RESOLUTE Mining said the $12m termination of a royalty held over a small portion of production at its Mako Gold Mine in Senegal would “greatly simplify” the refinancing of the group’s syndicated loan facility, due to be completed in mid-February.
The loan facility as it currently stands is A$300m (US$203m, US$ hereafter $). Resolute has requested an expansion of the facility to $300m. It has a facility expansion from the existing syndicate banks from $150m to an interim limit of $195m.
The royalty was in place as part of the financing of Mako Gold Mine by its previous owner, Toro Gold. Resolute bought Toro Gold for $274m in July through a cash and shares deal. Mako also has $63m of project finance still to be settled which Resolute added would be through cash reserves and via an expanded syndicated loan facility.
“Acquisition of the Toro Gold Royalty will boost the future cash flows received by Resolute from Mako and further enhances our exposure to higher gold prices and future exploration success,” said John Welborn, MD and CEO of Resolute. “We are working to simplify the company’s capital and debt structure and the termination of this external royalty on sound financial terms is value accretive for Resolute.”
Earlier this month, the company raised $134m with institutional investors, directors and existing shareholders which was directed towards a $130m bridging facility raised in order to complete the takeover of Toro Gold.
Today’s announcement represents further work on the balance sheet in which Resolute cancels a 1.1% royalty on first production from Mako Gold Mine. The royalty, held by entities associated with Taurus Funds Management, would be paid in either cash or shares, depending on royalty holder preference.
The shares will be priced at A$1.10 each if royalty holders want to go that route. The issue of shares also has to win the approval of shareholders at an extraordinary general meeting that is scheduled for February 27. The termination of the royalty as well as the repayment of the project finance in Mako Gold Mine is set to be completed during the March quarter.
In mid-January, Resolute confirmed the sale of its 54,500 ounce a year Ravenswood mine in Australia’s Queensland to a consortium led by EMR Capital for A$100m ($69m) of which half would be in cash and the balance in promissory notes.
The impact of these moves is to simplify Resolute’s business case in terms of its balance sheet and portfolio as well as reduce its cost of capital. The benefit of selling Ravenswood is that it removed A$150m in expenditure that had been contemplated. Net debt, which was at some $267m as of December 31, has been more than halved.
A decision still to be made at Resolute is whether the company will proceed with the reopening of Bibiani, an underground operate in Ghana especially as Welborn has said in the past the company was focused on improving the firm’s portfolio through merger and acquisition activity.