PERTH (miningweekly.com) – ASX-listed Southern Cross Goldfields has secured a A$60-million debt package and a new cornerstone investor, thereby fully funding its existing project pipeline.

The company told shareholders on Tuesday that it had secured the A$60-million debt package from global commodity trading company TrailStone Group. The financing package would be made available in two tranches, with the first comprising a prepaid A$25-million gold loan that would be available immediately.

The loan would be repayable over 22 months, starting from the first anniversary of the drawdown of the facility and would be satisfied by the delivery of 33 000 oz of gold, at 1 500 oz a month.

A second tranche A$35-million credit facility could be drawn down in stages from the first half of 2015.

Meanwhile, Southern Cross said that the company would also undertake a recapitalisation to raise A$6-million in order to strengthen its balance sheet and to deliver a platform for further growth.

This raising would include A$5-million through a share placement to sophisticated and professional investors, priced at 1c a share, which would include one free attaching option for every two shares issued. The option would be exercisable at no more than 1.4c each.

Following the placement, TrailStone was expected to subscribe for a minimum of A$1-million in new Southern Cross shares, at the same issue price. However, the subscription would not include any free options.

The subscription would result in TrailStone holding a 7% interest in Southern Cross, based on a minimum A$6-million equity raising.

Once this had been completed, current Southern Cross shareholders would be offered the chance to partake in a capital raising, under similar terms.

The company said on Tuesday that the TrailStone finance facilities and the proceeds from the placement would provide Southern Cross with enough funds to repay its existing debt and to deliver the staged development of first the Mt Boppy gold project, in New South Wales, and then the Marda gold project, in Western Australia.

The Mt Boppy opencut operation was expected to deliver some 64 000 oz of gold over a two-year mine life, at a cash cost of below A$600/oz.

Marda, in turn, could start production in 2017 and would produce some 167 000 oz over a four-year mine life, at a cash cost of below A$800/oz.

“This transaction is effectively a relaunch of Southern Cross. It enables us to bring our existing projects into production and creates a strong new platform for substantial growth,” said MD Frank Terranova.

“It ensures that the company is fully funded to develop its existing pipeline and is well positioned to capitalise on opportunities in the current market.”

Terranova pointed out that being fully funded and transitioning to producer provided Southern Cross with a catalyst for value and re-rating of its stock.

Following the drawdown of the gold loan, TrailStone would have the right to appoint a representative to the board of Southern Cross.

The commodity trader would also be issued with warrants exercisable before the end of 2019, with an exercise price of no more than 1.4c each. The warrants would be convertible into ordinary shares on a one-for-one basis, and once this conversion is approved by shareholders, could result in a further A$17.5-million investment for Southern Cross.

If the warrants were converted in full, TrailStone would hold a 44% interest in Southern Cross.