Scotgold Resources Limited ("Scotgold" or the "Company")
Pre Development financing for the Cononish mine agreed with RMB Resources
Scotgold Resources Ltd ("Scotgold" or the "Company") (ASX:SGZ, AIM:SGZ) is pleased to announce that agreement has been reached with RMB Resources ("RMB") for a £1.18m financing (the "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.
The Facility 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%.
The Facility has been arranged by RMB and will be provided by RMB Australia Holdings Limited. RMB's investment committee has approved the Facility subject to the satisfactory completion of legal due diligence and documentation.
In addition to the Facility agreement, Scotgold has agreed to mandate RMB to arrange a gold pre payment facility to fund the development of the Cononish gold project. Scotgold has also agreed to mandate LN Metals International Ltd to market the gold-in-pyrite concentrate which will be produced at Cononish to end consumers.
Planning permission for the Cononish Project was granted in October 2011, subject to the completion of legal agreements and outstanding conditions. These were concluded in February 2012 and confirmation of the Crown Lease was received in May 2012. Scotgold commenced infill drilling into the Inferred Resource at Cononish in January 2012. An initial phase of 8 holes has been completed and results are awaited. A further phase comprising up to 9 holes will be commenced shortly and drilling is expected to be completed by October 2012. Subsequent to drilling, the results will be incorporated into a revised Resource Estimate and the recently completed 'Cononish Project Development Plan' (see Press Release 17th April 2012 - Positive Results for Cononish Project Development Study) will be updated with the revised Resource Estimate. It is anticipated a final production decision will be made in January 2013, with a start of development on the project in March 2013.
John Bentley, Executive Chairman of Scotgold, commented "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".
Scotgold Resources Limited ("Scotgold" or the "Company") Pre...
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