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Romarco secures $200m, no-hedge finance facility

4th November 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – Romarco Minerals has inked a binding commitment letter with a consortium of financiers for a $200-million 8.5-year senior secured project finance facility, a week after obtaining a federal permit under Section 404 of the Clean Water Act for the company's Haile gold mine project, in South Carolina.

Toronto-based Romarco reported that Caterpillar Financial Services, Macquarie Bank and Societe Generale Corporate & Investment Banking had agreed to lend the project developer $200-million through a debt facility, which would carry no mandatory gold hedging requirements, at a London Interbank Offered Rate plus 3.75% to 4.25%, which would be secured by assets of Romarco subsidiary Haile Gold Mine without recourse to the parent after completion.

“This speaks to the strong endorsement of three global mining lenders for the Haile project and the economic strength of the project. As one of the lowest-cost, highest-grade openpit gold mines in the industry, Haile sits at the top end of the quality spectrum of gold assets having a positive feasibility study at $950/oz gold,” Romarco president and CEO Diane Garrett said.

The commitment is valid for 120 days to reach closing and confirms that each lender has committed to provide one-third of the facility, with an option to syndicate following closing. The term sheet includes customary project finance terms and conditions for fees and conditions to closing, and remains subject to executing definitive loan documentation.

Romarco expects to receive all environment permits and regulatory approvals for Haile in the current quarter.

The most recent funding estimate to complete the Haile gold mine is about $385-million, including initial mine project capital, wetlands mitigation, reclamation bonding, working capital and other start-up costs. The total funding estimate with project debt is about $455-million, including the cost overrun, debt service facility and financing fees and expenses.

The company is continuing to evaluate alternatives that might lower the overall funding requirement, including other facilities, equipment lease agreements and surety bonding.

Garrett noted that the company had built flexibility into its schedule, which enabled it to, for example, extend the agreement to buy Caterpillar equipment into March 2015. Thereby, Romarco would be furnished with the time to evaluate financing alternatives and stave off dilutive equity financing until such time as market conditions substantially improved, as the company felt its TSX-listed stock was currently undervalued.

Cutfield Freeman & Co was acting as Romarco’s financial advisor and Shearman & Sterling as its project finance counsel. The lenders were being advised by Allen & Overy.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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