Hillsborough Resources Limited

Hillsborough Resources Limited

October 17, 2007 14:10 ET

Hillsborough Has New Financing Offer for Up to $10 Million; Finalizing Details of Earlier Financing for Up to $40 Million

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Oct. 17, 2007) - Hillsborough Resources Limited (TSX:HLB) ("Hillsborough" or the "Corporation") today announced that it has received a formal offer of financing from MinQuest Capital Inc. ("MinQuest"), a mining investment firm based in Montreal, PQ, on top of having negotiated further details of the financing package that was previously announced on August 6, 2007.

The new offer from MinQuest, comprises two parts:

1. A $3 million equity investment consisting of a 6,000,000 share, non-brokered private placement issue at 50 cents, with each share having a half warrant exercisable within 18 months at 60 cents

2. A $7 million secured convertible debenture issue, maturing three years from date of issue, unless converted into common shares of Hillsborough prior to that date. The conversion price is 60 cents per share

The MinQuest financings, which have been approved by Hillsborough's board are expected to close in two tranches - first the $3 million equity raise followed by the $7 million debenture financing. Both are subject to due diligence and are conditional upon approval of the Minquest board as well as normal regulatory sanction.

In addition to the above, Hillsborough has continued lengthy discussions and negotiations with the unnamed international energy company ("Enerco") first mentioned in our release dated August 6th. This has resulted in Hillsborough having received a revised financing proposal apart from the previously announced coal off-take agreement details of which are below.

The financing package totals $40 million, and comprises:

- A $10 million advance for current equipment and wash-plant upgrade needs, as well as general corporate requirements, and

- A $5 million advance facility to cover the working capital needs of opening the new 7 South pit at Quinsam upon receipt of mining permits.

Both of the above facilities are repayable from proceeds of coal shipments made from both the existing Quinsam mine as well as from the proposed new 7 south pit.

- Enerco has also offered a $2.5 million, ten-year subordinated, unsecured convertible note facility, with closing conditional upon receipt of a mining permit for the 7 South pit.

- Finally, Enerco will provide the estimated $22.5 million required to cover equipment and infrastructure expenditures necessary for the Quinsam North mine, as and when that mine's feasibility has been proven and the necessary permitting obtained.

The above financing offer from Enerco is in addition to the previously-negotiated coal off-take agreement, whereby Enerco has agreed to purchase from Hillsborough a total of 3million tons of its coal production (600,000 tons per year for five years) at fixed and floating prices over a five year term. The fixed price will be commensurate with current market pricing, which is significantly higher than Hillsborough's current realized price to its existing contracted customers.

The Enerco financings remain subject to completion of due diligence which is currently in progress, as well as approval from Enerco's and Hillsborough's board of directors. The MinQuest offer has been approved by Hillsborough's Board.

David Slater, President & CEO stated, "Management is very happy with the two proposals received, which, although different in structure, can be seen as being complimentary to one another. The two facilities allow Hillsborough to take Quinsam to a much higher level of production, as well as potentially develop other thermal and metallurgical coal opportunities on the Pacific Rim. The partnership with Enerco permits us access to long term as well as spot markets in the Pacific basin, while the association with MinQuest brings a large strategic shareholder with excellent knowledge of the North American coal industry."

About Hillsborough Resources Limited

Hillsborough Resources Limited is a coal mining company that operates the Quinsam underground thermal coal mine in Campbell River, British Columbia, serving the local and west-coast U.S. cement industry. The Company holds a 20% interest in the Peace River Coal Limited Partnership, which has substantial metallurgical coal properties both in production start-up and under development near Tumbler Ridge, British Columbia. In addition, the Company is developing the proposed Wapiti thermal coal mine in the same region. Hillsborough also holds the Bingay Creek metallurgical coal property located in the Elk Valley region of southeast British Columbia.

Contact Information

  • Hillsborough Resources Limited
    David Slater
    President & C.E.O.
    (604) 684-9288
    (604) 684-3178 (FAX)
    Website: www.hillsboroughresources.com
    CHF Investor Relations
    Cathy Hume
    (416) 868-1079 ext. 231
    (416) 868-6198 (FAX)
    Email: cathy@chfir.com
    CHF Investor Relations
    Chris Haldane
    Assoc. Account Manager
    (416) 868-1079 ext. 237
    Email: chris@chfir.com