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Feronia Announces Up To C$10 Mln Brokered Private Placement Financing

Crude palm oil producer

Feronia

(

CVE:FRN

) unveiled Monday plans for a brokered private placement financing for up to C$10 million in proceeds.

The agreement, with Macquarie Private Wealth and Renaissance Securities, will include an offering of two types of securities.

The first type of security will be a unit consisting of C$1,000 principal amount 12% convertible unsecured subordinated debentures and 1,667 common share purchase warrants.

The purchase price for the debenture unit will be C$1,000 per unit.

The second security available to purchasers will consist of one common share at a purchase price of C$0.10 each.

The company said the new funds will be used for working capital purposes.

"We anticipate a rapid close to this financing and the addition of several new, high-quality investors as well as broad participation from our existing investor base, demonstrating our ability to secure funding in a difficult environment," said chairman Ravi Sood.

"Assuming completion of the offering in full, we expect to have sufficient working capital in place to fund our progress to positive free-cash flow across the business."

The agents in the deal will also have the option to accept subscriptions for up to an additional 15 per cent of the maximum offering, exercisable in whole or in part up to 30 days following the deal's closing.

The debentures will bear interest at 12.0 per cent per year, payable semi-annually, starting on December 31, 2012, and will be due five years from the closing of the offering.

The principal amount of the debentures will be convertible at into common shares of the company, anytime prior to the maturity date, at a price of 17.5 Canadian cents per share.

This represents a ratio of 5,714 common shares per C$1,000 principal amount.

Meanwhile, each whole warrant will entitle the holder to purchase one common share at a price of 30 Canadian cents for a period of two years following the closing of the offering.

The offering is expected to close in one or more tranches with the first anticipated to wrap up around July 19, subject to approvals.

"

Feronia

is at a major inflection point in terms of value creation," continued Sood.

"We expect that the completion of the Yaligimba palm oil mill in Q4 of this year will allow the company to increase crude palm oil production by over 50% in 2013.

"The company is then expected to have in place substantial excess processing capacity at each of its plantations allowing it to continue its major re-planting programme with minimal capital expenditures."

In the company's arable farming operations, Sood said that by the end of the third quarter,

Feronia

anticipates having capacity in place to mill over 30,000 tonnes of rice per year and to farm 2,000 hectares of land.

Feronia

said it is limiting its expenses on the arable farming operations and focusing its efforts on continuing to prove yields through smaller-scale plantings.

"Once commercially compelling yields have been demonstrated, our objective will be to leverage our existing infrastructure to rapidly expand the operation with far less capital expenditure than was required to commence the operation," concluded Sood.

Feronia

said it will apply to list the debentures and the warrants on the TSX Venture Exchange following the completion of the standard hold period.

Feronia

is focused on arable farming and oil palm operations in the Democratic Republic of Congo (NYSE:DRC).

Feronia

PHC's three plantations span 107,892 hectares, an area larger than Manhattan, San Francisco, Brussels, Amsterdam, Zurich, Paris, Geneva, Lisbon, Dublin and Montevideo combined.

For full-year 2011, the company achieved gross margin of 45 per cent, compared to 40 per cent in 2010.

Revenues grew to $7.45 million from $3.91 million a year earlier. Crude palm oil (CPO) production was up 61 per cent to 7,981 tonnes for the full year, up from 4,951 tonnes in 2010.

A total of 2,110 hectares of oil palms were replanted during the year.