Century Mining Receives Underwriting Proposal For US$65 Million Debt Financing
Century also announces C$1.75 million flow-through financing for Lamaque drill program and additional reserve and resource upgrades
BLAINE, WA, March 24 /CNW/ - Century Mining Corporation (CMM: TSX-V)today announced that the Company's Board of Directors has agreed to proceed with a proposal it has received for a fully-underwritten debt financing for its Lamaque project in the amount of US$65 million.
US$65 million debt financing details
On February 2, 2009 Century announced plans for a gold-based debt facility, whereby the Company would raise necessary funding from institutional investors and repay the loan with physical gold from production at Lamaque. After evaluating several financing alternatives, the Company has chosen to pursue the debt financing announced today because it requires no commitment of future gold production and minimizes potential dilution of the Company's shares.
Under terms agreed to in the underwriting agreement, Century will borrow $65 million for a term of 7 years, at an interest rate of 8% in the first year, and 6% per year in years 2 - 7. The interest for the first year of the loan will be paid in full at the time of closing of this transaction. Payments in years 2-7 will be interest only, with a balloon payment at the end of the loan term for the entire principal amount.
The primary use of proceeds will be for capital expenditures to restart mining operations at Century's Lamaque Underground Mine, located in Quebec, Canada.
This financing is being arranged by Union Securities Ltd. of Calgary. Union Securities has been instrumental in identifying sources of private debt financing for the Lamaque project.
In a confirmation letter sent to Century and Union Securities regarding the debt financing, the lenders stated, "We are pleased to confirm that we can underwrite investment for Century's project in the amount of $65 million." The source of funds will be from a consortium of international investors.
Closing on the debt facility will be subject to terms, conditions and guidelines as set forth by the lender, and security documentation. A 3% underwriting fee and a 6% finder's fee with 10 million warrants exercisable at C$0.15 for a period of two years will be paid at closing.
Regarding due diligence processes customary in financings of this scope, the lender has indicated that the extensive due diligence carried out by Fortis Bank and the resulting January 2009 Due Diligence Report are sufficient for the purposes of this transaction. This is significant because it will expedite the closing of the debt financing. The Company and the consortium anticipate finalizing the underwriting on this debt financing in approximately 21 days, with funding of the full amount to take place 30-45 days after that.
Century has terminated its agreement with Octagon Capital Corporation, which was acting as lead agent for the gold-based financing.
C$1.75 million flow-through financing details
Century also announced today that, subject to regulatory approval, it will complete a non-brokered private placement of up to C$1.75 million, comprised of flow through shares.
The Company will issue common shares on a flow-through basis at an issue price of $0.13 per share.
The Company will pay certain persons for introducing subscribers to the Company a finder's fee of cash equal to 6% of the aggregate gross proceeds, and broker warrants equal to 6% of the aggregate number of flow-through shares. Each broker warrant shall be exercisable for 18 months from the date of issue and shall entitle the holder to purchase a common share of the Company for a price of $0.13. The flow-through share issuance is subject to approval by the TSX Venture Exchange.
The proceeds from this offering will be used for diamond drilling of the Bedard Dyke at the Lamaque Mine and completion of an ongoing Vulcan computer modeling project of the Lamaque Mine from the 2,000 to 3,000 foot levels. All of the securities issued under these private placements will be subject to a four-month hold period.
Margaret Kent, President and CEO of Century commented, "Century has been working on this debt financing package for several weeks now. We are very pleased with the terms of this debt financing. Since early February, management and the Board have conducted extensive negotiations with potential lenders regarding both gold-based and straight debt financing alternatives. The terms of the deal announced today will allow us to restart operations at Lamaque without committing a single ounce of future gold production."
About Century Mining Corporation
Century Mining Corporation is a junior gold producer. The Company owns and is working towards the restart of the Lamaque mine in Québec that historically has produced over 9.2 million ounces of gold. In Peru, Century wholly-owned subsidiaries own an 82.6% interest in the San Juan Mine where the Company accounts for 100% of gold production. Total gold production for 2006 and 2007 was 70,401 ounces and 63,124ounces of gold, respectively.
"Margaret M. Kent"
Chairman, President & CEO
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the contents of this press release.
8 comments:
I'm in for more.
Initial comments:
1) 'The terms of the deal announced today will allow us to restart operations at Lamaque without committing a single ounce of future gold production.'
We know that this means not giving up any ounces for gold-based financing, but does it also mean no hedging. It's sounds like it, but it's not clear to me. It would be quite amazing if they didn't have to hedge. The hedge proposal in the Fortis deal was fairly decent, but no hedges would be even better.
2) Today's financing NR represents an equivalent stage to credit committee approval by Fortis (had that not been declined). However, as good as the Fortis deal was, this one is even better. And, the 21 days to closing is far less than what it would have been for closing off the Fortis deal.
3) "A 3% underwriting fee and a 6% finder's fee with 10 million warrants exercisable at C$0.15 for a period of two years will be paid at closing."
Union Securities would be wise to ensure this deal gets closed off in 21 days.
4) "subject to regulatory approval, it will complete a non-brokered private placement of up to C$1.75 million"
That note comes across as if the C$1.75M flow-through component is complete, subject to regulatory approval. This is important, as it would allow them to re-initiate drilling on the Bedard Dyke - 1 of 3 places they will be mining within the first 3 years of production. The Bedard Dyke also has high grade zones.
The plan called for the Bedard Dyke to be drilled 2 months prior to restart of Lamaque. Subject to regulatory approval, this step would represents the first official sign that restart work has begun at Lamaque.
5) "Payments in years 2-7 will be interest only, with a balloon payment at the end of the loan term for the entire principal amount."
My guess is that this is virtually unheard of for a junior company. Not having to pay down the principle for 7 years will allow Century to aggressively build the company with the substantial available cash flows within that time period - external and organic growth (i.e. ramp Lamaque up to 140,000 ounces of production and advance the Northbelt project forward and maybe build a producing mine if they can get Northbelt's resource count up to 750,000)
6) "at an interest rate of 8% in the first year, and 6% per year in years 2 - 7"
Quite amazing, especially in this credit crisis environment, and especially for a junior company.
Yes production. Sounds good, especially for us long suffering
shareholders. Thats why I'm in for
more. Though I do have a feeling
there might be hedges involved.
Hey Roxy,
I think this deal has the best chance of closing successful, partly due to how Union Securities approaches their business. I think they take kind of an executive search type of an approach to their deals. Everything initiates with investors approaching them. With our deal, it would have initiated with investors approaching Union Securities and asking them to find an appropriate place for their cash over the next 7 years. Union would have then gone out to search for deals that matches what the investors were seeking. The Century deal announced today would not have been done had there not had been an ideal match between Century and the investors. As such, I think all that is left to do over the next 21 days is administrative paperwork.
Long-term client relationships appear to be critical for Union Securities - they don't self promote. They would not have negotiated with Century over the past few weeks had they not believed that the situation was ideal for their clients. Here is something from their website, about their approach:
"Although Union Securities is well known to our many and varied clients, we have never devoted our efforts to self-promotion. Our clients have come to trust our service, rely on our honesty, and depend on our integrity."
"Our corporate, institutional, and retail clients require the highest levels of experience and expertise. And they appreciate that our low key profile enables us to quietly evaluate the marketplace before bringing them high potential investment opportunities."
Nothing is ever guaranteed, but Union Securities appears to follow an approach that is genuine. Within any material issues at the last minute, this type of approach sounds to be ideal to enable a successful close off (after reaching this stage of the process).
Hi Production,
Very good analysis of the news release! Unfortunately as is often the case with CMM, any good news is often accompanied with something else to put a damper on the share price. By that I'm referring to the 13-cent flow-through PP.
As I posted at SH, it's really amazing that there is so much selling of 12-cent shares after this news release.
I see many those shares are being sold by "Anonymous". Considering the tax break associated with FT shares, it is profitable to sell (short) shares at 12 cents if you are getting 13-cent FT shares.
It's a shame really, because this financing, if it closes, is a watershed event in the future development of the company. I guess we'll have to wait for 3 weeks to receive the real impact of the financing.
According to ir flow through almost
filled, no hedges.
According to Union...looking good.
Fingers crossed!
Production, check your e-mail.
If all goes well with ramping up production at both Lamaque and San Juan, the kind of cash this company will be generating even as early as 2011 is quite amazing for an $.11 stock:
*2011 production - 95K Lamaque + 30K San Juan = 125K ounces company wide
*gold price - $1,000 US
*cash cost per oz - $400 US company wide
$75,000,000 US in cash from operations in 2011, before to deducting Corporate costs and the $3.9M US interest payment on long-term debt
And, it just gets better in future years, as Lamaque ramps up to 110K ounces (potentially up to 140K) and San Juan goes to 35K ounces (potentially to 40K, with utilizing the full 700 tpd operation and 6.38 g/t).
We get 7 years worth of these kind of cash numbers before we have to pay back the $65M LT Debt. It only takes one year worth of cash from operations to settle the debt.
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