Scenario 1) New bank financing deal for Lamaque - a major key to this possibility is the very positive independent technical DD report issued by Gorman (apparently a highly regarded independent DD person by the banking industry). Apparently, Gorman is willing to drop everything he is currently working on in order to answer questions or perform additional support work on Lamaque, if a new bank gets involved and further requires his services.
In addition, Fortis is willing to help us out as much as they can. They have given us a contact list of other possible bank possibilities. They are willing to provide reasons (to possible future Lamaque bank candidates) as to why this deal was declined (Lamaque was not the reason – decline was entirely related to Fortis’ current condition).
Another recent positive relates to the change in credit market conditions. Banks are still not lending to consumers. However, relative to a few months ago, business to business lending appears to have picked up. We can see this in the 3 month libor rate. It was 2.8% just prior to the Lehman Brothers collapse, then spiked to 4.8% with the Lehman explosion, then gradually worked its way back down due to the massive injection of funds into banks by governments and as levels of reduced volatility / panic was established. As you know, a higher libor rate means less lending, while a lower rate means increased lending. The 3 month libor rate is currently around 1.2%, which is actually now lower than the pre-Lehman blow up. It’s also possible to sense the slight positive increase in business lending via comments by money managers, tv personalities and government type people. Of course, the economy is not going to get any better until lending to consumers pick up, but this slight increase in lending to businesses is at least a tiny first step.
The gold section is currently looked upon by lenders as being favourable, at least relative to many other sections. Over the past month or so, there appears to be a noticeable pick in lending (and equity financing) to gold companies, even junior companies. The key is to have a solid, advanced stage, asset.
Hopefully all of these positive developments will provide an opportunity for Century to secure another banking deal. If successful, hopefully the technical DD work already done by Gorman will make for a much shorter timeframe.
Scenario 2) Sale of Lamaque (all cash deal) – hopefully we can get somewhere between $45M US ($50M Cdn) and $110M US ($138M Cdn).
Scenario 3) Sale of Lamaque (combo cash and shares deal) – we probably owe around $15M Cdn to IQ and around $11M Cdn net in A/P ($14M A/P less $3M A/R). Let’s add in another $2M or so for other obligations. As such, I would like to see around $28M Cdn in cash to eliminate all obligations to creditors. Then I would like to see at least another $5M Cdn in cash to upgrade San Juan. In total, I would like us to get at least $33M Cdn in cash, if we were to do a combo cash and shares deal. Then the rest of the payment could be in the form of shares. However, I would want the shares to be paid out directly to Century’s shares, and not to the company itself. Shareholders can then benefit directly, and can choose to do whatever they please with the shares (and within their own timeframes). Under this scenario, hopefully the buyer will be an undervalued mid-tier company or strong junior company with access to capital or connections to raise the capital to bring the project back into production (without significantly diluting shareholder value). Also, hopefully the buying company will be in a position where this deal is viewed as being substantially accretive by the market, thus bringing significant (and immediate) share price appreciation to the shares being paid to Century shareholders.
To summarize, under this scenario we would get the cash to eliminate all creditor obligations, get some cash to upgrade our San Juan operation, get (hopefully) highly accretive shares from the buying company, and get to keep our current Century shares (which would be then trading without the burden of creditor obligations) with the primary asset being an upgraded San Juan (with increased cash generating abilities).
Scenario 4) Buy in by a joint venture partner with cash or with abilities to raise cash?
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