Re-financing Loan Facility

    RNS Number : 5536I
  Van Dieman Mines plc
  20 November 2008
   

    
    20 November 2008

    VAN DIEMAN MINES PLC

    Re-financing of Loan Facility 

    Van Dieman Mines Plc, (AIM:VDM), the AIM listed mining company (the "Company") announces that it yesterday agreed with Galena Special
Situations Master Fund Limited ("Galena") to re-finance the loan facility of up to £5,000,000 granted to it on 30 June 2008 by way of a new
facility to be granted by Galena of up to £6,750,000 (the "Re-financing").

    As previously announced, the Board had been considering undertaking a private placement prior to 31 December 2008. However, due to
current market conditions and the immediate cash requirements needed to meet the Company's current work programme (as described in the
announcement made on 14 November 2008) the Company has decided not to pursue, at this time, the proposed equity fundraising. Instead, the
Company has agreed with Galena that it will re-finance the original loan facility of up to £5,000,000 (the "Original Loan Facility") plus
the bridging loan of £750,000 granted to the Company on the 26 August 2008 (the "Bridging Loan") and the additional bridging loans of a
further A$2,250,000 granted in October 2008 (the "Additional Bridging Loans") by way of the new loan facility of up to £6,750,000 (the "Loan
Facility").

In order to facilitate the new Loan Facility on 19 November 2008 the Company entered into a new investors agreement (the *Investors
Agreement*) and facility agreement (the *Facility Agreement*) with Galena for up to £6,750,000. 

    The principal terms of the Re-financing and the accompanying agreements are summarised below:

·        Galena has agreed to lend the Company up to £6,750,000 secured by the existing first ranking fixed and floating charges over
substantially all of the Company's and its subsidiary Van Dieman Mines Pty Limited's assets which were granted to Galena on 30 June 2008
remaining.
·        Under the terms of the new Investors Agreement the Loan Facility will, once the necessary approvals of shareholders of the Company
have been obtained, be replaced with secured convertible loan notes (the *Loan Notes*) convertible into ordinary shares of £0.01 each in the
Company (*Ordinary Share*) at a conversion price of £0.025 per Ordinary Share. The Loan Notes will be convertible at any time prior to 19
November 2013.
·        The Loan Facility shall terminate on 19 November 2013 and at that date the Company will be obliged to repay any amount outstanding
together with all interest accrued but unpaid at that time. Interest will be calculated on a quarterly basis at 3 per cent. above LIBOR.
Until the Company can demonstrate that it has generated sufficient revenue for the 6 month period prior to any interest repayment date any
interest accrued shall be added to the Loan Notes outstanding and upon repayment of the Loan Notes the Company may elect to either pay such
interest in cash or convert into Ordinary Shares. 
·        In addition, for every £1,000 nominal value of Loan Notes issued to Galena as part of the draw down of the Loan Facility, Galena
will be issued 40,000 warrants to subscribe for Ordinary Shares ("Warrants") at an exercise price of £0.025. The Warrants will be
convertible at any time prior to 19 November 2013.
·        In the event that all the Loan Notes and Warrants were exercised and assuming that the interest that may accrue is also converted
into Ordinary Shares Galena would be interested in 689,660,800 Ordinary Shares representing an interest of 83.55% of the total voting rights
of the Company.
·        Under both the Investors Agreement and the Facility Agreement the Company will give various warranties customary for a transaction
of this nature. The liability for breach of such warranties is capped at £2,000,000.
·        For so long as any amount remains outstanding to Galena under either the Facility Agreement or there are outstanding convertible
loan notes or as long as Galena holds at least 10 per cent. of the issued share capital of the Company, Galena may appoint two directors or
observers to the Board.
·        A general meeting of shareholders (notice of which will shortly be sent to shareholders) will be called for 8 December 2008 (the
"General Meeting") at which resolutions increasing the authorised share capital of the Company, increasing the Directors* authorities under
section 80 of the Companies Act 1985 and disapplying pre-emption rights under section 95 of the Companies Act will be proposed (the
"Resolutions"). Within 2 business days of passing such resolutions at the General Meeting, the Loan Notes and Warrants constituted under the
various instruments will be issued.
·        In the event that the resolutions are not passed or the Company does not constitute the Loan Notes and the Warrant Instrument
within 5 business days of all approvals being received Galena has the right to terminate the Facility Agreement and in such circumstances
the Company will be obliged to re-pay all amounts borrowed under the Facility Agreement together with a redemption fee of £600,000.
·        Under the terms of the Investors Agreement, the previous facility agreement entered into on 30 June 2008 (and announced on that
date) has now terminated. In addition, the original investors agreement dated 30 June 2008 (the "Original Investors Agreement") along with
the original loan note instrument and warrant instrument created pursuant to the terms of the Original Investors Agreement, the Bridging
Loan and the Additional Bridging Loan, shall following the issue of the Loan Notes and the Warrants be immediately terminated and the loan
notes and warrants granted pursuant to the terms of the Original Investors Agreement shall also be cancelled.
 
    
 
    The Loan Facility shall be used to repay the Original Loan Facility, the Bridging Loan Facility and the Additional Bridging Loans and
for working capital purposes including enabling the Company to proceed to production at its Scotia tin-sapphire project.  
    Operational Update

    On 14 November 2008 the Company issued an operational update where it was announced that the initial phase of confirmatory drilling at
Scotia has been completed and the first assay results have been received by the Company. The assay results received to date are broadly
consistent with the historic drilling both overall and in closely adjacent holes. Further, the preparations for mining and processing at
Scotia continue and it is expected that production will commence in December 2008, ramping up to two-thirds full production through
January-March 2009 and then at the production levels previously forecast by the Company.  
    The Company also outlined in its announcement of 14 November 2008 its plans for achieving full production at Scotia by using only one
side of the twin plant on site subject to approvals by the authorities of an increase in operating hours. This will provide the option for
the Company to use the other side of the plant either at a second Scotia mining site or at its Endurance site. It also potentially gives the
Company the option of having three mining and processing sites at or around late 2009. The Company recognises that significant uncertainties
still exist as to the mine head grade of tin in the wash, the amount and recoverability of tin in the overburden above the wash, the amount
and recoverability of sapphires, gold and other products, the stripping ratio in various parts of the deposit, and exactly how the slurry
pumping system will be fed from the wash. As a result, the Company is treating the first few months of operation and production at Scotia as
a trial mining and processing phase and will be progressively reviewing and revising its mine plan. Accordingly, it has been decided that the Company will delay commencement on the
Endurance operation, probably until Q3 2009 so that the Company can take full advantage of the experience of the first few months at Scotia.
To see a full copy of the announcement of 14 November 2008, please visit the Company's website www.vandiemanmines.com.
    Related Party Transaction
    Galena is currently directly or indirectly interested in 18,455,000 Ordinary Shares in the Company representing an interest of 11.97% in
the total voting rights of the Company. Galena is therefore a substantial shareholder of the Company and considered to be a related party as
defined under the AIM Rules for Companies (the "AIM Rules"). The entry into the Re-financing and the terms and conditions contained within
the related documents is therefore classified as a related party transaction for the purposes of the AIM Rules. Accordingly, the Directors,
having consulted with Grant Thornton UK LLP (in its capacity as the Company's nominated adviser), consider that the terms of the
Re-financing and the grant of the Loan Facility are fair and reasonable insofar as the shareholders of the Company are concerned. 

    Upon conversion of the entire Loan Facility into Loan Notes and assuming such Loan Notes are converted into Ordinary Shares along with
all interest that shall have accrued, Galena will be interested in approximately 419,660,800 Ordinary Shares representing an interest of
75.56% in the total voting rights of the Company (assuming that no further Ordinary Shares are issued). In addition, Galena shall be
interested in 270,000,000 Warrants to subscribe for Ordinary Shares at £0.025 per Ordinary Share and on the assumption that all the Loan
Notes and Warrants are exercised and assuming that all the interest that has accrued is also converted into Ordinary Shares Galena will be
interested in approximately 689,660,800 Ordinary Shares representing an interest of 83.55% in the total voting rights of the Company
(assuming that apart from the Ordinary Shares issued on the conversion of the Loan Notes and the exercise of the Warrants no additional
Ordinary Shares are issued).  


    As the Company's place of central management and control is outside the UK, the Panel on Takeovers and Mergers has agreed that the
Takeover Code does not apply to the Company. Accordingly, Shareholders will not be asked at the General Meeting to approve the waiver of the
Rule 9 obligation that would apply if the Company were managed in the UK.

    Off-take Agreement with Trafigura

    The Company's subsidiary, Van Dieman Mines Pty Limited also entered into on 19 November 2008 an exclusive tin off-take agreement with
Trafigura Beheer B.V. ("Trafigura") whereby the Company has agreed to sell high grade tin concentrate produced at the Company's site at
Gladstone, Tasmania to Trafigura. Under the terms of the agreement the price for the tin concentrate is dependent on certain potential
deductions and penalties and will be priced at Trafigura's option based on various rates available on the London Metal Exchange for tin or
the Kuala Lumpur Tin Market during specified periods.  
    Trafigura is one of the world's leading international commodity traders, which specialises in the oil, minerals and metals markets. 
Galena's investments are managed by Galena Asset Management Limited which is a subsidiary of Trafigura. The Trafigura group holds
investments in Galena.  

    Mike Etheridge, Non-Executive Chairman, commented:
    "The Board appreciates the support of all shareholders, but with additional cash requirements at a time of turmoil in global credit and
equity markets and simultaneously being on the cusp of our first tin concentrate production from the Scotia mine in Tasmania, we feel very
appreciative of the additional support afforded the Company by Galena in refinancing the existing loan facility as outlined above. In
addition the arm's length tin concentrate off-take agreement successfully negotiated with the large international commodity trader Trafigura
should ensure the product is reliably sold and payment received within seven days of collection from the mine.
    These deals form significant foundation stones for the future of the Company and permit directors and senior management to focus on the
challenge of mining and processing the ore at our sites of Scotia and Endurance in Tasmania, in a manner which maximizes the return to
shareholders, consistent with the obligations we have as a respected corporate citizen to our workforce, the environment and the community
at large."  

    Enquiries

 VAN DIEMAN MINES plc             
 Mike Etheridge, Chairman        Tel: [phone]Tel: [phone]
 Ron Goodman, Managing Director  2112
 and CEO

 GRANT THORNTON UK LLP           Tel: [phone]
 Gerry Beaney / Fiona Owen

 FOX DAVIES CAPITAL LIMITED      Tel: [phone]
 Daniel Fox-Davies, Managing
 Director



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