London Mining announces that it has reached an agreement with Fraser Turner Limited in connection with the termination of a consulting agreement dated February 28th 2007 and settled the dispute relating to a claim for a 2% revenue related royalty brought by Fraser Turner over production at the Marampa Project in Sierra Leone with immediate effect.
The consulting agreement under dispute contemplated the payment of certain royalties relating to London Mining's iron ore production at Marampa. These royalties included a 10 cents per tonne sold royalty that was not in dispute and a 2% royalty on revenue from the Marampa Project, which was disputed by London Mining.
The key terms of the agreements are as follows:
The Consulting Agreement has been terminated.
In consideration of the settlement of the dispute which has included a close out of the Consulting Agreement (including replacement of the undisputed 10 cents per tonne royalty), London Mining has elected to pay Fraser Turner a fee of USD 2.35 million in cash and a further fee of GBP 2.38 million which London Mining has elected to satisfy by the issue of 1 million ordinary shares in London Mining at a price of GBP2.38 per share. If the shares and any benefits derived from such Shares are worth less than GBP 7 per a share at the end of three years or earlier in certain circumstances, an additional payment equal to the differential must be paid to Fraser Turner, which London Mining can elect to satisfy in shares and pay a total royalty equal to 0.3% of the price received by London Mining for iron ore sales from Marampa, net of the existing royalty payable to the Government of Sierra Leone on an FOB basis.
London Mining and Fraser Turner have agreed that the Shares will be subject to a lock up for a period of 2 years, provided that the Shares will be released from the lock up in certain circumstances, including in the event that London Mining's obligation to pay the Top up Amount falls away as a result of London Mining's share price exceeding GBP 7.
It has been agreed that London Mining will have a first right of refusal on any potential iron ore mining opportunities in West Africa identified by FT Services (Oxford) Limited pursuant to an agreement entered into between them.
The parties have agreed that half of the Shares, and any proceeds resulting from the sale thereof, will be held by a third party custody agent for a period of 2 years, which may be extended to 3 years in certain circumstances. In the event of a material breach of the Services Agreement, Fraser Turner has agreed to surrender half of the Shares and any proceeds resulting from the sale of such shares to London Mining, and that the amount of the Top up (if any) shall be reduced by 50%.
London Mining will apply for admission of the Shares to trading on AIM. Admission is expected to become effective on June 15th 2012.
Source - London Mining
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