PERTH (miningweekly.com) – Gold developer Orinoco Gold has secured a funding package of up to A$14-million to finance the construction and development of its Cascavel project, in Brazil.

The funding package would comprise a A$1-million capital raising, with shares being placed to professional and sophisticated clients, and a A$2.7-million nonrenounceable entitlement issue to existing shareholders.

The share placement would be priced at 7c a share, while the nonrenounceable entitlement offer would be based on one new share for every four shares held, and also priced at 7c each.

In addition to the equity raise, Orinoco also entered into a binding conditional term sheet with Singapore’s Chancery Asset Management encompassing a gold sharing arrangement over the Cascavel project.

Under this agreement, Chancery would participate in a share of the gold production from Cascavel for a period of three years from the start of commercial production, until Orinoco had delivered a minimum of 16 000 oz of gold.

Chancery would provide project finance of between $6-million and $8-million, which Orinoco would repay by entering into a gold sharing arrangement for 20% of Cascavel’s gold production. It would also have to pay an establishment fee of 1.5% of the consideration amount.

MD Mark Papendieck on Monday described the gold sharing arrangement as an “excellent outcome” for shareholders, adding that it provided significant up-front development funding without dilution to existing shareholders.

“This funding package is particularly well suited to provide the flexibility that a high-grade gold project such as Cascavel requires, where the coarse nature of the gold makes it prohibitively expensive to define Joint Ore Reserves Committee-compliant resources.”

Papendieck said the agreement would provide Orinoco with the foundation to make the transition to a self-funding junior gold producer.

“Considering the challenging investment climate for the junior resource sector, securing a funding package of this size is a huge achievement.”

The development of Cascavel would require a capital injection of about $6.6-million for an initial 40 000 t/y operation using a gravity circuit capable of achieving gold recoveries of between 80% and 90%.