[Update] Alexis is set for change

Alexis Minerals (AMC-T) looks to redeem itself by restarting the Snow Lake gold project in Manitoba with the help of a much needed financing.

Credit Sussie has agreed to provide the junior US$45 million to revive the past producing mine if the company raises more equity.

While Alexis works on structuring the equity, it is proposing a 20-to-1 share consolidation and name change to reflect its new and more focused demeanor.

Maybe in the past Alexis has tried to do many things at the same time, says Francois Perron, Alexis’ president and CEO, stressing the company’s key ambition now is to get Snow Lake “across the finish line.”

If shareholders approve the propositions in June, Alexis will roll back its 597 million shares outstanding to 29.8 million and rename the company QMX Gold Corp.

The Q stands for Quebec — the location of its sole producing mine, Lac Herbin — M for Manitoba and X for exploration, which it intends to pick up once funding kicks in.

While the company has had a slow start at Lac Herbin, Perron says he wants investors to take note of the junior’s recent achievements.

“Clearly, the capital structure had legacy issues with it with the number of shares outstanding,” Perron concedes, adding the consolidation will fix that.

“The QMX that I will show people is a QMX that in the last twelve months said they were going to turnaround Lac Herbin — done. It’s a QMX that said they were going to take Snow Lake into production —you know in the next couple of months that is also going to be a reality.”

Once Alexis has pushed the “gold button” the company estimates first pour at Snow Lake will take place in 12 months. After which it would ramp up to full production of 80,000 oz. gold a year, bringing Alexis closer to its goal of producing 100,000 oz. gold a year.

Alexis should be able to reach that annual output in 2014, depending on the financing, says Perron. 

He acknowledges while the company faces some short-term hurdles, like a low cash position, it has a few solutions in place.

In mid-May, Alexis agreed to sell its base metals camp in Rouyn-Noranda, Que., for $5 million and a 19% ownership in the new junior, Druk Capital Partners.

While that transaction is yet to close, Perron says it will give the company enough cash to work on raising equity for the Credit Sussie agreement.

In late May, Alexis inked a 4.5-year term loan agreement with the bank, which he describes as a “significant milestone.”

“We are now able to tell people and show people that it is imminently a real project, it’s a bankable project. I don’t think you can get better proof of that than having Credit Sussie approve a US$45-million loan for the project.”

The agreement bears an interest of LIBOR plus 5% and will include “an equity contribution prior to draw down on the loan,” says Alexis.

The proceeds from the combined debt and equity financing will go towards restarting Snow Lake and repaying Alexis’ $10-million bridge loan.  

Currently, the company recovers ounces from its sole mine near Val d’Or, Que., where Alexis started a turnaround plan last June to improve performance.  

Perron says the turnaround at Lac Herbin is on track and the cash costs are coming down, with steady production expected in June.

For the first quarter ended March 31, 2012, Lac Herbin generated 5,529 oz. gold at a cash cost of sales of $1,523 per oz., which was roughly a $1,000 improvement from a year ago.

The mine is in line to turn out 18,500 to 20,500 oz. gold this year, with cash costs averaging between $1,300 and $1,500 per oz.

While the company still has a lot to do before it can bring Snow Lake online, Perron says: “It’s the opportune time to reposition the company because I have a legitimate project and the turnaround in Val d’Or is on schedule… By the time everything is done, we will be on a very, very solid footing.”