BLAINE, WA, April 28 /CNW/ - Century Mining Corporation (CMM: TSX-V) announced today that further to the press release issued on March 24, 2009, the Company has now received a conditional underwriting commitment for US$65 million. The commitment is subject to the finalization of customary documentation and the transfer of all assets and liabilities associated with the Lamaque Mine into a new wholly-owned subsidiary of the Company. The shares of the new subsidiary will be pledged as part of the security package for the loan. Century is working with Union Securities Ltd. and their legal representatives to complete the transaction. The commitment announced today is with a consortium of international investors, and is being arranged by Union Securities and American Capital Commercial Lending Group.
Century is now proceeding with review of all necessary documentation and the formation of the operating subsidiary necessary to comply with the terms of the loan.
In addition to the $65 million debt financing, the Company is engaged in negotiations with two other separate parties regarding additional financing alternatives.
The two other potential deals under review include a merger with another resource company, whereby the combined entity would have sufficient capital to fund the restart of the Lamaque Mine and pay down the Company's liabilities and long-term debt, resulting in a significantly stronger balance sheet. The other scenario being considered by the Company's Board of Directors is a comprehensive agreement with a group of financiers for debt and equity financing for the Lamaque project, in addition to assistance with future capital requirements of the Company.
Century also clarified that the three alternatives are not exclusive of each other, and any combination of the $65 million debt deal and one of the two additional deals could be completed to form a well-funded mining house capable of funding current projects and pursuing other potential acquisitions.
Shares for Debt Arrangement
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Century also announced today a shares for debt arrangement, whereby Century will complete a private placement of up to C$2.0 million in lieu of payment to certain creditors. Under the arrangement, Century will issue up to 8.0 million shares of the Company at an issue price of C$0.25 per share. This offering is being made available to various creditors of the Company for the purpose of reducing liabilities and immediately strengthening the Company's balance sheet and financial position. The shares will be subject to a hold period of four months and a day. The issuance of the shares is subject to compliance with applicable securities laws and the approval of the Exchange.
Margaret Kent, President and CEO of Century commented, "We are working diligently with all interested parties to thoroughly evaluate each of the financing alternatives available to Century. Management and the Board of Directors recognize the importance of concluding a financing deal expeditiously, but need time to negotiate and make the appropriate decisions, giving due consideration to all proposals. Regarding the shares for debt arrangement, many of the creditors that are participating in this offering will play a key role in the restart of the mine, and have supported the Company for the past year. We are happy that as key stakeholders they will recognize the potential upside when financing for the project is completed."
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 63,124 ounces of gold, respectively.
"Margaret M. Kent"
Chairman, President & CEO
4 comments:
My first thoughts:
It looks like the ball is entirely on Century's side. The deal is done once Century validates the documentations and form the subsidiary. This is a normal part of the process. It's unfortunate that Century did not spell this out in the March 24th NR. It maybe has something to do with the additional opportunities presented to Century since March 24th. My guess is that the term "conditional" is in place because Century needs more time to assess the additional opportunities - not fully closing the $65M deal at this stage (as more companies would normally do) buys a bit more time to better assess the new offers.
It looks like Century is looking at the begger picture right now. It looks like they are targeting $120 - $130M US in cash, instead of just the $65M. Either:
1) the $65M US deal + merger = $120 - 130M US
2) the $65M US deal + the comprehensive agreement for debt and equity = $120 - 130M US
Cash is king in this environment, especially for a junior company.
My guess is that the extra cash (over and above Lamaque's restart needs) is required due to an advanced stage/producing asset the company has lined up or are in discussions about - to enable the company to take another step closer to mid-teir producer stature (a company goal).
"Century also clarified that the three alternatives are not exclusive of each other, and any combination of the $65 million debt deal and one of the two additional deals could be completed to form a well-funded mining house capable of funding current projects and pursuing other potential acquisitions."
I think Century would have liked to have waited a few more days/weeks before putting out this non-definitive NR, but probably felt pressured by their own timelines issued with the previous NR. Another week of silence after promising closure within 21 days would have caused doubts about the financing and caused some selling.
The NR gives us some insight into PK's thinking. The debt financing by itself is a tremendous opportunity for Lamaque development and share price appreciation, but she is looking beyond that.
Century's shareholder base is almost entirely made up of retail investors with little institutional ownership. Being debt-free makes the company more attractive to institutional investors and therefore merging with another resource company with more cash than CMM's soon-to-be debt does, as she says, strengthen the balance sheet. The question is at what cost in terms of dilution and whether it is worth the price to be paid.
A merger with a cash-rich company provides more options for the company in that the additional cash can be used for more acquisitions of properties owned by undervalued companies who are suffering because of a cash shortage. Having a clean balance sheet and the assets that the company owns also makes it easier to attract more investment for acquisitions.
It would have been nice to have had the stock halted and the expected financing close first before announcing any other corporate transaction, but perhaps this is part of the negotiating process with the other suitors.
"perhaps this is part of the negotiating process with the other suitors"
Carib, this was my very first conclusion after reading today's NR. With the commitment gained from the $65M investors, there is absolutely no pressure on Century with regards to the merger and the 3rd financing option. As such, this NR today represents a clear message to the merger partner and the people presenting the 3rd financing option; if you want to get in on the action then you better put in your best offer, and soon. The train will leave the station without them if their offers are not extremely attractive to Century.
Also, with the last 2 financings we have freed up about $4M Cdn from the $65M financing amount, which can now be allocated to ramping up San Juan's production. Based on the start up DD report published in January, $2.5M Cdn of the secured financing funds were targeted to pay off a future bridge loan (it turned out that the bridge loan was never needed). The earlier $2.0M Cdn equity financing replaced the bridge loan, thus no need to pay back. Today's $2.0M worth of share issuance to creditors means our $10M Cdn Quebec payables will be reduced to $8M. The Lamaque restart plan called for the entire $10M Cdn Quebec payables to be paid back through the $65M US financing. Again, no need to pay back the $2M Cdn as it is equity. Hence, the extra $4.0M Cdn to ramp up San Juan.
so what its really mean is good or not cuz i want my work back
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