Quadra Mining Ltd.

Quadra Mining Ltd.

March 08, 2010 07:00 ET

Quadra Mining Signs Memorandum of Understanding to Create a Strategic Partnership With State Grid International Development Limited

VANCOUVER, BRITISH COLUMBIA--(Marketwire - March 8, 2010) - Quadra Mining Ltd. ("Quadra" or "the Company") (TSX:QUA) is pleased to announce that it has executed a memorandum of understanding ("MOU") with State Grid International Development Limited ("SGID"), a wholly owned subsidiary of State Grid Corporation of China, the largest Chinese utility company and a major end user of copper for the formation of a joint venture (the "Strategic JV"). The Strategic JV will develop and operate Quadra's Sierra Gorda project and Franke Mine and seek to invest in other prospective copper assets, initially in Chile. The parties will be entitled to their proportionate share of the concentrate or cathode production of the Strategic JV on arm's-length terms. Quadra shall be responsible for supervising the day-to-day operations of the Strategic JV under the oversight and direction of a Board of Directors consisting of an equal number of representatives from both parties. SGID will lead the efforts of the Strategic JV to arrange the necessary project financing with a target of not less than a 60:40 debt equity ratio, subject to a bankable feasibility study and other conditions.

The final detailed structuring of the transaction will be determined before the definitive agreements are signed. Quadra will contribute the Sierra Gorda project and the Franke Mine, representing $900 million in assets, and SGID will contribute capital to each gain a 50% equity interest in the Strategic JV. Thereafter each party can contribute 50% of any further equity requirement to maintain its interest.

In addition, as part of the MOU, SGID and Quadra have agreed to undertake a private placement pursuant to which SGID will subscribe for shares representing approximately 9.9% of Quadra's outstanding shares on a post-subscription basis (approximately 10.9 million shares) at a price of CDN$13.91 per share being the market price of Quadra common shares on the date the Company applied for TSX approval during the course of negotiations. The private placement will be structured as a subscription receipt, with the proceeds to be released to Quadra and the shares to be released to SGID, upon closing of the Strategic JV. Under the MOU, a SGID nominee will be invited to join the Board of Quadra.

The MOU is non-binding except in certain limited respects but establishes the basis for the negotiation of the definitive Strategic JV agreements. Execution of definitive agreements is subject to a number of conditions for the benefit of both parties and common to agreements of this nature, including further due diligence and the applicable regulatory and government approvals. Both parties anticipate that the execution of definitive agreements will occur late in the second quarter of 2010.

"Quadra's agreement with SGID resolves the funding issue for the Sierra Gorda project and allows for development to proceed rapidly once we have the feasibility study and permits in place," said Paul Blythe, President and CEO of Quadra. "The project funding will be made in accordance with the requirements of the Sierra Gorda construction schedule, which is under development as part of the feasibility study now under way and due for completion in December 2010, and is expected to be spread over two years. The strategic joint venture brings together a unique and powerful combination, with State Grid's financial capacity and position as a major end user of copper in China and Quadra's skills in acquiring, developing and operating copper producing assets. We believe that with SGID, Quadra has a very strong strategic partner that will not only allow us to construct projects like Sierra Gorda, but also consider other attractive opportunities of substantial size."

CIBC World Markets, working with The Balloch Group, is acting as financial advisor and Blake, Cassels and Graydon LLP as legal advisor to Quadra on the transaction.

About State Grid International Development Limited

State Grid International Development Limited is a wholly-owned subsidiary of the State Grid Corporation of China ("SGCC"). SGCC is the largest public utility company in the world and its core business is to build and operate power grids and provides secure and reliable power supply in China. In the list of the world top 500 corporations for 2009 released by Fortune magazine, SGCC ranked 15th with revenue of USD$164 billion and is the third largest Chinese enterprise in the listing. SGID is a subsidiary of SGCC for developing its international businesses and engaging in international investments, centralized procurement and other services.

About Quadra Mining Ltd. (TSX:QUA)

Quadra is a British Columbia corporation based in Vancouver and is a mining company whose principal assets are the Robinson Mine in Nevada, producing copper and gold, the Carlota Mine in Arizona, producing copper cathode, the Franke Mine in northern Chile, producing copper cathode, the Sierra Gorda advanced exploration copper-molybdenum project in Chile and the Malmbjerg molybdenum development project in Greenland. The Company has the goal of becoming a mid-tier base metals development and operating company with interests in a number of advanced exploration, development and producing properties.

This Press Release contains "forward-looking information" that is based on Quadra's expectations, estimates and projections as of the dates as of which those statements were made. This forward-looking information includes, among other things, statements with respect to the formation of a Strategic JV with SGID, the ability of SGID to obtain financing and the acquisition and development of new properties by the parties. Generally, this forward-looking information can be identified by the use of forward-looking terminology such as "outlook", "anticipate", "project", "target", "believe", "estimate", "expect", "intend", "should", "scheduled", "will", "plan", "would" and similar expressions. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause Quadra's actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information and is developed based on assumptions about such risks, uncertainties and other factors, including but not limited to:

  •  the ability of Quadra and SGID to successfully negotiate a definitive joint venture agreement;
  • whether the conditions to closing the joint venture will be completed, including each party being satisfied with its due diligence on the other party;
  • uncertainties relating to the receipt and timing of any necessary government and regulatory approvals;
  • uncertainties relating to the receipt of approval of SGID's proposed private placement by the Toronto Stock Exchange;
  • uncertainties relating to the availability of debt and equity financing to Quadra and SGID, including SGID's ability to arrange financing for the proposed joint venture on acceptable terms;
  • uncertainties relating to the existence of new mineral properties which merit exploration and development and the proposed joint venture's ability to acquire them on acceptable terms;
  • uncertainties relating to the proposed joint venture's ability to bring new mineral properties into production;
  • fluctuations in copper and other metal prices;
  • uncertainties related to the possible recalculation or reduction in the Quadra's mineral reserves and resources;
  • uncertainties related to actual capital costs, operating costs and expenditures, production schedules and economic returns from the Company's mining projects;
  • risks associated with Quadra's ongoing litigation relating to its Sierra Gorda property;
  • uncertainties relating to the production ramp-up at the Franke Mine;
  • uncertainties related to the amount of funding required to achieve full production levels at the Franke Mine;
  • uncertainties related to the construction quality and structural design at the Franke Mine;
  • uncertainties related to the current global financial conditions;
  • inherent hazards and risks associated with mining operations;
  • uncertainties related to the competitiveness of the mining industry;
  • risks associated with Quadra and SGID being subject to government regulation, including changes in regulation;
  • risks associated with Quadra being subject to extensive environmental laws and regulations, including changes in regulation;
  • risks associated with the need of Quadra, SGID and the proposed joint venture's need for governmental license and permits;
  • political and country risk in the jurisdictions in which Quadra, SGID and the proposed joint venture operate;
  • risk of water shortages and risks associated with competition for water;
  • the need of Quadra and the proposed joint venture to attract and retain qualified personnel;
  • increases in off-site transportation and concentrate processing costs;
  • risks related to the stability of mine pit walls;
  • risks associated with costs of operating supplies, including sulphuric acid;
  • risks in the nature of investments; and
  • risks related to hedging contracts and exposure to the credit risk of counterparties.

A discussion of these and other factors that may affect Quadra's actual results, performance, achievements or financial position is contained in the filings by Quadra with the Canadian provincial securities regulatory authorities, including Quadra's Annual Information Form. Forward-looking statements are based on assumptions management believes to be reasonable, including but not limited to the continued operation of Quadra's mining operations, no material adverse change in the market price of commodities, that the mining operations will operate in accordance with Quadra's public statements and achieve its stated production outcomes, and such other assumptions and factors as set out herein. Although Quadra has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate. Accordingly, readers should not place undue reliance on forward-looking statements. Quadra disclaims any intent or obligations to update or revise publicly any forward-looking statements whether as a result of new information, estimates or options, future events or results or otherwise, unless required to do so by law.

Contact Information

  • Quadra Mining Ltd.
    Derek White
    Executive Vice President, Corporate Development
    (604) 999-0726