Palladon Ventures Ltd. ("Palladon" or the "Company") (TSX VENTURE:
PLL) announces the following update from Dale Gilbert, CEO of CML
Holdings Inc.
CML Metals Shareholder Update
Dear Shareholder,
I am pleased to provide an update concerning our financing,
offtake arrangements, hedging transactions, corporate restructuring
and concentrator construction.
Financing
On February 28, 2011 CML Holdings, Inc. ("CML", see description
of corporate restructuring below) and Tangshan Jidong Products and
Materials Trading Group Co., Ltd ("Tangshan") entered into a stock
purchase agreement for the sale to Tangshan of $2mm of common stock
in CML at a per share price of $52.93 (the "Initial Purchase"). The
parties also have an agreement in place for the sale of an
additional $18mm of stock in CML at the same per share purchase
price (the "Second Purchase"). This Second Purchase is subject to
final due diligence on the part of Tangshan, the completion of
final documentation and the obtaining of all necessary governmental
approvals in China by Tangshan. Tangshan's right to purchase the
additional $18mm of stock from CML expires on March 31, 2011. If
Tangshan fails to close the Second Purchase, Tangshan will remain
minority shareholders in CML with limited shareholder rights.
Assuming the Second Purchase closes, Tangshan will own, after both
purchases, 12.5% of the common stock outstanding of CML.
Tangshan Jidong Products and Materials Trading Group Co., Ltd.,
is a large commerce and logistics company specializing in
international trade, automobile refitting, real estate development,
logistics, storage and catering services. It was founded as a
state-owned company in 1994, and then privatized in 1999. The
company has more than 3,000 employees with a variety of technical
skills and expertise. The company has been ranked in the "Top 100
Enterprises" in Hebei Province, China for eight consecutive years.
It has also been ranked as one of the "China Top 500 Enterprises"
and "China Top 500 Enterprises in Service Industry" for five
consecutive years. The company is now one of 20 largest commerce
and logistics corporations as recognized by the Hebei Provincial
Government in China.
Tangshan Offtake Arrangements
Concurrent with the closing of the Initial Purchase, CML also
entered into offtake agreements with Tangshan. Both offtake
agreements with Tangshan are subject to Tangshan completing the
Second Purchase.
The first offtake agreement (the "Tangshan ROM Offtake") is for
the sale of run-of-mine ("ROM") ore to Tangshan for the period
extending from March 31, 2011 to the earlier of: a) June 30, 2012
or b) the completion of CML's concentrator facility. The Tangshan
ROM Offtake is for approximately 45,000-50,000 tons of ROM product
per month and settles at a fixed price subject to penalties and
premium for certain levels of impurities and iron grade. The fixed
price of the Tangshan ROM Offtake is within current market prices
and insures CML of profitability on the contract assuming the
Company's current cost of production and stable ocean freight
rates.
The second offtake agreement (the "Tangshan Concentrate
Offtake") is for the sale of concentrate product commencing upon
completion of the concentrate facility. The Tangshan Concentrate
Offtake is for approximately one-third of the Company's estimated
annual production and has a term of four years. The price is
benchmarked to Platt's CFR China Index subject to penalties and
premiums for impurities and iron ore grade. The Tangshan
Concentrate Offtake also includes a marketing fee for Tangshan
in-line with market rates for such services. For product sold under
the Tangshan Concentrate Offtake, based upon current market
conditions and the metallurgical test work and plant design
completed to date, CML expects, net of marketing fees paid to
Tangshan, to earn a premium above the 62% Platt's benchmark price
for iron ore, the most commonly quoted benchmark price.
Trafigura Offtake Agreements
CML also would like to announce the signing of another set of
offtake agreements with Trafigura, AG. The first offtake agreement
(the "Trafigura ROM Offtake") is for the sale of ROM ore to
Trafigura from the period extending from February 1, 2011 through
the earlier of: a) June 30, 2012 or b) the completion of CML's
concentrator facility. The Trafigura ROM Offtake is for
approximately 50,000 tons of ROM product per month. The settlement
price for the Trafigura ROM Offtake is based upon a fixed
percentage discount to the then 62% Platt's Benchmark Index price
for the month of settlement subject to penalties and premiums for
impurities and iron ore grade.
The second offtake agreement with Trafigura (the "Trafigura
Concentrate Offtake") is for the sale of concentrate product
commencing upon completion of the concentrate facility. The
Trafigura Concentrate Offtake is for approximately one-third of the
Company's estimated annual production and has a term of four years.
The price is benchmarked to Platt's CFR China Index subject to
penalties and premiums for impurities and iron ore grade. The
Trafigura Concentrate Offtake also includes a marketing fee for
Trafigura in-line with market rates for such services. For product
sold under the Trafigura Concentrate Offtake, based upon current
market conditions and the metallurgical test work and plant design
completed to date, CML expects, net of marketing fees paid to
Trafigura, to earn a premium above the 62% Platt's benchmark price
for iron ore, the most commonly quoted benchmark price.
Trafigura is one of the world's leading international commodity
traders, specializing in the oil, minerals and metals markets, with
67 offices in 44 countries in Europe, Africa, Asia, Australia, and
North, Central and South America. Its principal corporate offices
are in Amsterdam, Geneva, London and Lucerne. Trafigura's primary
trading businesses are the supply and transport of crude oil,
petroleum products, renewable energies, coal, refined metals,
ferrous and non-ferrous ores and concentrates. It is the world's
second largest independent non-ferrous trading company and the
third largest independent oil trader. Founded in 1993, the company
is owned by its founding shareholders and senior management. It has
achieved substantial growth in the last five years, growing
turnover from US$18 billion in 2004 to US$79.2 billion in 2010.
Hedging Transactions
In February, CML entered into a series of iron ore hedges with
Credit Suisse as required by the terms of the Company's credit
facility with Credit Suisse. The first series of hedges relates to
CML's production under the Trafigura ROM Offtake. By entering into
hedges with Credit Suisse for the production sold to Trafigura
under the Trafigura ROM Offtake, CML has effectively fixed the
price it will receive under that contract subject to penalties and
premiums for impurities and iron ore grade. Before netting out the
transaction costs associated with the Credit Suisse hedges, the
price fixed under the Trafigura ROM Offtake agreement by virtue of
the hedges with Credit Suisse, is substantially similar to the
fixed price under the Tangshan ROM Offtake agreement. The fixed
price received under the hedged Trafigura ROM Offtake is within
current market prices and insures CML of profitability on the
contract assuming the Company's current cost of production and
stable ocean freight rates.
CML also entered into a hedging contract with Credit Suisse for
a portion of the Company's 2012 production. For 2012 CML has sold
forward 180,000 tons of production at a benchmark price for 62% Fe
grade ore of $141 per ton CFR. The forward sales settle 30,000 per
month from January to June 2012. If the Company's concentrate
facility is producing by 2012, CML, on its 180,000 tons of hedged
production, will have locked in $141 per ton CFR plus premiums
expected from producing above the hedged 62% Fe grade (CML
estimates 67%+ Fe grades on its production) less marketing costs,
netting a price higher than $141 per ton CFR based on current
market conditions. If the concentrator is not producing, the
company will sell its tonnage under its ROM offtake agreement with
Trafigura and the hedges will serve to lock in a price at or near
the Company's current cost of ROM production.
Corporate Restructuring
On March 2, 2011, CML Metals, Inc. ("Metals") became a
wholly-owned subsidiary of CML Holdings, Inc. Shareholders in
Metals contributed all of their shares to CML Holdings, Inc. and
received shares of CML Holdings, Inc. in return so that their
beneficial interests remained unchanged. With respect to the credit
facility with Credit Suisse, CML Metals continues to be the
borrower, and the shares of CML Metals owned by CML Holdings, Inc.
are being pledged as collateral. This restructuring arrangement
should provide CML Holdings, Inc. with additional flexibility if it
chooses to develop its business beyond the scope of the
Concentrator Plant project. The corporate restructuring in no way
changed the economic or voting interests of any of the former,
direct shareholders of CML Metals.
Concentrator Construction Update
Construction on the Concentrator Plant continues to move forward
at a rapid pace. The mass excavation, of approximately 100,000
cubic yards was completed on February 25th and the first concrete
footing was poured shortly after on March 3rd. Concrete work is
expected to continue through the better part of the month, with the
building arriving on site towards the end of the month and erection
starting immediately thereafter. Equipment procured now includes
the SAG mill, Ball mill, Magnetic Separators, and Hydro-Cyclones.
Requests for quotes have been issued on the majority of remaining
components. Additional test work is being performed to optimize the
de-watering circuit and engineering continues to be completed for
portions of the plant.
Mine Operations
The operations at the mine continue on the planned ramp-up to
our optimal production of 2 million tons per annum. March marks our
first month with two vessels scheduled for shipment to China,
previous months had only one. CML also accepted delivery of an
additional 133 railcars bringing the total fleet to 283, with an
additional 126 cars to be delivered in approximately two weeks.
We are very excited about the addition of Tangshan and Trafigura
to our growing list of world-class partners. Both bring immediate
credibility in the international iron ore markets and provide CML
with consistent and reliable offtake arrangements for both our ROM
and concentrate production. The fixed price nature of the ROM
contracts allows us to lock-in profitability for the remainder of
2011 as we move toward our ultimate goal of producing concentrate
in January of 2012.
We look forward to closing the Second Purchase with Tangshan.
The additional capital provided by the Second Purchase will allow
us incremental cushion in our concentrate construction plan as well
as the flexibility to consider other strategic opportunities. I
look forward to updating you on some of these opportunities as they
are developed further.
Thank you for your continued support.
Dale Gilbert, CEO CML Holdings Inc.
John Cutler, CEO of Palladon, commented: "CML continues to make
great progress at Iron Mountain. We wholeheartedly support their
efforts."
About Palladon Ventures Ltd.
Assuming the Tangshan Second Purchase closes, Palladon will hold
an 18.62% fully diluted interest in CML Holdings Inc. CML is
focused on advancing the Iron Mountain project, an iron ore mine
located west of Cedar City, Utah.
Disclaimer for Forward-Looking Information:
Certain statements in this release are forward-looking
statements, which reflect the expectations of management.
Forward-looking statements consist of statements that are not
purely historical, including any statements regarding beliefs,
plans, expectations or intentions regarding the future. Such
statements are subject to risks and uncertainties that may cause
actual results, performance or developments to differ materially
from those contained in the statements. No assurance can be given
that any of the events anticipated by the forward-looking
statements will occur or, if they do occur, what benefits the
Company will obtain from them. These forward-looking statements
reflect management's current views and are based on certain
expectations, estimates and assumptions which may prove to be
incorrect. A number of risks and uncertainties could cause our
actual results to differ materially from those expressed or implied
by the forward-looking statements, including: (1) a downturn in
general economic conditions in North America and internationally,
(2) the inherent uncertainties and speculative nature associated
with mineral exploration and production, (3) a decreased demand for
minerals, (4) any number of events or causes which may delay or
cease exploration and development of the Company's property
interests, such as environmental liabilities, weather, mechanical
failures, safety concerns and labor problems; (5) the risk that the
Company does not execute its business plan, (6) inability to retain
key employees, (7) inability to finance operations and growth, and
(8) other factors beyond the Company's control. These
forward-looking statements are made as of the date of this news
release and, except as required by law, the Company assumes no
obligation to update these forward-looking statements, or to update
the reasons why actual results differed from those projected in the
forward-looking statement.
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
Contacts: Palladon Ventures Ltd. John W. Cutler Chief Executive
Officer 801.521.5252 604.681.4760 (FAX) info@palladonventures.com
www.palladonventures.com
Palladon Ventures Ltd. (TSXV:PLL)
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Palladon Ventures Ltd. (TSXV:PLL)
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