Financing has been secured for development of the Fort Knox gold deposit in Alaska.
Cyprus Amax Minerals (NYSE) made available to Amax Gold (NYSE) US$80 million in revolving credit. The money is in addition to a similar line of credit, for US$100 million, extended by Cyprus Amax last year. Amax Gold can repay the loan by issuing convertible preferred stock, and Cyprus Amax can convert this into common stock at a price of US$5.36 per share.
As a result, Cyprus Amax’s interest in Amax Gold is expected to rise to slightly more than 51%, from 42%.
The agreement eliminates the need for a US$100-million equity offering by Amax Gold, which had been planned for the middle of this year. The line of credit has the added benefit of eliminating significant costs incurred with the underwritten equity offering. Moreover, it should, in future, reduce the cost of Amax Gold’s debt financing.
Construction at Fort Knox is already under way, although shareholders are not expected to approve the $80-million financing until May.
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