Troy Resources have re-negotiated a debt deal with an excellent outcome that will free up cash to further develop their Karouni Gold Mine resource in South America. Karouni re-wrote the playbook when Troy managed to take the project from vacant land to producing gold bars in just 2.5 years having built the $130m mine in 9 months. it now produces gold at an amazing USD$412 an ounce.
In a significant show of faith in Troy Resources Karouni gold mine in Guyana, South America, the company’s bankers have agreed to a sizeable and very favourable tweaking of their $60m debt facility.
South African resources bank, Investec, backed Troy to build the Karouni gold mine in 2013 by providing a $100m corporate debt facility, about $60m of which was used to build the mine. Troy have already managed to pay down $40m of that debt to-date.
The terms of the remaining $60m debt were somewhat restrictive on Troy as Investec sought to prudently protect their gutsy investment in the start up gold mine in Guyana.
Under the terms of the debt facility, Troy were required to maintain $10m in dead money for a debt service reserve account, $15m minimum liquidity including gold bullion on hand and $100m worth of gold to be hedged at pre-determined prices denying them access to the spot market.
However, by any measure the Karouni gold project has been a screaming success and Investec have now relaxed some of the more onerous conditions in a sign that they have become comfortable with Troy’s project and senior management.
The $100m worth of hedging requirement has been reduced to just $50m and smoothed out over 18 months instead of 12 months previously.
The $15m liquidity requirement has been reduced to just $10m and the requirement to maintain $10m in a debt reserve servicing account has now been removed altogether.
Importantly Investec have given Troy another 12 months to pay the debt back which will see the facility paid out in June 2018 instead of June 2017 and in a sign that Investec are seeking to develop a longer term relationship with Troy, they have even reduced the interest rate on the facility.
Even though on current projections Troy expected to be able to repay the facility when it was due, the debt restructure will give the company substantial room to increase their exploration activity, expand the mine if necessary and seek new investment opportunities in what is undoubtedly one of the world’s gold hotspots.
Commenting on the restructured debt facility, Troy Resources Managing Director, Martin Purvis said: "This restructure puts in place a sustainable platform for the further growth and development of Troy. It also signals a watershed in the transformation of Troy’s business model over the past 18 months. That journey has been very challenging for the Company and it’s great to see those efforts being recognised by Investec and captured in this restructured facility. Investec’s support was fundamental to the successful development of Karouni and we now look forward to the next chapter in our long-standing relationship."
In many ways Troy Resources management re-wrote the playbook with the Karouni Gold mine.
They only acquired the ground in the middle of 2013 and were producing gold bars by November 2015 having only received their licenses in February 2015.
In fact the company managed to build the entire mine which cost around AUD$130m in just 9 months and with a 1million tonne per annum nameplate capacity that is no mean feat.
If that wasn’t enough, the company also produced its first 20 000 ounces of gold in their first operating quarter ending in March 16 at just USD$412 an ounce which arguably puts it in the top dozen or so low cost producers in the world.
Oh yes and their share price tripled this year.