Geomaque restructures, gets new board (December 19, 2001)

A financial restructuring at Geomaque Explorations (GEO-T) will see the company’s principal lender get a large net cash flow interest on the Vueltas del Rio gold mine in Honduras.

Geomaque reached an agreement with Resource Capital Fund II, to whom it owed about US$2.9 million, to restructure its debt with interest effectively paid out of cash flow from Vueltas del Rio. The principal of Resource Capital’s loan is being repaid in seven quarterly instalments starting at the end of September 2002.

Resource Capital and two other institutional investors are supplying US$1.3 million in cash by subscribing for a 39.7-million-share private placement. Shareholder aproval is needed to issue 31.3 million of those shares, so an extraordinary meeting is being called in February. Escept for an immediate payment of US$266,000, the cash remains in escrow until shareholders approve the new issue.

Resource Capital also receives 40% of net cash flow from Vueltas until it has recovered a net 40% internal rate of return on its US$2.9-million in advances to Geomaque. After that, it retains a 10% net cash flow royalty.

A US$1.7-million debt to the contract miner at Vueltas, Sococo de Costa Rica, is being paid off over ten quarterly instalments starting at the same time as payments begin to Resource Capital.

Vueltas, which poured its first gold in March of this year, has not met its initial cost and production goals. Over the third quarter, its first three months of commercial production, it produced just over 10,000 oz. at a cash cost of US$251 per oz. Feasibility projections for Vueltas had it producing 60,000 oz. annually at costs below US$200.

Coincident with the restructuring, a new board of directors will take over at Geomaque. Mining executive John Hick will become the new president and chief executive.