Val d’Or, Que.-based
The first deal is the closing of a previously announced US$10-million term loan with Standard Bank (London) and Canada’s National Bank. The facility, which is secured by a first charge on all of McWatters’ assets, matures at the end of 2004 and bears interest at the London Interbank Offer Rate plus 2.75%.
A portion of the proceeds will be used to repay a US$7.5-million loan from Credit Agricole Indosuez, with the balance directed toward satisfying part of a mandatory purchase obligation related to C$6 million worth of public notes due on Sept. 13.
In conjunction with the facility, McWatters has updated its gold-hedging program by buying put options and entering into a series of forward gold sales.
McWatters has bought 36,000 put options per quarter for the next 18 quarters at US$290 per oz. gold and has also sold, on a contingency-forward basis, up to 16,700 oz. gold per quarter for the next 22 quarters at a price of US$320 per oz.
The delivery obligation is zero at US$320 per oz. but rises to a maximum obligation of 16,700 oz. per quarter if the average gold price in that quarter exceeds US$370 per oz.
The hedging program, which cost McWatters US$1 million to implement, assures the sale of about 70% of current production at not less than US$290 per oz. while capping forward sales at a maximum of one-third of production, should gold prices exceed US$370 per oz.
McWatters’ second financing deal, worth C$12 million, comes from the sale to Quebec government-owned
The royalty rate, which can vary from 0.9% to 5.2%, will decrease as production increases but will rise as the price of gold increases. For example, at a gold price of US$300 per oz. and a production rate of 125,000 oz. per year, the royalty is 3%; this decreases to 2.9% at 150,000 oz. and to 2.6% at 175,000 oz.
After royalties have been paid on 2 million oz., McWatters may repurchase roughly half the royalty for C$5 million.
The money generated from the royalty sale will be used to develop McWatters’ properties, including a proposed $2-million expansion of the Sigma mill from to 4,000 from 3,000 tonnes per day.
That expansion, scheduled to begin early next year, follows a just-completed $1.7-million upgrade that boosted capacity to 3,000 from 2,000 tonnes per day.
Under the new deal with Soquem, McWatters must spend at least C$15 million on its properties by the end of 2002. Otherwise, Soquem can force McWatters to repurchase the royalty.
“For the company, the two financings are a great achievement,” says McWatters President Claire Derome. “It hasn’t been easy to find money, but since January we’ve raised $9 million in equity [from a rights offering] and now we’re adding $27 million of long-term financing. So, the company is on a much stronger foothold.”
Meanwhile, open-pit mining is ongoing at both the Sigma and Lamaque properties, with production expected to reach 105,000 oz. gold this year at a cash-operating cost of US$195 per oz. Next year, production should reach 128,000 oz. at a cash operating cost of US$175 per oz.
McWatters personnel have been carrying out a pit-optimization study that has already delineated an area to be mined over the next seven years. In order to conclude the financing, that pit outline only took into account less than half the current reserve base of 16.3 million tonnes grading 3.02 grams gold per tonne, or 1.6 million contained ounces gold.
Also under way at Lamaque is a new round of exploration drilling, which will test the main plug zone.
Nearby, under Lac de Montigny, is McWatters’ other producing asset: the Kiena underground gold mine. Kiena is expected to have another solid year of performance, cranking out 80,000 oz. gold at a cash operating cost of US$225 per oz.
Be the first to comment on "McWatters raises $27m for Quebec mines"