Wiluna Mining Corporation Ltd (ASX:WMX) has completed all documentation for a gold prepaid swap financing facility and gold hedging facility, a key finance step towards executing the company’s Stage-1 Expansion at the Wiluna Mining Centre.
Execution of these transactions with Mercuria Energy Trading Pte Ltd has resulted in A$21 million being drawn down immediately.
Tranche 1 will be repaid in full by delivering 699 ounces of gold per month over 12 months, totalling 8,388 ounces.
Mercuria has also provided Wiluna Mining with a secured gold hedging facility for 34,000 ounces at an average price of A$2,674 per ounce maturing over the next 12 months.
The facility gives Wiluna the flexibility of drawing a further A$40 million in tranche two for a total of A$61 million, subject to Mercuria credit approval, to further advance the stage one expansion.
Wiluna Mining executive chair Milan Jerkovic said: “We are delighted to be able to draw down on this A$21 million facility as it provides important funding for our stage one expansion.
“The ability to upsize the prepay amount by up to an additional A$40 million, and to align this to our capital requirement timetable on the stage one sulphide extension, gives us real flexibility to finish the stage one expansion and fast track studies for stage two.”
This additional funding will be made available upon Mercuria’s credit approval of the financial model which includes the company further developing and upgrading its stage one expansion mine plan.
Shares have been almost 8.5% higher in early trade to $1.32.
The company’s sulphide expansion strategy involves a staged upscaling of operations and the transition to mining the large sulphide resource at the Wiluna Mining Centre with treatment through a new flotation plant.
Stage one is targeting the mining of around 750,000 tonnes per annum of underground ore producing 100,000-120,000 ounces of gold doré and gold in concentrate commencing in September 2021.
Wiluna’s favourable, ongoing hedging facility with Mercuria will see 34,000 ounces sold at an average price of A$2,674 per ounce, which is net of transactions costs, maturing over the next 12 months.
The hedge prices are based upon a weighted average forward price less an agreed discount over a 12-month period and are a condition of the drawdown.
The company welcomes this hedge facility in a time of important risk management during significant levels of capital expenditure and high gold prices.
Jerkovic said: “With gold trading at record highs, the timing of the finalisation of this drawdown and the associated hedging facility Mercuria has provided immediately on drawdown, is extremely favourable.”
Additionally, the company’s plans have progressed with a drilling program at the Wiluna Mining Centre involving up to seven rigs drilling on-site with six rigs currently active.
The work is expected to be completed towards the end of this year and is important for the mine planning and resource to reserve conversion which will assist with the required credit approval for tranche two.
“Advancing five-point strategy”
The cash and bullion balance upon drawing down tranche one will be about $30 million.
Jerkovic said: “This initial funding from Mercuria, along with our solid operating cashflow expected for the next 12 months from our current operation, allows us to continue to advance our 24-month, five-point strategy which is to:
- Strengthen the balance sheet;
- Maintain and increase immediate operational cash flow;
- Transition to include gold concentrate production;
- Expand production; and
- Undertake exploration and feasibility studies to fully develop a more than 250,000 ounces per annum, long-life, gold operation.”