pertaining to: the
construction and expansion of mining operations including the Papomono Masivo incline block
caving underground mining project, as well as the timing thereof and production therefrom;
profitability of the Company and MTV and timing thereof; completion of the JRA and the JRP
process and the terms thereof; expected timelines for drawdown and repayment of
indebtedness of MTV; creation of the Creditors’ Commission and the composition thereof;
expectations regarding the lack of challenge to the legality of the JRA; expected performance
under the offtake agreement; expected implementation of a further amendment to the offtake
agreement and the terms thereof; and MTV’s focus for the remainder of 2020 and the expected
reopening of the Don Gabriel mine and the timing thereof.
Although SRHI believes that the Forward-Looking Statements are reasonable, they are not
guarantees of future results, performance or achievements. A number of factors or assumptions
have been used to develop the Forward-Looking Statements, including: that the JRA and the JRP
process will be resolved as expected and on the terms currently agreed to; that the assumptions
for future ore mined and copper cathode production together with future cash flows, including
future copper prices, operating costs and capital expenditures remain materially accurate; there
being no additional significant disruptions affecting the development and operation of MTV; and
assumptions concerning general marketing, political, business and economic conditions.
Actual results, performance or achievements could vary materially from those expressed or
implied by the Forward-Looking Statements should assumptions underlying the Forward-Looking
Statements prove incorrect or should one or more risks or other factors materialize, including: (i)
risks associated with the mining industry in general (e.g., operational risks in development,
exploration and production; delays or changes in plans with respect to exploration or
development projects or capital expenditures; the uncertainty of estimates and projections
relating to mineral reserves, production, costs and expenses; and labour, health, safety and
environmental risks) and risks associated with the other portfolio companies' industries; (ii) risks
associated with investments in emerging markets; (iii) general economic, market and business
conditions; (iv) the successful challenge to the legality of the JRA; (v) the JRA not being
implemented on the expected terms or subsequently complied with;; (vi) commodity price
fluctuations and uncertainties; (vii) risks associated with catastrophic events, manmade disasters,
terrorist attacks, wars and other conflicts, or an outbreak of a public health pandemic or other
public health crises, including COVID-19; (viii) risk that MTV and/or the Company cease to be
going concerns and the Company’s guarantee of the MTV debt is called and the related pledge is
realized (ix) those risks disclosed under the heading "Risk Management" in SRHI’s Management’s
Discussion and Analysis for the year ended December 31, 2019 and its first and second quarterly
report of 2020; and (x) those risks disclosed under the heading "Risk Factors" or incorporated by
reference into SRHI’s Annual Information Form dated March 24, 2020.
The Forward-Looking Statements speak only as of the date hereof, unless otherwise specifically
noted, and SRHI does not assume any obligation to publicly update any Forward-Looking
Statements, whether as a result of new information, future events or otherwise, except as may
be expressly required by applicable Canadian securities laws.
Investor contact information:
Michael Staresinic
President and CFO
(416) 943-7107
Source: SRHI Inc.