First Bauxite Enters Into Commitment Letter With RCF

Nov. 16, 2010 - FIRST BAUXITE CORP. is pleased to announce that it has entered into a binding commitment letter with Resource Capital Fund V L.P. (RCF) for a two tranche convertible loan facility of up to US$28 million. The facility will be used primarily to fund further development work including detailed engineering, reserve definition, equipment procurement and such further work as may be required to secure bank financing and final permitting over the known refractory-grade bauxite deposits in the Bonasika Mining Licence and the Waratilla-Cartwright Prospecting Licence in Guyana.
The proposed facility will be comprised of a first tranche of US$8 million principal amount of unsecured convertible notes (having a five year term, bearing no interest), which notes will be convertible into common shares of the Company at a conversion price of C$0.83. Upon completion of certain conditions precedent, RCF will have an option to make an additional US$20 million investment to subscribe for additional convertible notes in the aggregate principal amount of US$20 million, which notes will be convertible into common shares at a conversion price equal to the greater of:
1. the maximum discount permitted by the TSX Venture Exchange (TSXV), but in any event not less than a 20% discount to (i) the volume-weighted average closing price of the Company's common shares on the TSXV for the 20 trading days preceding the day on which the RCF exercises its option to acquire the second tranche notes; and
2. C$1.245 (150% of the conversion price for the first tranche notes),
provided that,
3. the second tranche conversion price will not be greater than C$2.00 per share; and 4. the second tranche conversion price will be reduced as necessary to ensure that the common shares issuable on conversion of the second tranche notes will comprise not less than 12.5% of the Company's common shares calculated on a fully diluted basis following the issuance of the second tranche notes based on the second tranche conversion price.
Upon the closing of the first phase of the financing, RCF will have the right to appoint one nominee to the Board of Directors of the Company.
The Company has agreed to pay to RCF, in cash, an establishment fee in the amount of 3.75% of the proceeds of each tranche of the facility. If the first phase of the financing is not closed as a result of the failure to satisfy the conditions precedent, the Company will reimburse RCF for its actual costs in connection with the facility to a maximum of US$100,000.
Completion of the proposed financing is subject to a number of conditions, including completion of satisfactory due diligence by RCF, receipt of all necessary TSXV and other applicable regulatory approvals, receipt of all necessary shareholder approvals, and the execution and delivery of definitive agreements. It must be noted that the proposed facility by RCF and the existing active financing facility by Pacific Road Resources Funds (announced on June 4, 2009) are constructed on a parri passu basis and thus on same business terms. It is anticipated that the first tranche will close on or before December 31, 2010.
Yannis Tsitos, President of First Bauxite commented: "The First Bauxite team is executing its strategy of becoming a significant new producer in the sintered refractory bauxite industry. Securing this level of investment is a strong expression of confidence in our business model, future product and current resources. This facility allows us to maintain momentum and pursue our plans in the short and medium time framework. Resource Capital Funds are private equity funds supporting mining companies throughout the globe across a diversified range of mineral commodities inclusive of industrial minerals, and run by highly experienced professionals. Following the necessary approvals by the Exchange and our shareholders, the execution of definitive agreements and the closing of this financing, Resource Capital Funds will hold a significant part of the issued capital of the Company. We are very pleased to have the financial support of this major resource group and we will welcome their nominee on our Board."