Magellan Metals in $10m Esperance deal

Magellan Metals, the miner at the centre of the Esperance lead contamination drama, has agreed to a $10 million commitment towards the clean up of the town and the establishment of a community fund.

The clean up commitment was negotiated between the state government and the company, which operates the Wiluna lead mine that has been placed into care and maintenance since early 2007.

The state government said $9 million will go towards cleanup efforts, including the removal of the lead shed at the Esperance port and the reimbursement of past cleanup works around the port and the town area.

Magellan will make the cleanup payment in $3 million installments over the next three years.

Ivernia, the Canadian parent company of Magellan, said the first payment is due by the end of next year.

Ivernia added that the payments are subject to Magellan achieving set cumulative earnings targets beginning next year.

"The earnings targets are A$6 million, A$12 million and A$18 million respectively by the three repayment dates.," the company said in a statement.

"In the event that such earnings targets before interest, taxation, depreciation, amortization and unrealised foreign exchange gains and losses have not been met by the respective due dates then the payment dates will be extended until such targets are met," Ivernia said.

"If A$6 million of the total contribution is not paid by Magellan by June 30, 2012 the Esperance Agreement will be of no effect and the parties shall have the rights and remedies to claims as existed prior to the agreement being signed."

The government and the Esperance Port Authority have also retained the right to seek further compensation of $3 million from Magellan for the remediation of the seabed in the Esperance port area, if necessary.

The company has also agreed to contribute a further $1 million towards the establishment of a community fund, which will be administered by the Shire of Esperance.

Today's settlement triggers a previous deal between company and the government, whereby Magellan will be able to remove 9000 tonnes of lead carbonate which has been stockpiled at the Esperance Port for the past 18 months.

Esperance MLA Graham Jacobs said the signing of the Deed of Settlement with Magellan was a considerable step forward for the local community.

"This will enable the lead to finally be removed which is very important for the people of Esperance and the State," Dr Jacobs said.

The government and Ivernia announcements are pasted below:

The Liberal-National Government has negotiated a $9 million contribution from Magellan Metals towards the cost of cleaning up lead contamination in Esperance.

Transport Minister Simon O'Brien said Magellan Metals would pay the $9million settlement package in $3million instalments over the next three years.

These funds would be used for
- past cleanup works in and around the port area and the town of Esperance
- the decontaminating, demolishing and removing of the lead shed and cleanup of the lead shed area
- further costs of cleaning up the lead contamination in the town of Esperance.

Magellan Metals had also agreed to establish a Community Fund, in conjunction with the Shire of Esperance, with a contribution of a further $1million.

The agreement also provides that the State or the Esperance Port Authority may seek compensation for remediation of the seabed in the Esperance port area. In that case the State Government could seek a further $3million contribution from Magellan Metals.

Mr O'Brien said the State Government and the Esperance Port Authority would carry out the cleanup of the port area and Esperance townsite to the standards approved by relevant government agencies.

He said the departments of Health; Environment and Conservation, and Consumer and Employment Protection had set out standards for the cleanup.

An independent auditor would be appointed to verify the standard of the operation and a steering committee including community members would oversee the cleanup.

The Minister said the signing of the Deed of Settlement enabled Magellan to enter into a contract allowing 9,000 tonnes of stranded lead carbonate to be removed from the Esperance Port.

Lead carbonate owned by Magellan and exported through Esperance between April 2005 and January 2007 resulted in significant lead contamination of the town, elevated blood lead levels in the community, particularly in children and many bird deaths.

"The Esperance Port Authority and the previous government entered into negotiations for a settlement package with Magellan Metals but those negotiations were never concluded," he said.

"This issue has dragged on for more than 18 months and I am very pleased we've been able to finally reach a settlement with Magellan Metals."

Esperance MLA Graham Jacobs said the signing of the Deed of Settlement with Magellan was a considerable step forward for the local community.

"This will enable the lead to finally be removed which is very important for the people of Esperance and the State," Dr Jacobs said.

Agricultural Region MLC Wendy Duncan welcomed settlement.

"Lead contamination had a major impact on Esperance residents and businesses and the elements of this settlement package are further steps in addressing the community's concerns," Mrs Duncan said.

Ivernia Inc. (TSX: IVW) (the "Company") is pleased to announce that together with its wholly owned subsidiary, Magellan Metals Pty Ltd ("Magellan") it has agreed with the State of Western Australia (the "State") and the Esperance Port Authority ("EsPA") a suitable financial contribution toward the resolution of outstanding lead issues at Esperance.

The agreement, dated December 23, 2008 (the "Esperance Agreement"), provides for a financial contribution by Magellan of A$9 million toward comprehensive clean-up activities at the Port and within the town. The agreement has been formally approved and signed by the State, EsPA, Magellan and Ivernia and mutually releases the parties from claims against each other in respect of lead pollution in and around the port and town of Esperance.

The clean-up activities to be undertaken by the State and EsPA include testing rainwater tanks and ceiling voids, and clean up where lead is present; plus demolition and disposal of the existing lead shed and clean-up within the Port and surrounding area.

The State and EsPA will carry out the clean up under relevant laws and regulations and requirements and use their best efforts to complete the clean up by December 31, 2010.

Magellan's contribution comprises three equal payments of A$3 million on December 31, 2009, December 31, 2010 and June 30, 2011 subject to Magellan achieving set cumulative earnings targets beginning January 1, 2009. The earnings targets are A$6 million, A$12 million and A$18 million respectively by the three repayment dates. In the event that such earnings targets before interest, taxation, depreciation, amortization and unrealized foreign exchange gains and losses have not been met by the respective due dates then the payment dates will be extended until such targets are met.

If A$6 million of the total contribution is not paid by Magellan by June 30, 2012 the Esperance Agreement will be of no effect and the parties shall have the rights and remedies to claims as existed prior to the agreement being signed.

The State or EsPA have retained the right to seek to claim from Magellan a future contribution to seabed remediation in the harbour adjacent to the port area to remove lead carbonate should this work be required in the future. Magellan's maximum exposure to such a claim is A$3 million, however the Company may defend such a claim as it sees fit.

Alan De'ath, Ivernia President and Chief Executive Officer said, "Ivernia, Magellan, the State Government and the EsPA believe that the agreement reached today is an appropriate contribution toward clean-up activities at Esperance and will allow everyone involved in the issue to move forward by addressing the community's outstanding concerns about Magellan lead at the Port and within the town."

As previously announced on December 3, 2008, State Government approval has been granted for Magellan to export its remaining stockpile at Esperance as an essential first step toward a final clean-up of the Port and town of Esperance. Magellan is required to export the lead carbonate by April 30, 2009 and is well advanced on finalizing the container and shipping logistics and will be moving the bagging machine to Esperance to commence bagging operations in January.

Separately, Magellan also announced today an A$1 million fund for community-based projects in Esperance over the next three years. This fund, to be administered by the Shire of Esperance, is not part of the agreement with the State and will be jointly dispersed by Magellan and the Shire. Detailed information on the Magellan Community Fund and its operation can be found in the Company's media statement at www.magellanmetals.com.au