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Century Mining launches two financings to fund Lamaque Gold Mine restart

Published: 06:45 06 Aug 2009 AEST

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Financing facilities linked to production is not unusual in the gold business. They however are not necessarily available to all companies. In order to qualify for a financing facility, the company requires producing properties or near-production assets. The ability to secure such a facility therefore ushers in considerable confidence in the company’s assets and its business plan.

In what could be a similar situation Canadian Venture listed Century Mining Corporation (TSX.V: CMM) in receipt of a financing term sheet for a US$25 million prepaid gold forward facility from a major international bank with a large gold trading business. The prepaid gold facility is a forward contract to deliver 49,868 ounces of gold over a five-year term. The debt facility has other price participation terms whereby the Company will receive an additional cash payment for gold pricing above US$800 per ounce, up to a maximum of US$950 per ounce. There are no upfront fees, warrants or interest payable to the bank during the term of the facility.

Simultaneously, Century has appointed Union Securities as the lead agent to undertake a C$20 million equity issue. The combination of the two financings will provide the necessary cash for the Lamaque Mine to restart in September 2009. It is expected that both facilities will close by early September. The Company further announced its Board decision not to proceed with the proposed $65 million project financing that was originally announced on March 24, 2009. It is the Board's view that completing this transaction would have subjected the Company and its shareholders to an unacceptable level of risk with regard to the Lamaque project.

Located in Val-d’Or, Quebec, the Lamaque project is an exceptional gold asset with 1.1 million ounces of gold reserves (7,736,181 tonnes at 4.56 g/t), 1.3 million additional ounces of measured and indicated resources (8,310,074 tonnes at 4.81 g/t), and an additional 3.1 million ounces of inferred resources (19,633,148 tonnes at 4.96 g/t). The project is characterised by its relatively higher grades and low operating costs (a cash cost of approximately US$423 per ounce of gold). The project is ready to restart upon closing of the financing and will reach full production of approximately 105,000 ounces of gold production per annum.

For those who are less familiar with Century, the company is not a pure exploration play but has an existing gold production of approximately 18,000 ounces per year at its San Juan Gold Mine (Peru). Century expects to increase production at this mine over the next three years to approximately 30,000 ounces of gold per year.

The Company’s preference for a gold based facility after reviewing several alternatives primarily to eliminate financing risk. Century can service the commitments under this facility from either its Peruvian or Canadian operations. Furthermore, the commitment of only 49,868 ounces of gold production from the more than 2.4 million ounces of reserves and measured and indicated resources and 3.1 million ounces of inferred resources will allow Century's shareholders significant upside in a bull market for gold.

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