Gold outfit Troy Resources says it has signed a mandate iwth Investec Bank (Australia), which will provide a $25 million revolving corporate debt facility for the development of the Casposo gold project in Argentina.
Gold outfit Troy Resources says it has signed a mandate iwth Investec Bank (Australia), which will provide a $25 million revolving corporate debt facility for the development of the Casposo gold project in Argentina.
The Facility is provided in two tranches. Tranche A for the amount of A$15m has already received Investec Credit
Approval and will be available for drawing when the loan documentation is finalised, currently expected in March 2010. Tranche A is intended to provide the balance of funding to finalise construction of the Casposo gold and silver mine in Argentina.
Tranche B for the amount of A$10m is subject to Investec's due diligence review and final credit approval which is expected in May 2010. For clarity, the availability of Tranche A is not impacted by the availability of Tranche B. Although the funding from Tranche B is intended for general corporate purposes it is expected that it will primarily be directed to funding an accelerated exploration program of the Casposo and Castaño Nuevo leases to build the Company's gold and silver Reserves and Resources, with a view to extending the Casposo mine life.
Part of the cost of the loan facility includes the granting of call options over Troy ordinary shares to Investec (subject to the standard approval of the Toronto Stock Exchange). The volume of the shares will be equivalent to A$3m for Tranche A and A$2m for Tranche B. The exercise price for these options will be a 30% premium over the relevant 90 day VWAP (volume weighted average share price):
Tranche A exercise price - $3.15/share
Tranche B exercise price - to be calculated on the date Investec advises Troy that Tranche B is credit approved
The term of the loan is 3 years and no mandatory gold or silver price hedging is involved. Finalisation of the loan is subject to standard conditions precedent and completion of documentation.
The acceptance of Investec's offer followed a rigorous and competitive selection process undertaken with the assistance of Optimum Capital.
Commenting on today's announcement, Troy's CEO Paul Benson said: "Casposo plays a significant role in Troy's strategy to become a profitable mid-tier gold company. In this context, securing the debt facility to finalise construction funding is a very important company milestone. With full funding in place, Ken Nilsson, Troy's Executive Director Operations, can focus on bringing Casposo into production. We remain on track to pour first gold in the September quarter of 2010.
"Importantly the facility includes a second Tranche of A$10m (Tranche B) that puts Troy in the position to continue to look at and evaluate new gold projects. With the additional funding in place, acquisitions are very much on the agenda along with accelerated exploration programmes testing the potential of the Casposo leases and the nearby Castaño Nuevo Joint Venture. We are very excited by the geological prospectivity of the leases and are confident that we will be able to add significantly to the existing gold and silver Reserves and Resources over the coming twenty four months, with a view to extending the Casposo mine life.
"Based on the significant free cashflow forecast from Casposo, our expectation is that any debt drawn-down will be repaid expeditiously. Any repayments ahead of schedule can be redrawn for corporate acquisitions or project developments.
"We reached agreement with Investec following an exhaustive and rigorous competitive process. Of importance for Troy shareholders, the facility does not require mandatory gold or silver price hedging. Also, part of the fees payable is in the form of call options over Troy stock. The exercise price of these options is at a 30% premium to the relevant Troy share price; and a significant appreciation in the Troy share price would presumably be necessary before these options are exercised."
