Leagold Mining Corp. [LMC-TSX; LMCNF-OTCQX] on Thursday May 2 announced a US$400 million refinancing package that will be used to pay down existing debt and fund capital expenditures at the company’s organic growth portfolio.
The financing package consists of a US$200 million term loan and a US$200 million revolving credit facility under an arrangement with a syndicate of international bank lenders. The interest rate is LIBOR plus 3.75% to 4.45%. Maturity is 5.5 years with repayment on the term loan commencing on September 2021.
Leagold is establishing itself as a mid-tier gold producer with a focus on opportunities in Latin America.
Its key asset is the Los Filos Mine located 230 km south of Mexico City, Mexico. The open pit mine started commercial production in 2008.
In May 2018, Leagold completed the acquisition of Brio Gold Inc., an established Canadian mining company with significant gold producing, development, and exploration-stage projects in Brazil. The company’s portfolio includes three operating gold mines, and a fully-permitted, fully-constructed mine (Santa Luz) that was on care and maintenance and currently is in development to be restarted at the end of 2018.
With the addition of Leagold’s Bermejal Underground Project at the Los Filos Mine and the restart of Brio’s Santa Luz Mine, the combined operations have the potential to produce over 700,000 ounces of gold annually in 2020 at an all-in sustaining cost of US$850 an ounce.
With the diversification benefit from multiple jurisdictions, Leagold will have a strong platform to expand within both Mexico and Brazil, the company has said.
Together with the financing, Leagold also announced a phased project development approach beginning with a restart of development for Bermejal Underground Project at Los Filos in July 2019 and pre-stripping at the Guadalupe section of the Bermjal open pit to start in the fourth quarter of 2019.
Los Filos CIL plant construction is targeted to start in mid-2010 and the Santa Luz construction start is planned in 2021. The capex for Bermejal Underground and the 4,000 tonne-per-day carbon-in-leach plant remains unchanged at $180 million, and no material changes in operating costs or all-in-sustaining costs are expected.
The net cash investment requirement is now mostly self-financed from operations at current gold prices. However, as a result of the greater proportion of ore being heap leached due to the deferral of the CIL plant, the estimated life-of-mine gold production is approximately 1.5% lower than the 3.2 million ounces estimated in the March 2019 feasibility study.
Meanwhile, Thursday’s announcement removes the potential equity financing overhang for Leagold shares. It also eliminates the debt repayment requirement of US$100 million in November 2019 from the previous financing facility.
As a result, Leagold can now proceed with organic project development using a phased construction approach.
On Thursday, Leagold shares eased 4% or $0.06 to $1.42. The shares are trading in a 52-week range of $1.28 and $3.17.