Mawson West (TSE:MWE) has agreed to a US$33.4 million financing package with Galena Asset Management, the manager of the Galena Private Equity Resources Fund, which will provide the copper and silver miner with enough capital to manage the ramp up of its Kapulo copper mine.
In addition, the company said that Galena's affiliate entity, Trafigura Pte Ltd., Mawson's current off-take partner and senior lender, will provide additional financial assistance.
Galena will become Mawson West's largest shareholder with 41.67 million shares of the company.
"We are delighted to welcome Galena as our largest shareholder and strategic partner," said chief executive officer, Bruce McFadzean.
"This transaction strengthens our balance sheet and provides a sound base for Mawson West to establish a strong cash flow and provide opportunity for growth in a difficult market.
"We are pleased with the support shown by Trafigura and Galena who share the company's view that Mawson West has quality assets and a strong future as a copper producer."
The company said the proceeds of the financing will be used to manage the "uninterrupted ramp up of the Kapulo copper mine through to positive cash flows and strengthen its balance sheet to manage its debt repayment requirements."
Under the terms, Galena will purchase 41.67 million shares of Mawson West under a C$5 million private placement at 12 Canadian cents apiece. The private equity fund will also provide the company with US$10 million secured loan facility, repayable in September 2017, as well as a US$5 million unsecured bridge loan due February 2015.
Galena has also agreed to backstop Mawson West by purchasing additional shares of up to C$21.6 million under future financing efforts.
Meanwhile, Trafigura has amended the maturity date of Mawson West's prepayment facility by 9 months to June 2017, as well as deferred US$19 million in repayments and increased the flexibility of proceeds account structure to assist with cashflow.
"Trafigura's willingness to re-sculpt the debt payment profile to better reflect our production ramp up is welcomed by the company," said McFadzean.
"Their strong African presence and support provides a great future opportunity for Mawson West shareholders."
The chief executive highlighted that commissioning of the Kapulo copper mine in the Democratic Republic of Congo started last month, with production anticipated to start in the first quarter.
The company said that once this financing package is closed, it will focus on the ramp up and optimization of both of its copper projects, with expectations that they will be producing at "their full potential" and generating cash flow in 2015.
The copper and silver producer, which is based in Perth, Australia, also owns the Dikulushi copper-silver mine in the DRC, which has been transitioning over the past year from an open pit operation to underground mining as a means to extend the mine life.
Mawson West recently upgraded mineral reserves at its Kapulo project, with 86 percent now in the proven category. The project is estimated to have an after-tax net present value of some US$156 million using a base case copper price of US$7,100 per tonne for the life of the mine. Life-of-mine cash costs are projected at US$1.92 per pound.
The completion of the financing package transactions with both Galena and Trafigura are subject to the receipt of exemptions sought from the Toronto Stock Exchange under a financial hardship application, Mawson West said. Galena will also have the right to nominate up to two directors to the company's board.