USD165m in secured debt financing for Teranga

USD165m in secured debt financing for Teranga

Teranga Gold Corporation announced the receipt of a commitment letter from Taurus Funds Management setting forth a secured development finance facility.

The facility includes provision for the following:

  • USD165-million to be used towards funding the development of the Wahgnion Gold Project and to repay all the company’s current outstanding bank debt, totalling    USD15-million drawn on its revolving credit facility.
  • USD25-million to be used toward future advancement of a feasibility study for the Golden Hill Project.
  • USD10-million equipment lease facility carve out for which the company has received several term sheets and is currently evaluating.

"We are very pleased to be partnering with Taurus to deliver on our vision of becoming the next multi-asset mid-tier gold producer in West Africa,” says Richard Young, president and chief executive officer. “Together with our cash on hand and free cash flows from our flagship Sabodala mine, we expect to have sufficient financial resources to bring Wahgnion, our second gold mine, into production and continue to advance Golden Hill through feasibility.” (1)

Construction at Wahgnion began last autumn with an early works programme. Mill construction is scheduled to commence in the second quarter of 2018.  Wahgnion is expected to increase the company’s annualised gold production by 50% to between 300 000 and 350 000oz following first pour, which is anticipated at the end of 2019.(2,3,4)

Golden Hill is one of West Africa’s most exciting and rapidly advancing gold exploration projects.  With multiple discoveries over the last year, Golden Hill now has five advanced prospects and numerous exceptional intercepts of high-grade, near-surface gold. An initial resource estimation for the most advanced prospects is planned for year-end 2018.

Both Wahgnion and Golden Hill are in Burkina Faso, one of the world’s fastest growing gold regions.

Teranga first executed a project finance mandate with Taurus in November 2017 following a competitive selection process supported by the Company’s independent financial advisor, Cutfield Freeman and Co.  The facility is anticipated to close in the second quarter of 2018.

In commenting on the Facility, Taurus chief investment officer, Michael Davies says, “We are delighted to be working with the board and management of Teranga as the company continues to evolve and diversify its operations away from being a single asset company to a multi-asset producer. The proven operational ability of the Teranga team, as demonstrated though its Sabodala operations, will see the company continue to evolve and grow and Taurus looks forward to being part of that story.”

Taurus completed its technical due diligence process in February 2018 and committed to the Facility subject to the term details outlined below. The terms of the definitive documentation in respect of the facility remain subject to negotiation and there is no guarantee that a transaction will be consummated with Taurus or the terms upon which such transaction may be consummated.

Wahgnion Tranche (USD165-million)

  • Interest rate of 8.75% per annum on drawn amount, paid quarterly in arrears.
  • Principal repayments commence in the quarter ending 31 March 2020, followed by 10 quarterly repayments commencing 31 July 2020 and a bullet repayment on 31 December 2022. 
  • Early repayment is permitted at any time without penalty.
  • Conditions precedent to drawdown principally are execution and delivery of the facility documents, lodging of security documents and obtaining all requisite consents.
  • The company will enter into an offtake agreement for 1.075 million ounces of Wahgnion production pursuant to which the company will receive the prevailing spot price subject to an agreed upon quotational period.
  • Upon execution of the facility agreement, and subject to TSX approval, Taurus will be granted 2 000 000 unlisted four-year warrants to acquire Teranga common shares at an exercise price that is the greater of:

(i)   Teranga’s volume-weighted average share price on the TSX for the five trading days prior to the date of execution of the facility agreement; and

(ii)   120% of the Teranga’s volume weighted average share price on the TSX for the 20 trading days prior to the date of execution of the facility agreement.

Golden Hill Tranche (USD25-million)

  • Interest rate of 8.75% per annum on drawn amount, payable quarterly in arrears.
  • Bullet repayment on 31 December 2022. 
  • Early repayment is permitted at any time without penalty.
  • Conditions precedent to drawdown include the completion of a satisfactory preliminary economic assessment of Golden Hill as well as customary conditions precedent like the Wahgnion tranche.  

Endnotes

(1)  Please refer to the Liquidity and Capital Resources Outlook in the Company’s MD&A for the twelve months ended 31 December 2017 for a detailed discussion of the assumptions and qualifications around the company’s liquidity sources.

(2)  This production target is based on proven and probable ore reserves only for Wahgnion as at 7 September 2017. For more information regarding the Wahgnion’s Mineral Reserves and Resources and related notes, please refer to the NI 43-101 technical report for Wahgnion dated 20 October 2017 accessible on the Company’s website at www.terangagold.com and on SEDAR at www.sedar.com.

(3)  This production target is based on proven and probable reserves only from Teranga’s Sabodala Project as at 30 June 2017. For more information regarding Teranga Gold’s Mineral Reserves and Resources and related notes, please refer to the NI 43-101 technical report for the Sabodala Project dated 30 August 2017 available on the company’s website at www.terangagold.com and on SEDAR at www.sedar.com.

(4)  See the NI 43-101 technical report for the Wahgnion Project. This LOM production plan was based on Wahgnion plant construction commencing in Q1 2018. Wahgnion plant construction is expected to commence in Q2 2018 and, as a result, first pour has shifted by a couple of months to the end of 2019.


 

 

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