BLAINE, WA, Feb. 2 /CNW/ - Century Mining Corporation (CMM: TSX-V) announced today that it has chosen to sell a structured gold-based financing, whereby the Company will raise up to US$66 million from institutional investors and repay the loan over a period of 5 years with physical gold from production at the Lamaque underground mine in Quebec. The completion of this financing will also improve the Company's financial position by eliminating a significant portion of short-term liabilities.
The Company has chosen Toronto-based Octagon Capital Corporation as lead agent to arrange this brokered financing. Century and Octagon will work closely together to place this structured financing with qualified institutions. This financing is expected to close by the end of February 2009.
The Company will sell 15,000 units, each unit consisting of 600 common shares of the company, 1,000 purchase warrants and 5 troy ounces of gold, each such ounce deliverable by the Company on November 30 in each of 2011, 2012, 2013, 2014 and 2015. Each unit will be priced at $4,400. The combination of shares and warrants issued through this financing will result in less than an additional 15% dilution to current shareholders.
After evaluating several strategic options and consulting with various investment banking groups over the past two weeks, the Company has chosen this solution, which it believes is in the best interests of Century's shareholders and other stakeholders.
This financing alternative will allow Century to secure financing by committing just a small percentage of the gold that will be mined at Lamaque between 2009 and 2019. The gold-based financing will also eliminate the significant dilution of the Company's shares and overhang normally associated with convertible debt and other conventional financing methods. The method chosen by Century also allows the Company to avoid excessive interest rates associated with high-yield debt facilities.
The funds raised through this financing will be used for the Lamaque project development (74%), working capital and pay down of short- and long-term liabilities (19%), and various fees and costs associated with the closing of this transaction (7%).
Margaret Kent, President and CEO of Century commented, "The Board of Directors and management consulted financial advisors and reviewed numerous alternatives for the Lamaque project, including mergers, joint ventures, high-yield debt and other facilities with senior lending institutions. Based on these consultations, management determined that in a robust gold market and with a positive outlook for gold, it is in the best interests of Century's shareholders to minimize dilution with a gold-based financing alternative. Octagon Capital Corporation reviewed available information from the Fortis financing due diligence process and has agreed to be lead agent for the offering."
6 comments:
Unless I'm missing something here, this looks like a very good deal for us Century shareholders.
*15,000 units
*600 shares per unit
*1,000 warrants per unit
*5 ounces per unit
It means we give up only 9M o/s shares and 15M warrants. That is only 24M FD shares, or 12% of our current o/s share total or 14% of our curren FD share total. Also, I would assume that we will get extra cash once the warrants are converted, as you would think they would have an exercise price attached to them.
We will only be giving up 75,000 ounces of gold, representing only 6.3% of our current gold reserve total or 1.6% of our current total resource gold base at Lamaque. Also, we are paying back the loan in the form of gold, thus I would assume that the payback is fixed (5 ounces per unit) even if the price happens to fall during the payback period. In addition, the remainder of our ounces will be completely unhedged (or so it seems).
The financing is $66M US, but that's about $80M Cdn.
Also, the payback period and terms are both very nice.
"each such ounce deliverable by the Company on November 30 in each of 2011, 2012, 2013, 2014 and 2015."
It means we only have to pay 15,000 ounces per year for that 5 year period. And, we have almost 3 years (2 years, 10 mths) before the first gold payment is due. To put the numbers in perspective, Lamaque is expected to produce 95,000 ounces in year 3.
As an added bonus for paying back the loan in gold, we have San Juan as a contingency. If Lamaque is some how unable to ramp up in time, we have ounces being produced at San Juan which can partly supplement payment total, if necessary.
"Octagon Capital Corporation reviewed available information from the Fortis financing due diligence process and has agreed to be lead agent for the offering.”
This is an important point I think. It's potentially a hint of how the potential buying institutions may view the Lamaque offer.
Also, Octagon Capital appears to be well connected.
The expected close date is less than a month (end of Feb'09).
I guess it's now a matter of whether we get sufficient participants - it should be ripe right now, with gold performing the way it is.
I take is that the institutions are trying to keep the share price down in order to negotiate the lower possible conversion price for the warrants.
Anyway, those are my first thoughts. I like it though. I really like the potential of this. It would be good if it gets closed off alright.
Production, first of all many thanks for keeping this blog going through many dark days. I didn't abandon ship, but have been too busy to spend much time here, but I've read all of the posts.
Re today's news, if Peggy can pull this off, it would cement her reputation as being a shrewd financier. For $US66 million it will only cost us 24 million shares (which at 7 cents is only $1.6 million) and we sell 75,000 oz of gold over 5 years starting in 2011 for $880/oz.
The fact that there is a non-reaction to the news is probably because we've been told many stories in the past year about negotiated financings - none of which panned out. In spite of that we are still here.
The future looks brighter today than it has for a long time. As least we're still in the game.
I agree production05 and Carib: this is a no-brainer for us IF they actually pull this one off. I love the idea of forward selling some gold production at $880/oz. Still, I'm irked by Peggy's taking 8 million effectively options at our expense (4M at $0.05 & 4M at $0.07). I've been trying to shame her into reversing this decision. Please continue with emails and phone calls to Peggy and the Board.
To reiterate, this act of self-dealing aside, the gold loan would be huge for us.
"Once more into the breach, dear friends, once more..."
Thanks Carib!
I really like this deal. It's perfect, given the environment we are in. It has tremendous upsides for everyone involved - us shareholders, the potential new institutional investors, province of Quebec.....
Carib, I think this deal has a much better chance of closing than any of the previous deals. My guess is that Octagon would not have taken on this task unless they were comfortable they could sell it - I wouldn't be surprised if they had already placed some calls to some institutions (to get a feel) prior to accepting this task.
Here is something interesting, and another reason why I think we are in a favourable position right at this moment. I was listening to a conversation with Peter Munk (Chairman, Barrick Gold) just last week. I said that Barrick is not having any problems at all with getting financing. The reasoning is very interesting. He said that previously he had to compete with base metal mining firms, as well as firms in other sectors. However, with base metal prices depressed right now, institutions are no longer investing in that area. They is also limited funding provided to most of the other (more mainstream) sectors also.
As a result, Peter Munk was saying how gold companies are essentially first in line for instituational funds right now.
I think the great gold price outlook, coupled with depressed situations in almost all of the other sectors, has provided a lot of extra institutional cash to be channeled into gold companies (that would otherwise have to shared with other sectors, especially the base metal sector).
With regards to the share price not moving, yes, I agree, I think it has a lot to do with Century's recent record of not being able to close off deals. Hopefully this more positive situation will help.
I also think that potential institutional subscribers (to this deal) have / will be doing things to get the most favourable warrant price for themselves (unfortunately).
Production, I too admire all of
the amazing input yu have put into
this blog. Out all day, just read
the release now. Looks like we have
a pulse again. End of month is not
too far away. They must be pretty
confident it will fill.
Also , noticed Wolverton buying
again last week. Hmmmmmmmmmmmm!
Thank you kindly Roxy14!
Hey guys, there are 2 other major advantages of the gold-based financing deal that I haven't highlighted as yet (relative to conventional debt deals, including the Fortis deal):
1) Under the Fortis deal, it was a requirment for us to hedge 45,000 of our produced ounces per year. This requirement should no longer be madatory under this gold-based financing set up. Now, the company may still choose to hedge a few ounces at some point down the road (once the global financial crisis situation eases up or concludes - for longer term protection), but that would be our choice and at our own timing (not a forced requirement for any deals).
2) No interest payments - I don't know as yet if people realize how huge this is, especially with the size of an $80M Cdn financing amount. Not only will there not be any quarterly interest payments from this financing, but it appears as if most, if not all, interest payments from current balance sheet commitments will be eliminated: "working capital and pay down of short- and
long-term liabilities (19%)" No major interest payments means substantially less cash requirements on a quarterly basis, and thus the availability of more cash that can go back into improving operations or growing the business, but also less balance sheet pressure on a quarter to quarter basis. This is a great advantage for a junior company.
It would be very nice if we can close this deal.
One other quick point I wanted to make. I think this deal is a continuation of all the hard work put in by the Century staff over the last 10 months. I don't think this deal would have been possible had we not gone through the gruelling Fortis DD process. We came out of it with a report (by a well respected technical DD person) that showed the economical viability of the Lamaque mine. I think this why it might be possible to close the deal off so quick (end of Feb) - it is a continuation of 10 months worth of work. If we close off the financing by end of Feb. then it would actually be quicker than the expected close date for the Fortis deal, believe it or not. This essentially means that we will experience no start up delays (if we can close it off at end of Feb).
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