TORONTO (miningweekly.com) – TSX-V-listed project developer Red Eagle Mining has secured $65-million in financing from Orion Mine Finance to build its fully permitted San Ramon gold mine, in Colombia.

The financing comprised a private placement of common shares and a $60-million credit facility.

The San Ramon underground mine project formed part of the 100 km² historic Santa Rosa gold project, where gold mining predated the seventeenth century, when an estimated 30-million tonnes of ore were mined.

Under the terms of the private placement, Red Eagle would issue Orion with an amount of shares equal to the lesser of $4-million, divided by the US-dollar equivalent of C$0.33 on the closing date and the amount of stock required to give Orion a 19.9% stake of the issued and outstanding shares.

Orion also subscribed for a first tranche of $1-million, which closed on February 3.

Under the terms of the subscription agreement, so long as Orion owned at least 15% of Red Eagle, it would have the right to appoint a director to the board and, so long as Orion owned at least 5% of Red Eagle, it would have the right to participate in any future equity financing to maintain its equity ownership.

Under the terms of the credit facility, Red Eagle agreed to complete an equity financing of at least $15-million before it would be able to draw down any funds. The credit facility would have a five-year term with a principal holiday and capitalised interest for up to 18 months from the first advance, while advances would bear interest at the London Interbank Offered Rate plus 7.5%.

Further, Red Eagle agreed to a production payment of $30/oz on the first 405 000 oz of gold produced and to issue five-million warrants to buy Red Eagle stock, exercisable over a five-year term at a price determined similar to that of the equity financing.

Amounts outstanding under the credit facility would be secured against all Red Eagle’s property and assets.

"San Ramon is now fully permitted and close to being fully financed to meet the planned capital expenditure of $74-million, including contingencies," Red Eagle CEO Ian Slater commented, adding that the company was on track to start construction by mid-2015, with production to start in 2016.

According to an October 2014 feasibility study, the 1 000 t/d operation would produce, on average, 50 000 oz/y over an eight-year mine life.

The project’s reserves stood at 2.42-million tonnes, grading 5.2 g/t gold for 405 000 oz.

Assuming a long-term gold price of $1 300/oz, the project’s net present value, at a 5% discount, was $104-million, with an internal rate of return of 53% and a payback period of 1.3 years.