Century Chooses US$65M Debt Financing Option

After looking at several financing alternatives to get its Lamaque gold mine in Quebec back into production, Century Mining (CMM-V, CMNZF-O) is resorting to debt financing of US$65 million and a further $2 million in flowthrough financing.

Century said it chose debt financing over a gold-based loan option because it doesn’t require any future production to be committed and minimizes potential dilution.

Margaret Kent, Century’s president and chief executive, said in a statement that the company’s mannancing agement and board had held “extensive” negotiations on gold-based and straight debt financing alternatives with potential lenders, but ultimately felt the debt-financing option made the most sense.

“The terms of the deal announced today will allow us to restart operations at Lamaque without committing a single ounce of future gold production,” she explained.

Under the terms of the underwriting agreement, Century will borrow US$65 million for a seven-year term at an interest rate of 8% in the first year and 6% per year in the following six years.

The interest for the first year will be paid in full when the transaction closes. Payments for the second through seventh years of the loan will be interest only. The entire principal amount will be due at the end of the loan term.

Union Securities is arranging the financing, which Century says will come from a consortium of international investors.

The Calgary-based securities firm has been instrumental in identifying sources of private debt fi- for Lamaque, Century says.

A 3% underwriting fee and a 6% finder’s fee with 10 million warrants exercisable at 15¢ for a period of two years will be paid at closing.

Century plans to finance a drill program at Lamaque and reserve and resource upgrades with an additional non-brokered private placement of $2 million, made up of flowthrough shares, issued at 13¢ per share.

The proceeds from that offering, which closed April 3, will be used to drill Lamaque’s Bedard dyke and finish an ongoing Vulcan computer-modelling project of the mine from the 2,000-to 3,000-ft. levels.

Historically, the underground Lamaque mine, near Val-d’Or, has produced more than 9.2 million oz. gold, Century says.

Outside Canada, Century’s wholly owned subsidiaries in Peru own an 82.6% interest in the San Juan mine. San Juan produced an estimated 14,300 oz. gold in 2008.

Century recently traded at about 26¢ per share in a 52-week range of 1-28¢. The company has 169.1 million shares outstanding, generating a $40-million market cap.