Mining Sector: Scotgold up after it gets funding for Cononish...

Mining Sector: Scotgold up after it gets funding for Cononish project
2 July 2012 | 16:18pm
StockMarketWire.com - Shares in Scotgold Resources (LON:SGZ) rose by more than 9% after it reached agreement with RMB Resources for a £1.18m financing facility.

This will provide funds to allow Scotgold to take the Cononish gold project in Scotland through to its final development decision.

In particular the facility will enable Scotgold to continue drilling at Cononish with a view to improving confidence in that part of the resource that will be mined in the early years of the mine life thereby enhancing the debt capacity of the project.

The facility is a convertible loan structured as a secured corporate loan facility with share options which provides for RMB to acquire Scotgold shares at a cost equal to the value of the loan if all the options are exercised. The strike price for the RMB options is £0.045.

It will be repaid on the earlier of the date that equity or debt funds are available or 31 December 2013. The annual interest rate for the facility will be Libor plus 5%.

Planning permission for the Cononish Project was granted in October last year, subject to the completion of legal agreements and outstanding conditions. These were concluded in February and confirmation of the Crown Lease was received in May.

Scotgold began infill drilling into the inferred resource at Cononish in January.

Executive chairman John Bentley said: "This facility and the endorsement of a bank of RMB's standing puts Scotgold in a position to bring the Cononish gold project into production with an optimum mix of debt and equity thereby enhancing shareholder value.

"The terms of the pre payment facility have been substantially agreed but final pricing and the extent of the debt capacity will depend upon the final resource estimate and the gold price at the time the loan receives credit approval from RMB. It is currently anticipated that approximately 50% of the development costs for the mine may be provided by debt finance."