General chit chat, page-8

Hi Kinaboy - from the IPO doco for BMR

Im trying to find a way to drop the 280 page file on the web, but here is the section regarding the BMR plant

Recent Developments
The ESI Agreement
On May 22, 2018, ESI and BMR entered into an early stage processing facility and cobalt supply
agreement (the “ESI Agreement” under which ESI agreed to make an initial payment of $10 million and provide up to $90 million of capital to build a cobalt processing facility for material mined from the Cobalt District Exploration Project prospects with the intention of achieving commercial mining operations.

Throughout the term of the ESI Agreement and on an annual basis, BMR has agreed to deliver a certain volume of cobalt feedstock material, including associated by-products, to ESI. A five-member technical committee is to be established by ESI and BMR to oversee a planned feasibility study for mining operations and to make a recommendation on whether to proceed with the processing facility project. If the processing facility project is approved, the technical committee would oversee mining, construction and operations.

Under the terms of the ESI Agreement, BMR would earn an initial 35% interest in the processing facility
and related assets once sufficient quantities of feedstock material have been delivered such that ESI achieves a onetime return of its capital. BMR would earn a further 40% interest once ESI achieves, on a cumulative basis, twotimes its return of capital. If BMR earns a cumulative 75% interest, BMR and ESI would establish a joint venture to assume responsibility for purchasing feedstock material from BMR, operating the process facility and marketing Cobalt concentrate.

BMR would have a right of first refusal to purchase ESI’s interest if ESI wishes to sell to a third party and
an option to purchase ESI’s remaining 25% interest after the joint venture is formed. The ESI Agreement contains various default and termination events. Certain events (failure by ESI to raise required financing, commence design and procurement activities or advance construction by determined dates) would entitle BMR to terminate the ESI

Agreement and receive a $20 million fee.

The Cobalt District Exploration Project is an early stage exploration project. There is no assurance that
mining operations or a processing facility will result.

Participation Payment and Construction Financing
ESI must make a $10 million payment to BMR by July 17, 2018 for the right to participate in the
processing facility project. The payment is non-refundable unless BMR does not use commercially reasonable efforts to advance the development of the Cobalt District Exploration Project. As set out in the news release of ESI dated May 22, 2018 (the “ESI News Release”, ESI’s payment obligation is expected to be funded through the issue of subscription receipts convertible into common shares of ESI for proceeds of $10 million at a price of $1.50 per subscription receipt. The closing price of ESI’s common shares on the Canadian Securities Exchange on May 18, 2018, the last day on which the common shares traded before the ESI Agreement was announced, was $0.36. An investment partnership managed by Yorktown is expected to be the sole purchaser of the subscription receipts.

Per the ESI News Release, Yorktown partnerships owned 87.6% of ESI’s outstanding common shares. Yorktown is a New York based asset management firm dedicated to making private equity investments in the energy sector.

The ESI News Release stated that ESI plans to raise up to $90 million to be used towards construction of
the processing facility, if constructed. The estimated cost of the processing facility has yet to be determined. Pursuant to the terms of the ESI Agreement, an initial $50 million must be raised by the later of December 31, 2018 and four months after the Closing Date. The balance of $40 million would be raised later as required.

The ESI transaction is structured to offer BMR and its shareholders several significant benefits. Primarily,
the transaction does not affect the balance sheet, avoiding debt and dilution and allowing shareholders to retain a larger ownership of BMR’s assets, including continued 100% ownership of the Company’s other assets, and the bulk of the Cobalt District Exploration Project. Secondly, the Company believes entering into the ESI Agreement de-risks the financing and development of the Cobalt District Exploration Project, as the risks associated with cost overruns, permitting, and environmental and process issues at any future mines or mill remain with ESI.

As a result, the Company can continue to focus on building its asset base through the aggressive exploration of existing assets and the acquisition of new assets. In addition, nothing in the ESI transaction prohibits BMR from selling additional off-take materials to strategic partners, building or contracting for additional mills, or selling products to a third party. Thirdly, the Company believes the ESI Agreement is a driver of value for shareholders and investors. The Company believes that market uncertainty with respect to financing of feasibility studies and processing facilities would exert negative pressure on the trading price of Ordinary Shares in the market, as holders would expect additional dilution to fund such projects.
Additional subscription amounts were provided to BMR by Yorktown investee companies Weston Energy
II and Weston Cobalt of US$2 million and US$5 million, respectively.