Century Mining chooses US$65 million debt financing option

After looking at several financing alternatives to get its Lamaque gold mine in Quebec back into production, Century Mining (CMM-V) is resorting to debt financing of US$65 million and a further C$1.75 million in flow-through financing.

Century said it chose the debt financing option because it “requires no commitment of future gold production and minimizes potential dilution of the company’s shares.”

Margaret Kent, Century’s president and chief executive, said in a statement today that the company’s management and board had held “extensive” negotiations on gold-based and straight debt financing alternatives with potential lenders but ultimately felt that 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 7-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 financing for the Lamaque project,” Century says.

A 3% underwriting fee and a 6% finder’s fee with 10 million warrants exercisable at C$0.15 for a period of two years will be paid at closing.

Century plans to finance a drill program at Lamaque and additional reserve and resource upgrades with an additional non-brokered private placement of up to C$1.75 million, made up of flow-through shares.

The junior gold producer will issue common shares on a flow-through basis at a price of $0.13 per share.

The proceeds from that offering will be used to drill Lamaque’s Bedard dyke and finish an ongoing Vulcan computer modeling project of the mine from the 2,000 to 3,000 foot levels.

Historically the underground Lamaque mine has produced more than 9.2 million ounces of gold, Century says.

The markets seemed to welcome the financing news. At midday in Toronto, Century’s shares were up 2¢ apiece, or 16.7%, to 14¢ per share.

The company has traded in a 52-week range of 1¢-28.5¢ per share and has 169.1 million shares outstanding.

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 ounces of gold in 2008.