Frontera Copper Corporation

Frontera Copper Corporation

January 19, 2010 09:55 ET

Frontera Copper Announces Proposed Note Exchange Offer

MEXICO CITY, MEXICO--(Marketwire - Jan. 19, 2010) - Frontera Copper Corporation ("Frontera" or the "Company") (TSX:FCC.NT) (TSX:FCC.NT.A) today announced that it has developed a refinancing plan to address its upcoming debt maturities and its general liquidity needs which will provide sufficient financial flexibility to realize the benefits associated with the improving business and mine operating environment. The Company intends to offer to exchange its outstanding 10% Senior Unsecured Notes due June 15, 2010 (the "Series 1 Notes") and its outstanding 10% Senior Unsecured Notes due March 15, 2011 (the "Series 2 Notes" and collectively the "Old Notes") for new 10% Senior Secured Notes due December 31, 2012 (the "New Notes"). The New Notes will be denominated in US dollars and will be issued by the Company's Mexican subsidiary Cobre del Mayo S.A. de C.V., owner of the Piedras Verdes mine. The Note exchange will be proposed and effected pursuant to a statutory Plan of Arrangement (the "Plan") under the Business Corporations Act (British Columbia) which is a Court supervised process. The Plan requires that Note holders support the Plan by a margin of at least 75% by value and 50% by numbers of those Note holders who vote in person or by proxy at the Note holder Meeting which will be convened to consider the Plan and is further described below.

Details of Exchange Offer

For each C$1,000 in principal amount of the Old Notes, Frontera is offering:

  • US dollar equivalent at closing of 85% in principal amount of New Notes;
  • An additional Early Support Premium of 5% in principal amount of New Notes to holders who agree to vote in favour of the Plan at least 10 days before the Meeting bringing their amount to 90%. The premium is to encourage early support that will provide the benefit of greater certainty to the entire restructuring process;
  • Past due interest on the Old Notes accrued to the date of completion of the exchange, will be paid in cash; and
  • The New Notes will pay interest at 10% but that may be reduced to 6% if copper prices fall below US$2.90 per pound for certain stated periods.

The maximum aggregate principal amount of New Notes being offered in the exchange is the US dollar equivalent at completion of Cdn $80 million which is inclusive of the Early Support Premium.

The New Notes will be secured on a second lien basis by the Piedras Verdes mine assets ranking behind only the Mexican commercial bank which granted the credit facility to Cobra del Mayo and Frontera. Additional terms of the New Notes include that they will be callable by the Company at 105% during the first 12 months, 102% in year 2 and at 100% thereafter and will be repaid in tranches of 25% every 6 months starting 18 months from issuance. The repayment dates may be extended by one six month period in the event copper falls below US$2.35 for a certain period. The New Notes will not be stock exchange listed nor Canadian RRSP eligible. The restructuring Plan will also involve a wind-up of Frontera and consequential amendments to the Indentures governing the Notes and the commercial banking agreements in order to allow Cobre del Mayo, as the issuer of the New Notes, to have greater flexibility in borrowing for operating and enhancing the Piedras Verdes mine.

The Company will be convening a meeting of Note holders for late February 2010 at a place, time and pursuant to procedures determined by the British Columbia Supreme Court in an interim court order to be sought in the next week or so. An information circular further detailing the proposal and Plan, will be mailed to Note holders and be available for download on 21 days before the meeting. Further details will be provided in a press release at the time of the issuance of the Circular.

Update on Technical Report of Piedras Verdes Mine

The Company has received an advanced draft of the independent technical report co-authored by qualified persons Brian Kennedy, P.Eng., Matt Gray, P. Geol. and John Nilsson, P.Eng updating operations at the Piedras Verdes mine, including anticipated copper recoveries, reserve estimates and economic analyses. Frontera expects to receive and publicly file the final report in the next few days.

Cautionary Statement on Forward Looking Information

Information in this news release that is not current or historical factual information may constitute forward-looking information or statements within the meaning of applicable securities laws. Implicit in this information, particularly in respect of statements as to future operating results and economic performance of the Company, and resources and reserves at the Piedras Verdes operations, are assumptions regarding projected revenue and expense, copper prices and mining costs. These assumptions, although considered reasonable by the Company at the time of preparation, may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including risks relating to general economic conditions and mining operations, and could differ materially from what is currently expected. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Steve Vanry, Chief Executive Officer

Contact Information

  • Frontera Copper Corporation
    Mark Distler
    (480) 477-6789