Bolivar funds Venezuelan work program

Toronto-based Bolivar Goldfields (BVG-T) has completed a US$20-million financing with Barclays Bank and Standard Bank London.

The financing comprises a US$16-million senior loan and a US$4-million subordinated debt. The former bears interest at the U.S. dollar-denominated London interbank offer rate (LIBOR) plus 2.5% during the construction phase and then US$LIBOR plus 2% afterwards. The latter bears interest at US$LIBOR plus 5%.

The debt is scheduled to be repaid over four years and nine months, though all of Bolivar’s excess cash flow must be used to pay down the outstanding debt. The company forecasts repayment within three years.

As well, Barclays and Standard received a combined 3 million warrants convertible into Bolivar shares at 35 cents per share within three years. If these are executed, the banks would end up holding 20% of Bolivar’s issued shares.

For allowing its US$1-million loan to Bolivar to be subordinated to this latest financing, Gran Colombia Resources (GRM-T) will receive 1.25 million share purchase warrants convertible into Bolivar shares at 35 cents per share, with a term equal to one year after repayment of the bank indebtedness, to a maximum of five years.

Of the US$20 million raised, some US$8.25 million will pay for Bolivar’s spring acquisition of Monarch Resources’ (MRE-T) Revemin gold processing plant, 16 km from Bolivar’s Tomi gold mine in eastern Venezuela. The balance will be used for three purposes: to upgrade and expand the Revemin plant to a 1,400-tonne-per-day capacity, buy mining equipment, and improve existing facilities at Tomi.

Bolivar has been testing the Revemin plant with ore from Tomi, and has produced more than 3,000 oz. gold as a result.

In a related development, Bolivar has hedged, at an average price of US$305 per oz., about 80% of its gold to be produced to the end of the first quarter of 2002. The forward program was sold at a discount providing for the purchase of call options for 50,250 oz. gold, of which 56% has a strike price of US$330 per oz. in the year 1999, while the balance has a strike price of US$345 in the year 2000.

Bolivar envisages an open-pit mine at Tomi capable of producing an average of 46,000 oz. gold annually over seven years. Cash operating costs over the mine life are estimated at US$160 per oz., though, during the first two years, production is estimated to be 58,000 and 63,000 oz. gold, respectively, at an average cash operating cost of US$116 per oz.

Bolivar plans to continue exploring for additional mineralization outside the area covered by the current production plan, as well as at depth within the Tomi deposit.