VANCOUVER, BC--(Marketwired - September 09, 2016) - Pine Valley Mining Corporation ("Pine Valley" or the "Company") announces that it has agreed with the buyer of the Walter Energy, Inc.'s ("Walter") coal assets in British Columbia, Conuma Coal Resources Ltd. ("Conuma"), to amend the Royalty Payment Agreement under which Pine Valley was receiving and distributing to creditors of Falls Mountain Coal Ltd. ("Falls Mountain") payments received for the use of its formerly owned Load-Out facility at the Willow Creek mine. Upon Walter seeking creditor protection and seeking a buyer for its assets, it became clear that a buyer would not assume the obligation to pay the amounts in the Royalty Payment Agreement at current and projected coal prices. Conuma agreed that it would only assume the Royalty Payment Agreement on amended terms (the amended agreement will be renamed the "Load-Out Facility Payment Agreement"). These terms provide that payments for the use of the Load-Out facility will be made on the following basis:
1. Pine Valley will be paid a facility fee payment on each tonne of coal shipped through the Load-Out facility. The payment rate will vary depending on Conuma's average selling price of coal per tonne, less deductions for transportation related costs (anticipated to be approximately $20 to $30 per tonne) and less governmental fees, taxes and assessments, and reasonable arm's length sales related costs, fees and commissions.
2. The facility fee payment rate will be as follows:
|Average Selling Price (C$ Per Tonne)
||Facility Fee Payment Rate (C$ Per Tonne)
|>80 and ≤ $90
|>$90 and ≤ $95
|>$95 and ≤ $105
|>$105 and ≤ $125
|Special Note: Every 5 years commencing for the Calendar Year 2027 each of the Average Selling Price ranges will be adjusted up or down to reflect inflation that has occurred based on the change in the Industrial Product Price Index for British Columbia since Q4 2016.
3. Facility fee payments, in the aggregate, will not exceed $17,717,160.30.
4. Conuma has advised Pine Valley that it anticipates shipping approximately 1,400,000 tonnes of coal per year through the Load-Out facility beginning in 2017 which, at current coal prices, will result in payments to Pine Valley of approximately $140,000 per year, assuming that coal is selling for $100 per tonne, which is the approximate current value of coal suggested by Conuma.
In addition, Pine Valley will be paid for its legal expenses, up to a maximum of $70,000, in dealing with Walter's court process and the analysis of the past and future contractual arrangements, and negotiation of the Load-Out Facility Payment Agreement. It will also receive $50,000 as an advance on the facility fee payment amount payable in 2017 when the payments are expected to begin, but this fee will not be refundable should coal not be shipped. The new Load-Out Facility Payment Agreement will have a term of 30 years, contrasted with the present agreement which has no termination date.
Conuma's obligations under the Load-Out Facility Payment Agreement, including the payment of all facility fees owed, will be guaranteed by its parent company, ERP Compliant Fuels, LLC.
To secure the obligations under the Load-Out Facility Payment Agreement Conuma will grant to Pine Valley a junior security interest on the coal tenures owned by it and related to the Willow Creek and Brule coal tenures. This security interest will be subject of subordination to Conuma's arm's length borrowings and security for an indemnity granted in favour of PJT Partners LP.
Pine Valley has concluded that the likelyhood of success of any potential claim against Walter for damages arising from the failure to ensure that the buyer would assume the existing obligations under the original Royalty Payment Agreement was too uncertain and the management of Pine Valley along with certain of the larger creditors believe that agreeing to these new contractual terms is in the best interest of all the creditors of Falls Mountain.
Forward-Looking Statement Cautions:
This press release contains certain "forward-looking" statements within the meaning of United States and Canadian securities legislation, relating to amendments to a Royalty Payment Agreement. Such statements include, without limitation, statements regarding the implementation of a the amended agreement, the timing and amounts of future facility fee payments, the sale prices of Conuma's coal production and the payment of dividends by Pine Valley. Although the Company believes that it will complete the Load-Out Facility Payment Agreement and Conuma will commence coal production that will result in the use of the Load-Out facility which use will generate facility fee payment income, it can give no assurance that such expectations will prove to be correct. Forward-looking statements are statements that are not historical facts; they are generally, but not always, identified by the words "expects," "plans," "anticipates," "believes," "intends," "estimates," "projects," "aims," "potential," "goal," "objective," "prospective," and similar expressions, or that events or conditions "will," "would," "may," "can," "could" or "should" occur, or are those statements, which, by their nature, refer to future events. The Company cautions that forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made and they involve a number of risks and uncertainties. Consequently, there can be no assurances that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Except as required by the securities laws and stock exchange policies applicable to the Company, the Company undertakes no obligation to update these forward-looking statements if management's beliefs, estimates or opinions, or other factors, should change. Factors that could cause future results to differ materially from those anticipated in these forward-looking statements include, Conuma's ability to restart operations at the mine and to sell the coal produced at prices proximate to its current estimates, and other events that could delay or prevent Pine Valley from receiving future facility fee payments. The reader is urged to refer to the Company's historical disclosure record, publicly available through the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com for a more complete discussion of the principal risk factors associated with the operation of the mines and related coal handling facilities previously operated by the Company.