First Nickel Inc.
TSX : FNI

First Nickel Inc.

February 09, 2015 10:03 ET

First Nickel Announces Debt Refinancing

TORONTO, ONTARIO--(Marketwired - Feb. 9, 2015) - First Nickel Inc. ("First Nickel", "FNI" or the "Corporation") (TSX:FNI) announces that it is has entered into a commitment letter (the "Commitment Letter") with three of its major shareholders and lenders: Resource Capital Fund IV L.P. ("RCF IV"), Resource Capital Fund V L.P. ("RCF V" and, together with RCF IV, "RCF"), and West Face Long Term Opportunities Global Master L.P. and/or its affiliates ("West Face") to complete a transaction to refinance all of its outstanding debt obligations (the "Debt Refinancing"). FNI also announces that it intends to seek the approval of its shareholders for a consolidation of its issued and outstanding common shares, anticipated to be completed later in 2015 (the "Share Consolidation").

Completion of the Debt Refinancing and the Share Consolidation are subject to certain closing conditions, including approval by the shareholders of FNI and the Toronto Stock Exchange (the "TSX"). The Corporation has called a special meeting of the shareholders (the "Meeting") to be held on March 11, 2015 to approve the Debt Refinancing and the Share Consolidation. The Corporation has set a record date of February 9, 2015 for the Meeting. Further details of the Debt Refinancing and the Share Consolidation will be contained in the management information circular in respect of the Meeting, which will be sent to shareholders of the Corporation.

The details of the Debt Refinancing and the Share Consolidation were reviewed by the Corporation and the board of directors of FNI (the "Board"), with Mr. Russell Cranswick, a director nominated by RCF, recusing himself from the Debt Refinancing approval. The Board carefully considered the terms and conditions of the Debt Refinancing, with input from management and legal counsel, and determined that it is in the best interests of the Corporation.

Details of The Debt Refinancing

Existing Indebtedness

FNI's outstanding indebtedness is currently approximately US$38 million in the aggregate, comprising four separate instruments: (a) the US$18 million revolving credit facility (the "BNS Facility") with the Bank of Nova Scotia ("BNS"), which matures on March 12, 2015; (b) the US$10 million convertible loan (the "RCF IV Convertible Facility") with RCF IV, which matures on March 31, 2015; (c) the US$5 million term loan (the "RCF V Loan") with RCF V, which matures on March 31, 2015; and (d) the US$5 million term loan (the "West Face Loan") with West Face, which matures on March 31, 2015.

The Terms and Conditions of the Debt Refinancing

The RCF IV Convertible Facility

Pursuant to the Commitment Letter, the Corporation has agreed to issue 624,150,000 common shares to RCF IV in full satisfaction of FNI's outstanding obligations under the RCF IV Convertible Facility, which represents a per common share issue price of C$0.02 and a USD - CAD exchange rate of 1:1.2483 to convert the outstanding principal amount under the RCF IV Convertible Facility into Canadian dollars. Upon the issuance of the common shares, the RCF IV Convertible Facility will be terminated and the security previously granted to RCF IV will be released.

The RCF V Loan and the West Face Loan

Pursuant to the Commitment Letter, the Corporation has agreed to amend and restate the RCF V Loan and the West Face Loan (the "Amended Loans").

The RCF V Loan will be increased to US$15.5 million and the West Face Loan will be increased to US$12.5 million. The Amended Loans will mature December 30, 2016 and both will bear interest at an annual rate of 10%. Interest will be payable in cash or, at the election of the applicable lender, in common shares of the Corporation. The number of common shares issuable in satisfaction of interest will be calculated on the basis of the formula within each applicable Amended Loan agreement. In connection with the Debt Refinancing, the Corporation will issue 240,000,000 warrants to RCF V and 194,000,000 warrants to West Face. The warrants will have an expiration date of December 30, 2016 and an exercise price of C$0.02 per common share and will be substantially in the form previously issued to RCF and West Face in the Corporation's April 2013 refinancing transaction. Under the Amended Loans, the Corporation will be subject to an excess cash sweep, whereby every quarter the excess of the Corporation's cash balance above C$5.0 million will be applied to repay the Amended Loans. The terms of the Amended Loans will be substantially similar to the existing RCF V Loan and West Face Loan. However, the Amended Loans will contain, among other things, an event of default if the Corporation's common shares are delisted from the TSX, unless the delisting is not voluntarily and the common shares are then listed on the TSX Venture Exchange.

Certain proceeds from the Amended Loans will be used to pay out the outstanding balance under the BNS Facility. Following repayment in full, the BNS Facility will be terminated and the standby letters of credit securing the BNS Facility posted by RCF V and West Face will be returned and cancelled. The credit facilities made available by RCF V and West Face backstopping the letters of credit posted with BNS will also be terminated.

Board Recommendation

The Debt Refinancing will enable the Corporation to avoid a default on its current debt obligations, as the Corporation would otherwise be unable to repay its outstanding obligations prior to their maturities in March 2015.

As a result of, among other things, the challenging third-party debt market for junior resource companies, the imminent maturity of the Corporation's existing indebtedness, the lack of interest demonstrated by investors for an equity financing as a result of the depressed market price for the common shares of the Corporation, the existing substantial equity and debt positions in the Corporation of RCF and West Face, and the challenges facing the price of nickel in the commodities market, the Board and management of the Corporation believe that the Debt Refinancing represents the best financing alternative available to the Corporation under the current circumstances.

The Board unanimously recommends, with Mr. Russell Cranswick, a Director nominated by RCF, disclosing an interest in the transaction and abstaining, that shareholders vote in favour of the Debt Refinancing.

Shareholder Approval Requirements

The Debt Refinancing must be approved, in accordance with securities laws and the requirements of the TSX, by a simple majority of the votes cast by the shareholders other than RCF IV, RCF V, West Face and each of their respective directors, senior officers and affiliates.

Upon completion of the Debt Refinancing, and including common shares already held by it, RCF will hold approximately 67% of FNI's common shares outstanding, and 63% on a pro forma fully diluted basis. Upon completion of the Debt Refinancing, and including common shares already held by it, West Face will hold approximately 11% of FNI's common shares outstanding, and 20% on a pro forma fully diluted basis.

Share Consolidation

The Corporation is also seeking shareholder authorization to effect the Share Consolidation. If approved by the Corporation's shareholders, the Board will have discretion to: (a) implement the Share Consolidation at any time prior to March 11, 2016, and (b) determine the consolidation ratio, provided that the ratio determined by the Board is between 250 and 1,000 pre-consolidation common shares for each one post-consolidation common share.

As of February 9, 2015, the Corporation had authorized an unlimited number of Common Shares of which 701,163,591 pre-consolidation common shares were issued and outstanding. Upon completion of the Debt Refinancing, the Corporation will have approximately 1,325,313,591 pre-consolidation common shares issued and outstanding.

The proposed Share Consolidation will not alter the rights and preferences of existing shareholders and will not affect any shareholder's proportionate ownership or voting interest in the Corporation, except to the limited extent the Share Consolidation would result in fractional shares that are cancelled.

About FNI

FNI is a Canadian mining and exploration company. FNI's mission is to be the most dynamic North American emerging base metal mining company in which to work and invest and to be respected in the communities in which it operates. FNI owns and operates the Lockerby Mine in the Sudbury Basin in northern Ontario, which reached full production during 2013 and is expected to produce approximately 13 million pounds of contained nickel and approximately 7 million pounds of contained copper in 2015, providing a foundation from which to grow the Corporation.

FNI's shares are traded on the TSX under the symbol FNI.

Cautionary Statement Regarding Forward Looking Information

Certain statements contained in this news release may contain forward-looking information about the Corporation. Forward-looking information can often be identified by the use of forward-looking terminology such as "anticipate", "believe", "continue", "budget", "forecast", "estimate", "schedule", "expect", "goal", "intend", "target", "potential", "objective", "may", "plan" or "will" or the negative thereof or variations thereon or similar terminology. Forward-looking information may include, but is not limited to: the realization of value through the Lockerby restructuring plan announced on January 12, 2015; expectations that the Debt Refinancing will be completed; that the Debt Refinancing may improve the Corporation's financial position; anticipated effects of the Debt Refinancing including: the reduction of leverage, improved liquidity, preservation of the possibility for future returns for shareholders; potential impacts of not implementing the Debt Refinancing; the anticipated effects of the Share Consolidation (as defined below); continued operations at the Lockerby mine, including the Lockerby restructuring plan and its expected impact on the Lockerby mine; net cash flow generated by the Lockerby mine; and future operating performance of the Corporation and its projects.

By its nature, forward-looking information is based on certain factors and assumptions which involve known and unknown risks, uncertainties and other factors which may cause the actual results, realization of mineral resources, performance or achievements of the Corporation, financial position or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information.

Accordingly, actual events may differ materially from those implied by any forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, which speak only as of the date the statements were made and readers are also advised to consider such forward-looking information while considering the risk factors set forth in: the management information circular to be dated on or about February 9, 2015, under the heading 'Risks and Uncertainties' in management's discussion and analysis for the year ended December 31, 2013 and under the heading 'Risk Factors' in the Corporation's annual information form for the year ended December 31, 2013. The Corporation disclaims any intention or obligation to publicly update or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.

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