The funding of expenditures by Danakil Corp. (as well as any subsequent pro rata funding by Danakil Corp. and EPC) will be by way of intra-group loans, on terms to be agreed between the parties. Such terms are expected to include, without limitation, a substantial threshold amount which must be met in order for any sale of EPC's interest in JVCo pursuant to drag rights of Danakil Corp. in the JV Agreement without EPC's prior approval (in its absolution discretion). In the event of a sale of Danakil Corp.'s 70% interest only, it will be a condition of such sale that any intra-group loans outstanding at such time not become payable as a result of such sale. In addition, any failure by Danakil Corp. (in breach of its obligations) to fund any expenditures will result in a claw-back of Danakil Corp.'s ownership interest in JVCo, on a pro rata basis (i.e. in order for Danakil Corp. to have maintained a 70% ownership interest in JVCo at the time of the first pro rata funding by the parties, it must have funded aggregate expenditures of at least US$10 million).
The establishment and funding of the Danakil Joint Venture will be subject to the satisfaction of all related conditions precedent and will thereafter close in escrow, pending the completion of the restructuring of G&B debt described below and the Waiver having been unconditionally granted on or before June 30, 2013.
Danakil Corp. is a wholly owned BVI subsidiary of Circum Minerals Ltd., incorporated to pursue mineral opportunities in Eastern Africa. As at the date of the MOU, each of Circum and Dankil Corp. is at arm's length to EPC.
Restructuring of Outstanding Debt
EPC will assume all outstanding debt of G&B incurred on behalf of EPC, or otherwise incurred by G&B, in connection with the Option (being approximately CAD$1.665 million) and will arrange with substantially all creditors to have all outstanding debt of EPC (being approximately CAD$3.365 million including all G&B debt to be assumed) satisfied by the issuance of 33,650,000 common shares in capital of EPC at a deemed price of CAD$0.10 per share (subject to TSXV approval). Any debt not satisfied with shares will be satisfied with part of the US$1.5 million received from Danakil Corp. under the terms of the Danakil Joint Venture or in due course, as may be agreed between EPC and any creditor.
EPC to Acquire New Potash Permits
The MOU also contemplates the acquisition by EPC, for a total purchase price of CAD$2 million (which will be satisfied by the issuance of shares of EPC at a price of $0.10 per share), of certain rights to acquire potash exploration permits for a group of mineral substances in Mali. The area is known to have produced table salt (NaCI), other salts and Sylvite (KCI).
EPC's acquisition of such permits will be subject to the satisfaction of all related conditions precedent and will thereafter close in escrow, pending the completion of the restructuring of G&B debt described above and the Waiver having been unconditionally granted on or before June 30, 2013.
The potash permits are held by a subsidiary of Premier African Minerals Limited ("PREM"), a mineral exploration and development company of which ZRH is a principal shareholder, and George Roach and Pamela Hueston are directors. As a result, minority shareholder approval of the acquisition may be required under the applicable securities laws and the rules of the TSXV. As PREM is admitted to trading on AIM, the disposal will need to comply with the AIM Rules and other regulatory requirements in the United Kingdom.
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