Peninsula is a uranium producer with its Lance Project based in Wyoming.
The new facility involves an extension of the maturity date of the existing convertible note facility by two years to April 22, 2020.
Peninsula produced more than 40,000 pounds of uranium in the March quarter but the real focus for the near term is on reducing costs through the introduction of a low pH operation.
Funding chimes in with development of low pH operation
Consequently, this confirmation of funding is timely as it provides financial assurance and balance sheet strength as the company looks to transition to a low pH operation.
Peninsula’s managing director Wayne Heili said: “Peninsula is pleased to have secured this extension to the convertible loan facility with two of our major shareholders.
“The two-year extension will allow Peninsula to achieve a number of important project milestones well before the new maturity date.
“This will greatly assist the company on its path to transition to low pH operations which are expected to significantly lower operating costs and are intended to align Lance with leading global uranium production projects.”
Peninsula reduces facility by US$3 million
The convertible loans will bear interest at the rate of 10% per annum for the first 12-month period up until April 22, 2019, and then 12% thereafter.
The facility will also be reduced from US$20 million to US$17 million following a cash repayment by Peninsula of US$3 million.
Following this payment, Peninsula’s cash position remains strong at about US$20 million.
Furthermore, the company continues to generate cash flow from production at Lance.
Potential conversion of shares at 50% premium
The lenders may elect to convert all or part of the principal amount of the convertible loans, including any capitalised interest, into ordinary shares at any time prior to maturity.
Under the terms of the agreement, this would be at a fixed conversion price of 40 cents per share.
This implies a 48.6% premium to the 5-day volume weighted average price of the company’s shares prior to the date of this announcement.
Option to convert to shares a show of confidence
The fact that the lenders have opted to include the conversion clause and signed off at a premium share price perhaps is an indication of the value they see in the project.
It also underlines the potential share price upside that could occur as the company transitions to a producer with a much lower cost profile.