The credit agreement, arranged through the Toronto-based mining firm’s wholly owned subsidiary Continental Gold Limited, provides immediate access to $100 million USD presuming the “satisfaction of certain customary conditions.” These funds can be used for project development, construction, and working capital. Some $30 million USD can go to equipment financing, according to the company.
Photo: One of the tunnels leading into Continental Gold’s Buriticá gold mine in Antioquia, Colombia. (Credit: Continental Gold)
The arrangement, which has a term of 7.25 years, includes an additional $25 million USD equity investment by Red Kite and allows Continental Gold to make no interest or principal payments for 42 months. The interest, which will be applied to the principal during the initial holiday period, will be at three-month LIBOR plus 8%, with a 1% minimum LIBOR rate, according to the company.
“The Red Kite senior secured debt facility best met the company’s objectives, providing maximum flexibility and a low cost of capital relative to other private debt deals executed over the past few years, with no hedging, off-take agreements, or royalty attached,” said Ari Sussman, CEO of Continental Gold. “With sufficient capital now in place for the bulk of 2017 planned expenditures, the company will now accelerate detailed engineering and will commence construction and securing the long-lead-time items in the first half of 2017.”
According to the corporate website of Red Kite — which has offices in Toronto, New York, London, Shanghai, Hong Kong, and Bermuda — this is one of the largest transactions conducted by RK Mine Finance. The company says it has provided more than $1.4 billion USD in capital since its founding.
“We are delighted to be supporting Continental Gold to develop the Buriticá project, which represents a major milestone for precious metals mining in Colombia,” said Harry Tefoglou, CIO of Red Kite.
Continental Gold’s Buriticá holding includes a project area covering some 60,000 hectares about a two-hour drive from Medellín, the nation’s second-largest city. Its feasibility study projects a 14-year mine life at the site that can produce nearly 3.5 million ounces of recovered gold and more than 6.4 million ounces of recovered silver.
In a statement, Continental Gold released the following additional details about the agreement, included here in full:
Senior Facility Agreement – Key Terms
- Term of 7.25 years
- US$250 million Agreement structured in three tranches:
- First advance of US$25 million is available immediately with the next portion of the first tranche, being US$75 million, available on satisfaction of certain customary conditions precedent
- Second tranche of US$100 million is available to the Company once it secures an additional US$100 million in net equity financing and satisfies certain other customary conditions precedent
- Red Kite has committed to investing up to an additional US$25 million in equity (which is not included in the US$100 million net equity financing)
- Third tranche of US$50 million is available to the Company when the project is at least 65% complete and the Company has sufficient capital (including the final tranche of US$50 million) to complete the Buriticá project
- Agreement bears interest at 3-month LIBOR plus 8%, with a 1% minimum LIBOR rate
- 3% arrangement fee payable upon execution of the agreement
- 42-month principal and interest payment holiday whereby interest payments are added to principal
- Quarterly principal repayments and monthly interest payments thereafter
- Repayable after the fifth year with no penalty; 2.5% prepayment fee between years three and five and 5% prepayment fee in the first two years
- Fixed production-linked payment of US$20 per ounce of gold on the first 1.25 million ounces produced from the Buriticá project (no payment made on ounces produced thereafter), with the number of ounces subject to the payment to be pro-rated in the event that the Company does not drawdown the full US$250 million project debt facility. The production-linked payments are to be financially settled on a monthly basis and can be terminated at any time by the Company by payment of an early termination fee calculated as the then present value of the outstanding obligation using a 7.5% discount rate
- 3,000,000 warrants issued to Red Kite having a four-year term and an exercise price of US$3.67 (equivalent to CDN$4.93 and representing a 25% premium to the volume-weighted average price of the Company’s common shares on the Toronto Stock Exchange (the “TSX”) for a 20-day period prior to the closing date). The warrants can be accelerated by the Company in the event the share price of the Company’s common shares on the TSX exceed 200% of the exercise price for a period of not less than 40 consecutive trading days.