West Red Lake Gold Mines (TSXV: WRLG; US-OTC: WRLGF) has agreed terms for a loan of up to $95 million (C$132.8 million) to lower borrowing costs and support its Ontario operations after cutting this year’s gold production target by about a quarter.
The binding term sheet with Gunvor USA, a subsidiary of Centalion Group, provides for an initial loan of up to $65 million and a further loan of up to $30 million subject to additional conditions, the company said Monday. Funding requires due diligence, definitive agreements and approvals. The money would refinance Nebari debt and support Madsen, about 260 km east-northeast of Winnipeg, and potential development at Rowan.
“Over the course of the year, we have built a strong business relationship with Centalion, culminating in a financing arrangement that would provide West Red Lake Gold with increased liquidity, a more competitive cost of capital and significantly improved repayment terms,” CEO Shane Williams said in the release. “This represents an important step in strengthening our financial position.”
Cheaper debt would ease financing costs while the company works to establish reliable output. Red Cloud Securities analyst Ian Parkinson viewed last week’s operating update as slightly negative in an Oct. 28 note, citing reliance on lower-grade remnant areas. Parkinson identified the forthcoming Madsen–Rowan prefeasibility study as the key catalyst for a shift toward higher-grade ore from previously unmined ground.
The financing proposal follows a 26% reduction in the midpoint of Madsen’s annual production guidance last week. Labour shortages and difficult mining in previously worked areas have slowed an operation that declared commercial production in January. Previous operator Pure Gold Mining shut Madsen and entered creditor protection in October 2022 after failing to generate consistent positive site-level cash flow. West Red Lake acquired the mine in June 2023.
Shares gained 7.7% to C56¢ by mid-Monday in Toronto, valuing the company at C$232.1 million. They’ve traded between C52¢ and C$1.49 over the past year.
Cheaper borrowing
The proposed loan would carry interest at one-month secured overnight financing rate, or SOFR, plus 5.5%. It would mature five years after the initial draw, with no scheduled principal repayments on the first tranche for nine months.
That compares with the existing Nebari loan, originally capped at $35 million, which charges three-month SOFR plus 8%. Its benchmark-rate floor of 4% means a minimum annual interest rate of 12%. The original maturity was 42 months after the first draw on Dec. 31, 2024. The proposed interest margin is 2.5 percentage points lower, although the loans use different benchmark tenors.
Gunvor would receive senior security over Madsen and Rowan and purchase all gold doré produced by the operation.
At June 30, West Red Lake carried C$43.7 million under the Nebari loan and held C$31.2 million in cash, according to its interim financial statements. Part of the proceeds would repay Nebari rather than provide new working capital.
Operating strain
Madsen produced 7,859 oz. in the third quarter, down 8.4% from the previous three months, bringing nine-month output to 22,102 ounces. The company now expects 27,000 to 32,000 oz. this year, down from 35,000 to 45,000 ounces.
West Red Lake has added specialized contractors and commissioned a secondary crusher to improve material handling. It is developing additional mining fronts, including previously unmined areas deeper in the deposit.
The integrated study would assess a combined production plan using Madsen’s mill to process ore from Rowan as an underground satellite operation. The company expects to release the study in the coming weeks, it said Oct. 27.
Source: www.northernminer.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.
