Canada-based gold miner PureGold has closed a $6-million additional credit facility with Sprott Resource Lending as part of several agreements reached with the lender, including a new debt repayment schedule to enhance the company’s liquidity and provide financial flexibility.

The new repayment schedule is the second amendment of the restated credit agreement of April 2021.

The additional, first-priority, non-revolving credit facility enables drawdowns for payments owing to Sprott including interest, gold stream and production payment agreement payments, with the first such drawdown expected to be made regarding amounts owed to Sprott as of June 30.

The additional credit facility matures on December 31, and accrues interest at a rate of 14% a year.

In addition, LSE- and TSX-V-listed PureGold has agreed with Sprott to defer the first four scheduled principal repayments, each 2.5% of the total principal amount, originally scheduled for the last day of September and December this year, and March and June 2023; while the bullet payment is due in August 2026.

The bullet payment will increase from 35% of the total principal amount to 45% as a result, creating about C$12-million of additional liquidity for PureGold within the next 15 months that would have otherwise been allocated to debt repayments.

Further, PureGold has also agreed with Sprott on temporary reductions to the minimum cash and minimum working capital ratio covenants to $5-million (about C$6.5-million at the current exchange rate) and 0.75x, respectively, for the months ending June 30 and July 31.

At June 30, PureGold had C$13-million in cash, C$21-million in available liquidity including the full additional credit facility, and a net working capital ratio of about 0.85x.

However, PureGold notes that it might not be able to comply with its covenants in the future without further amendments from Sprott.

TURNAROUND PLAN
PureGold is also progressing with its operational turnaround plan, its updated life-of-mine plan and is also launching a strategic review process with the objective of increasing shareholder value and the value of its PureGold mine in Ontario.

PureGold president and CEO Mark O'Dea says the company has initiated a strategic review process to explore potential alternatives for increasing shareholder value and generating the financial strength to enable the PureGold mine to achieve its potential.

“We remain focused on achieving positive site-level cash flow by the third quarter of this year, and delivering an updated National Instrument 43-101 technical report and life-of-mine plan by the fourth quarter,” he says.

The strategic review process, which was initiated with the assistance of advisers, might include a potential sale or merger of the company, sale of some or all of the PureGold mine, or various other potential long-term financing alternatives.

O’Dea adds that if PureGold can increase the value of the mine, it can also increase value for its stakeholders, including but not limited to its shareholders, employees and the local communities surrounding Red Lake.

Meanwhile, to better forecast the mine's near-term production, PureGold is postponing until August, a 2022 guidance update that had previously been scheduled for June.