European Goldfields (TSE:EGU) (AIM:EGU) said Monday that it has come to a "heads of terms" agreement with Qatar Holding for the provision of a US$600 million seven-year senior secured loan facility, and has secured additional financings to fund its entire project portfolio.
Investors cheered the news, with shares of the southeastern Europe-focused resource company jumping over 20% to trade at $10.00 in Toronto as of 11:34am EDT on Monday.
The $600 million loan will be used primarily for the development of European Goldfields' Skouries and Olympias gold projects in Greece, for which the environmental permit was recently granted, as well as general corporate purposes.
Under the terms of the deal, the facility will have an interest margin of 7% above 6-month Libor per year, and will be repayable in eight equal instalments beginning in 2015, the company said.
The loan will be secured over European Goldfields' Greek assets, including the shares of all intermediate holding companies, and will contain certain informational and financial covenants.
In exchange, Qatar will be issued warrants for the purchase of around 40.44 million shares, at a strike price of C$9.08 per share.
Whitehorse-based European Goldfields will also offer unsecured loan notes with warrants for US$150 million to existing shareholders, to be made available on the same economic terms as the facility, it said.
The aggregate proceeds of US$750 million from the facility and loan notes are expected to fully finance the company's entire project portfolio, it said.
Executive Chairman and President, Martyn Konig, commented, "This Facility from Qatar Holding represents not only a significant commitment to the company, but also to Greece.
"In these very uncertain times, these financings will provide all of the development capital required to bring the group's entire project portfolio into production and allow us to accelerate the development of all our projects.
"Furthermore, we are delighted to welcome Qatar Holding as a significant shareholder and key strategic partner, particularly as this is their first investment into the gold sector.
European Goldfields also said that in two separate transactions, Qatar acquired shares in the company. Qatar has acquired, from Aktor Construction International and Dimitrios Koutras, a total of 18.2 million shares at C$10 per share collectively, representing almost 10% of the undiluted share capital of the company.
Qatar also entered into a call option agreement, allowing it to acquire a further 9.37 million shares of European Goldfields at a price of C$13 each.
The loan facility and issue of warrants are subject to definitive documentation, as well as shareholder and regulatory approvals.
Commenting on the transaction, Managing Director and Chief Executive Officer of Qatar Holding, Ahmad Mohamed Al-Sayed, said: "This transaction reflects an outcome of the Memorandum of Understanding between the State of Qatar and the Hellenic Republic of Greece, signed in New York during 2010.
"Our latest investment helps to further diversify our investment portfolio in the commodities sector, with a specific position in gold resources and another long-term partner secured for the future."