Formation Metals Inc.

Formation Metals Inc.

November 10, 2009 19:27 ET

Formation Metals Inc. Announces Preliminary Short Form Prospectus for Debt and Equity Offering

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 10, 2009) -


Formation Metals Inc. (formerly "Formation Capital Corporation") (TSX:FCO) (the "Company") is pleased to announce it has obtained a receipt for the filing of a preliminary short form prospectus dated November 10, 2009, in all of the provinces of Canada, except Quebec, in respect of an offering (the "Offering") of common shares ("Common Shares") and units (the "Units") of the Company.

Each Unit will consist of one series A senior secured note in the principal amount of US$1,000 (each, a "Series A Note") and 150 series A share purchase warrants (each, a "Series A Warrant") and 125 series B share purchase warrants (each, a "Series B Warrant"). The Series A Notes will bear interest at the rate of 10% per year, all of which will be prepaid at closing and will mature two years from the date of closing at a price of US$1,050 per US$1,000 principal amount. On the maturity date of the Series A Notes, the Company may, at its option, elect to redeem all or part of the Series A Notes in denominations of US$1,000 or multiples thereof by issuing series B senior secured notes (each a "Series B Note") in the principal amount of US$1,000, on the basis of US$1,100 principal amount Series B Notes for each US$1,000 principal amount Series A Note. The Series B Notes will bear interest at the rate of 7% per year, payable semi-annually in arrears on May 31st and November 30th of each year, with the first interest payment to be made on May 31, 2012. The Series B Notes will mature five years from the date of issuance. The Series B Warrants will be exercisable only in the event that the Series B Notes are issued, and will be exercisable for a period of 5 years from the issue date of the Series B Notes.

Under the Offering, up to 117,347 Units will be offered at a price of US$980 per Unit for aggregate proceeds of up to US$115,000,060 and C$45,000,000 of Common Shares. The amount and issue price of the Common Shares and the exercise price of the Series A Warrants and Series B Warrants under the Offering will be determined at the time of filing the final short form prospectus. The Offering is subject to certain conditions including, but not limited to, the receipt of all necessary approvals, including the acceptance of the Toronto Stock Exchange.

The Offering is expected to close on or about December 15, 2009. The Offering will be conducted on a best efforts agency basis. Jennings Capital Inc. is the lead agent of a syndicate that includes Blackmont Capital Inc. and Acumen Capital Finance Partners Limited (collectively, the "Agents"). The Agents will be granted an option to purchase up to 15% of the number of Common Shares sold up to 30 days after closing and up to 15% of the number of Units sold up to 48 hours prior to closing to cover over-allotments, if any and for market stabilization purposes.

In consideration for the services to be rendered by the Agents under the Offering, the Agents will receive a cash commission of 4% of the gross proceeds of the Units and 5.5% of the gross proceeds of the Common Shares sold under the Offering and including any Units or Common Shares sold as a result of the exercise of the Agents' over-allotment option. The Company will also issue agents' warrants to purchase up to 4% of the number of Series A Warrants sold under the Offering and 5.5% of the number of Common Shares sold under the Offering (including the Series A Warrants and Common Shares issuable upon exercise of the Agents' over-allotment option).

The Company plans to use the proceeds of the Offering to fund construction at the Idaho Cobalt Project and the Big Creek Hydrometallurgical Complex, for bonding requirements, for general corporate purposes, and to pre-pay interest on the Series A Notes.

"This unique approach to financing achieves many of our objectives." stated Mari-Ann Green, C.E.O. of Formation Metals Inc. "It provides the mechanism to raise the initial 'high risk' money which will be used to advance our high purity cobalt project to production in early 2011. After the second year, the structure then provides the Company with refinancing flexibility once we are up and running and have removed the startup risks that affect every new mining project. With robust annual net cash flows from the project in excess of US$30 million in the previously announced 43-101 base case analysis, the cobalt production from our Idaho operations should prove to be a long – life , profitable cash flow generator from which to grow our business."

These securities have not been registered under the United States Securities Act of 1933, as amended, (the "US Securities Act") or any state securities law, and they may not be sold in the United States or to or for the account or benefit of "US persons" as defined in Regulation S under the US Securities Act unless an exemption from registration is available. This press release does not constitute an offer to sell or a solicitation of an offer to buy these securities in the United States or to US persons.

Formation Metals Inc. is dedicated to the principles of environmentally sound mining and refining practices, and believes that environmental stewardship and mining can co-exist. The Company trades on the Toronto Stock Exchange under the symbol FCO.

Formation Metals Inc.

Mari-Ann Green, CEO

This press release contains "forward-looking statements" within the meaning of applicable Canadian securities legislation. Generally, forward-looking statements can be identified by the use of forward- looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may" ,"could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to: risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, the nature of our customers and rates of default, and competition as well as those factors discussed in the Company's documents filed on SEDAR (

Although the Company 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 such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws. Further information on the Company is available at

The statements contained in this news release in regard to Formation Metals Inc. that are not purely historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including Formation Metals Inc.'s beliefs, expectations, hopes or intentions regarding the future. All forward-looking statements are made as of the date hereof and are based on information available to the parties as of such date. It is important to note that actual outcome and the actual results could differ from those in such forward-looking statements. Factors that could cause actual results to differ materially include risks and uncertainties such as technological, legislative, corporate, commodity price and marketplace changes.

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