LONDON (Alliance News) - Aureus Mining Inc shares dropped on Monday after agreeing terms for USD21.5 million of financing, the majority of which will come from heavily-discounted equity financing, and also warned it may have to raise further funds in the future if gold prices don't improve.
Aureus shares were down 38% to 8.18 pence per share on Monday morning.
The company said the USD21.5 million of financing will be split into a USD10.0 million liquidity facility provided by Rand Merchant Bank and Nedbank, and USD11.5 million of brokered equity financing under an agreement with GMP Securities Europe LLP and Numis Securities Ltd.
The USD11.5 million of equity financing will be raised by Aureus issuing 153.0 million new shares at a price of 5.0 pence per share, representing a large discount to its current share price.
In addition, Aureus said the International Finance Corp, which currently holds a 14.6% stake in the company, has no obligation to maintain its pro rata shareholding in the company through the equity raising, but said it is in discussions about International Finance Corp making a further potential investment.
Aureus said the liquidity facility and equity financing will be used to strengthen its balance sheet and accelerate its New Liberty project in Liberia.
"The funds to be raised pursuant to the new facility and the offering will be used to strengthen the company's balance sheet, and in particular allow the company to reduce its accounts payable, facilitating the procurement of additional mining equipment, which will enable accelerated mining of the New Liberty ore body to compensate for lost production to date and reduce the waste stripping shortfall," said the company in a statement.
Aureus said it will use USD15.0 million of the proceeds to pay down its creditors, of which USD9.0 million is owed to the supplier of its mining fleet. Another USD5.0 million will be used for working capital whilst it ramps up operations at the New Liberty project.
Overall, the new financing is aimed at giving the company breathing space to optimise the New Liberty mine, which is behind schedule and currently unable to generate sufficient cashflow. Aureus said it believes it can "deliver on the production and cost estimates, which at the prevailing gold price, should see it generate sufficient cashflow to meet its continuing obligations, including its debt repayments, until the end of 2016," it said.
"Aureus has faced the challenges of a low gold price environment combined with issues associated with the impact of the Ebola outbreak in Liberia and the commissioning and ramp up of production at New Liberty, resulting in a delay to commercial production," said David Reading, president and chief executive of the company.
"The funds to be raised through the new facility and the offering will enable the company to reduce our creditor balance to a normal operating level and allow additional mining equipment to be procured which will accelerate the mining rate and allow the company to reduce the shortfall in waste mining tonnage," he added.
However, the miner also said it has USD6.6 million of debt due to be repaid in January 2017, and said if gold prices have not improved, it "may be unable" to make those repayments which would require it to seek further funds from its stakeholders.
The new USD10.0 million liquidity facility is due to be repaid at the end of 2017 and carries an interest rate of 5% plus LIBOR.
On top of the USD11.5 million of equity financing, Aureus has also issued options to the two banks providing the USD10.0 million liquidity facility. Those options are over 20.4 million Aureus shares.
"Whilst we have experienced some unexpected incidents during the commissioning phase which resulted in a longer ramp up to commercial production than we had hoped, the New Liberty gold mine has now operated successfully at an average of 92% of design capacity for the past 27 days and we look forward to declaring commercial production in the New Year," said Reading.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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