In this presentation, Charles Spector Partner at FMC, gives an overview on how to finance mining projects in the Plan Nord Region.

1. Financing Mining Projects in the Plan Nord Region
Presented by: Charles R. Spector
charles.spector@fmc‐law.com
+1 514 878‐8847
October 2, 2012

2. Mining Financing
• Preliminary Exploration and Development
– mostly equity
– very little debt financing possible absent personal or other guarantees
• Pre‐Production Financing
– primarily equity
– some debt may be available in the form of a line of credit
• Project Financing
– Generally third party lending but can also be with varied levels of equity
participation
• Production Financing
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3. Available Financing Instruments
• Convertible Bonds
• Secured Bonds
• Bonds combined with warrants (units)
• Common terms and conditions
– Interest rate
• fixed
• variable
– Maturity date
• short term (2‐5 years)
• long term (5‐10 years)
– Representations and warranties
– Covenants
– Negative covenants
– Default provisions
– Guarantees
– Security
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4. Warrants
• Exercise price
– Stock exchange rules
– Accounting issues
• Transferability
– Public or private
• Cashless exercise
• Shareholder or regulatory approval
• Change of control provisions
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5. Project Financing
• Typical lenders would include financial institutions (banks, trust companies,
lifecos and pension funds)
• Usually we will have a series of very strict covenants and milestones in
order to receive advancement of payments (environmental reports,
engineers reports, percentage of project to completion, absence of liens,
etc.)
• Will often be conditional upon off‐take agreements and all other material
contracts already being in place
• Lenders may also insist on the assignment of all material contracts,
permits, concessions, etc.
• Depending on the construction period, a higher rate of interest may be
charged during the construction period and then once complete and
certified, the construction loan is converted to a longer term (5‐25 years)
loan.
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6. Equipment of Asset‐Backed Financing
• Many equipment and machinery sellers offer financing
programs
• This could apply to equipment such as earth movers,
conveyors, trucks, etc.
• The equipment could be financed with an option purchase or
be sold on a conditional basis pending payment in which case
the ownership of the equipment would remain with the seller
• Registration issues and underlying security interest
• In addition to the equipment manufacturers themselves, there
are a number of lenders which we refer to as asset back
lenders who advance funds for the purchase of machinery and
equipment
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7. Equipment Financing (cont’d)
• The lender takes security in all of these assets
• The security is typically registered in the Registre des droits
personnels et réels mobiliers (RDPRM)
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8. Conventional Bank Financing
• Credit facilities
• Short term
• Long term
• Immovable property financing
– Typically covers buildings, including infrastructure facilities
(dormitories, dining rooms, cooling or heating equipment,
concentrators, conveyors, etc.)
– Would only be available for companies with significant financial
resources or mines already in an advanced stage of production
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9. Particularities of the Plan Nord
• Much of the territory is not cadastered
• Cadastral description is necessary in order to register hypothecs on
immovable property
• Necessary to open files in various registers including the register of real
rights of State resource development, the land register, the RDPRM, the
Registre des droits miniers, réels et immobiliers)
• Coordinates can now be given by GPS in order to localize the property and
to effectively register the security (3036 C.C.Q.)
• Hypothecation of mining claims may also be done through GESTIM but in
some cases the lenders will insist that the security be registered in one of
the other registers
• Timing and advance planning will be very helpful particularly given weather
patterns and other working conditions
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10. Railway, Airport and Port Facilities
• Since these are integral parts of many mining projects, lenders
want to be able to “step in the shoes of” the borrower in case
of a loan default
• It is therefore necessary to obtain consent in order to assign
any rights under various agreements (airport lease, railway
tolling agreements and port leases) to ensure that in the event
of a default the operations and deliveries can continue
• It is critical for the bankers to know that agreements for the
production and delivery will be respected so the loans can be
serviced and, if necessary, the underlying assets and
“business” can be sold as part of a realization process
• Assignment of agreements and permits
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11. Partnerships and Joint Ventures
• Still a very common form of mining financing
• Often a junior will partner up with a major mining company
• The partnership agreements could be quite complex including
provisions with respect to allocation of profits, capital cost
allowance and other depreciation, management and control
• Rachet clauses
• Clawback clauses
• Default
• Extensive partnership agreements or joint venture agreements
• Often end up in litigation
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12. The preceding presentation contains examples of the
kinds of issues companies dealing with Insurance
could face. If you are faced with one of these issues,
please retain professional assistance as each situation
is unique.

13. Thank you!
charles.spector@fmc‐law.com
+1 514 878‐8847
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