PERTH (miningweekly.com) – Gold miner Red 5 has secured a A$175-million finance facility to fully fund the development of its 2.4-million-ounce King of the Hills project, in Western Australia.

The company told shareholders on Thursday that it had executed a commitment from a syndicate comprising three banks for a A$160-million senior secured project loan facility, and a A$15-million cost overrun and working capital facility.

In addition, the company has also launched a 4-for-21 fully underwritten non-renounceable entitlement offer, priced at 16c a share, to raise a further A$60-million.

The entitlement offer price represented a 15.8% discount to Red 5 last closing price and a 13.6% discount to the company’s theoretical ex rights price.

“The launch of the fully underwritten capital raising together with commitments for A$160-million of construction debt and A$15-million cost overrun and working capital facility marks a key milestone in the development of King of the Hills,” said Red 5 MD Mark Williams.

“It is also a critical juncture for Red 5 as we continue on our pathway to becoming a midtier Australian gold producer.

“The commitment of debt financing follows an exhaustive due diligence process by the banks’ independent technical expert. We will now work with the banks as quickly ass possible to achieve financial close, putting us in a position to make our first draw-down in the June 2021 quarter.”

The senior secured project loan facility will have a 5.75-greater term, maturing at the end of September 2026, and includes expected mandatory hedging at current gold prices of between 190 000 oz and 200 000 oz, or some 25% of production during the loan term.

Williams on Wednesday said that with multiple work streams already well under way, and the engineering, procurement and construction contractor advancing to Phase 2 of the plant construction contract, King of the Hills was a busy work environment.

“Having received commitments for the project financing, Red 5 can move ahead with the development of one of the most significant new, long-life projects currently under development in Australia.”

The initial mine plan for King of the Hills estimated a mine life of 16 years, with gold production in years one to six expected to average 176 000 oz/y, while peak annual gold production of 203 000 oz/y will be achieved in 2024, benefitting from underground mining of one-million tonnes a year in years one to four.