Franconia Minerals Corporation report that it has received all funds from the State of Minnesota related to its 2006 loan agreement, providing the Company with a total of US$2.0 million in loans and US$500,000 in the form of a non-repayable grant.
According to the original terms of the 2006 loan agreement, the State – through its two economic development entities, Iron Range Resources and the Department of Employment and Economic Development – agreed to loan Franconia up to US$2.5 million towards the development of the Company’s copper-nickel-PGM resource project at Birch Lake in the Duluth Complex of northeastern Minnesota (see Franconia press release of October 2, 2006). The Legislature changed the terms so that Franconia would become eligible to receive a loan of up to US$2.0 million in addition to a non-repayable grant of US$500,000.
The loan amortization date is the close of financing for the commercial mining operation at the Birch Lake site, or on December 31, 2011, whichever date comes first terms. Interest on the loan disbursements will accrue at the Prime Rate and be capitalized on the amortization date. Monthly payments of interest only, at Prime +3%, will be required for a two-year period commencing on the Amortization Date. Regular monthly payments of principal and interest payments will commence after the two-year period of interest payments and will be in an amount to fully amortize the outstanding balance of the loan by December 31, 2016 (the “Due Date”). Monthly payments will be adjusted semi-annually to reflect any change in the effective interest rate. All payments of principal and interest will be due on the Due Date. The borrowings under the 2006 loan agreement have been secured by one mineral lease held by the Company, guarantees by the Company and its joint venture partner, and intellectual property and data associated with the Birch Lake project.
Under the terms of the 2006 loan agreement, as amended, Franconia was required to contribute matching funds on a one-to-three basis. Thus, in order to draw down the full US$2.5 million dollars, Franconia had to expend at least US$10 million on a continuing technical development program aimed at advancing Birch Lake towards becoming a producing mine. To date, Franconia has spent more than US$15 million on this program. Franconia reached the US$10 million benchmark in October 2008 with the finalization of extensive drilling and other development work at Birch Lake.
Pursuant to the 2006 loan agreement, as amended, the Company has issued to the State of Minnesota, 2,500,000 common share purchase warrants (one warrant for each dollar advanced by the State of Minnesota under the loan and grant.) Each warrant entitles the State to acquire one common share of the Company at an exercise price of Cdn$0.75 until January 13, 2012. The terms of the warrants were amended from the original 2006 loan agreement to reduce the exercise price from Cdn$1.13 to Cdn$0.75; to change the expiry date from September 29, 2009 to three years from the drawdown date; and to include the funds advanced under the US$500,000.
Franconia Minerals Corporation trades on the TSX under the symbol FRA. (For additional information see www.franconiaminerals.com.) Franconia currently has 59,017,572 shares issued and outstanding.