2 February 2022
TSX and OTCQX: MPVD
TORONTO and NEW YORK, Feb. 1, 2022 /CNW/ - Mountain Province Diamonds Inc. ("Mountain Province" or the "Company") (TSX: MPVD) (OTCQX: MPVD) today announces that it has mailed to its shareholders a notice of special meeting and management information circular (collectively, the "Information Circular") and related materials for a special meeting of shareholders (the "Special Meeting") to be held on February 28, 2022 at 11:00 a.m. Eastern Time. The record date for determining the shareholders entitled to receive notice of and vote at the Special Meeting was set as the close of business on January 21, 2022.
At the Special Meeting, the Company will seek disinterested shareholder approval for (i) the entry into a new US$50 million junior secured term loan credit facility (the "Proposed Loan Agreement") with an entity (the "Lender") ultimately beneficially owned by Dermot Desmond, and (ii) the issuance to the Lender or another entity ultimately beneficially owned by Dermot Desmond of warrants (the "Warrants" and together with the Proposed Loan Agreement, the "Proposed Transactions") to purchase up to 41,000,000 common shares of the Company for an aggregate exercise price of approximately US$25,000,000. The Warrants will be exercisable in whole or in part at any time up to the Maturity Date (as defined below) by paying US$0.60975 per common share.
The Proposed Loan Agreement will mature on December 15, 2027 (the "Maturity Date") and be secured by substantially all of the properties and assets of the Company and its subsidiaries on a junior basis to the Company's existing second lien notes. The Proposed Loan Agreement will bear interest at a rate of 8% per annum until December 15, 2022, after which the interest rate will be 2% per annum greater than the interest rate on the debt that replaces or refinances the Company's existing second lien notes, payable on a semi-annual basis. The Company will be entitled to prepay the Proposed Loan Agreement at any time prior to the Maturity Date without penalty.
The Company intends to issue the Warrants, as described above, as partial consideration for the extension of credit under the Proposed Loan Agreement. The exercise price and number of common shares underlying the Warrants will each be subject to customary anti-dilution adjustments.
"This loan agreement represents a further vote of confidence from our largest shareholder, and long-standing supporter Mr. Dermot Desmond and positions the Company very well to execute on the broader bond refinancing later this year. With the rough diamond market fundamentals currently moving in our favour, the Company expects to be well placed to execute on its strategy through 2022 and beyond. The Company's strategy being to optimize operations and costs, focus on sustainability and CO? emissions reduction, effectively manage debt and grow the mine life through new discoveries. This proposed loan agreement forms an integral part of that plan."
Dermot Desmond is an insider and a related party of Mountain Province. The Proposed Transactions therefore each constitute a "related party transaction" within the meaning of Multilateral Instrument 61-101 Protection of Minority Shareholders in Special Transactions ("MI 61-101").
In accordance with MI 61-101 and the rules of the Toronto Stock Exchange (the "TSX"), the shareholders' resolution approving the Proposed Transactions must be passed by a simple majority of the votes cast thereon by the disinterested shareholders present electronically or by proxy at the Special Meeting, which excludes the votes attached to common shares beneficially owned by Dermot Desmond, Brett Desmond and Jonathan Comerford.
The Proposed Loan Agreement constitutes the borrowing of money from, or the entering into of, a credit facility with a related party. Accordingly, pursuant to Section 5.4(1) of MI 61-101, a formal valuation in respect of the Proposed Loan Agreement is not required.
In respect of the Warrants, Section 6.3(1) of MI 61-101 provides the subject matter of a formal valuation are the non-cash assets involved in a related party transaction. Pursuant to Section 6.3(2) of MI 61-101, because the non-cash assets, being the Warrants, are securities of a reporting issuer, a formal valuation in respect of the Warrants is also not required.
On November 9, 2021, the board of directors of the Company established a special committee of independent directors (the "Special Committee") in connection with the consideration and oversight of options to improve the Company's capital structure and its short and long-term liquidity, including by way of a restructuring or refinancing of its outstanding indebtedness.
The review, direction and supervision of the Proposed Transactions falls within the mandate of the Special Committee. Each member of the Special Committee is independent of the Company's management and the Lender and unrelated to the Proposed Transactions. The Special Committee was advised by independent legal counsel and an independent financial advisor, Eight Capital, in connection with the Proposed Transactions.
The Special Committee has reviewed and considered the Proposed Transactions and, giving due consideration to the best interests of the Company and the impact on shareholders and the Company's other stakeholders, unanimously concluded that the Proposed Transactions are in the best interests of the Company and that the terms of the Proposed Transactions are reasonable in the circumstances of the Company.
The final form of the Proposed Loan Agreement, Warrants and other definitive documents in respect of the Proposed Transactions will be subject to approval by the Special Committee.
The Information Circular contains a detailed description of the items to be considered at the Special Meeting, the Proposed Transactions, and other information relating to the Company. A copy of the Information Circular is available under the Company's profile on SEDAR.
In addition to disinterested shareholder approval, the Proposed Transactions are subject to final approval by the TSX.
Mountain Province Diamonds is a 49% participant with De Beers Canada in the Gahcho Kué diamond mine located in Canada's Northwest Territories. The Gahcho Kué Joint Venture property consists of several kimberlites that are actively being mined, developed, and explored for future development. The Company also controls 107,373 hectares of highly prospective mineral claims and leases surrounding the Gahcho Kué Mine that include an Indicated mineral resource for the Kelvin kimberlite and Inferred mineral resources for the Faraday kimberlites. Kelvin is estimated to contain 13.62 million carats (Mct) in 8.50 million tonnes (Mt) at a grade of 1.60 carats/tonne and value of US$63/carat. Faraday 2 is estimated to contain 5.45Mct in 2.07Mt at a grade of 2.63 carats/tonne and value of US$140/ct. Faraday 1-3 is estimated to contain 1.90Mct in 1.87Mt at a grade of 1.04 carats/tonne and value of US$75/carat. All resource estimations are based on a 1mm diamond size bottom cut-off.
For further information on Mountain Province Diamonds and to receive news releases by email, visit the Company's website at www.mountainprovince.com.