Minera IRL Announces $80 Million Financing for the Don Nicolas Gold Project From Argentina Sources
19 August 2013 - 8:00AM
Marketwired Canada
Minera IRL Limited ("Minera IRL" or the "Company")
(TSX:IRL)(AIM:MIRL)(BVL:MIRL), the Latin American gold mining company, is
pleased to announce that it has entered into a definitive agreement (the
"Agreement") with Compania Inversora en Minas ("CIMINAS") for 100% of the
financing required to develop the Don Nicolas Gold Project in Santa Cruz
Province, Argentina.
All figures are in United States ("US") dollars unless otherwise noted.
Highlights:
1. 100% of Don Nicolas Project financing secured from Argentina sources for
a total consideration up to $ 80 million
2. Minera IRL will retain 51% equity in Minera IRL Patagonia S.A. ("MIRL
Patagonia" the subsidiary of Minera IRL which holds the Company's
Argentinean assets). CIMINAS will invest $45 million as a capital
contribution in exchange for a 45% interest in MIRL Patagonia and 9.1
million ordinary shares in Minera IRL. An additional 4% equity in MIRL
Patagonia will be issued to the arrangers of the transaction
3. In addition, CIMINAS has made arrangements to provide a bridge loan
facility for up to $35 million bringing the total funds available to
develop Don Nicolas to $80 million
4. The Don Nicolas Project is fully permitted and project development can
commence immediately. An EPCM consortium has been selected to build the
mine and infrastructure. Gold production, estimated in excess of 50,000
ounces per annum, is expected to commence in late 2014
5. CIMINAS is a company formed by a group of established Argentine private
capital investors with a mission to invest in projects in Argentina with
high medium- and long-term growth potential, and with a main focus on
creating export revenue
Mr. Courtney Chamberlain, Executive Chairman of Minera IRL, commented, "We are
delighted to have financing in place to develop the Don Nicolas Project. Our
resource base, experience and highly prospective land position, augers well for
a solid and enduring mining venture."
Dr. Diego Benavides, President of MIRL Patagonia, added, "We have developed
excellent relationships with representatives of CIMINAS who complement our
mining experience with their business experience in Argentina, long established
contacts and knowledge in terms of employment, industry and government
regulations. Together, we make a responsible and diverse team committed to
growth."
Mr. Fabio Rozenblum, President of CIMINAS, said, "This is an excellent
investment opportunity for a productive precious metals project that is fully
permitted and ready to develop. We are delighted to have a partnership with this
team formed by recognized professionals of the mining industry to manage the
creation of direct and indirect employment and services resulting in a benefit
for Argentina and the region. We believe the Don Nicolas Project is a solid
investment opportunity and is of a size and scope that provides us with an ideal
entrance into the mining industry."
The Transaction
CIMINAS has agreed to provide financing for up to a total of $80 million, to be
made up of a combination of equity and debt, for the development of the Don
Nicolas Gold Project in Santa Cruz Province, Argentina.
The equity funding package comprises a number of tranches of convertible
preferred and common shares in MIRL Patagonia totalling $42 million to earn an
equity position of 45%. The convertible preferred shares have preferential
dividend rights until they are redeemed or converted into common shares.
In addition, CIMINAS has subscribed for 9,146,341 ordinary shares of Minera IRL
Limited (the "Shares") and as consideration CIMINAS has contributed $3 million
to MIRL Patagonia toward the development of Don Nicolas bringing the total
investment to $45 million. The Shares will be issued pursuant to a prospectus
supplement to the Company's base shelf prospectus dated July 12, 2012 and are
subject to regulatory approval including, without limitation the approval of the
Toronto Stock Exchange.
Application has been made for the 9,146,341 ordinary shares to be admitted to
trading on AIM ("Admission"). The new ordinary shares will rank pari passu with
the existing ordinary shares in the Company and following Admission, it is
expected that Minera IRL will have 182,824,225 ordinary shares in issue. This
figure may be used by shareholders as the denominator for the calculations by
which they will determine if they are required to notify their interest in, or a
change to their interest in, the Company under the FSA's Disclosure and
Transparency Rules.
An additional 4% equity interest in MIRL Patagonia has been provided to an
Argentine based company as compensation for arranging the $80 million combined
equity/debt financing for the development of the Don Nicolas Gold Project.
Appendix I at the end of the press release sets out the details of the various
components of the equity investments.
CIMINAS will also provide a bridging debt package of up to $35 million (the
"Credit Facility") while MIRL Patagonia seeks to arrange an Argentina sourced
debt facility to replace the Credit Facility. In the event that the Company is
unable to obtain a replacement facility, the Credit Facility will be converted
to longer term project financing under the terms of the existing agreement.
Appendix II at the end of the press release sets out the terms of the Credit
Facility.
Buenos Aires Advisors, an investment banking firm in Buenos Aires, Argentina
acted as the Company's financial advisor.
The Project
The Don Nicolas Project is located in the Deseado Massif, a geological formation
rich in gold and silver, in Santa Cruz Province, Argentina. Minera IRL completed
a definitive feasibility study in February 2012. The results of the study
demonstrated an economically robust project based on the open pit mining of
open-ended high grade epithermal gold deposits in the La Paloma and Martinetas
vein fields. A conventional crush, grind and carbon-in-leach (CIL) treatment
plant at Martinetas will have a processing rate of 350,000 tonnes per annum.
Average annual steady-state gold and silver production is estimated at 52,400
ounces and 56,000 ounces, respectively, and average cash operating costs are
estimated at $528 per ounce, after silver metal credits. Post-tax internal rate
of return using a base case gold price of $1,250 per ounce is 22.8%. Payback
period is projected to be 2 years or less.
The Strategy
The Company is negotiating a contract with a consortium comprised of SAXUM
Ingenieria S.A. ("Saxum"), an Argentina engineering firm, and Kappes Cassiday &
Associates ("KCA" or jointly "Saxum KCA") to carry out the Engineering,
Procurement, Construction & Management ("EPCM") of the Don Nicolas Project.
A development team is in the process of being assembled and the detailed
engineering and procurement process will commence shortly hereafter. This will
be followed by site mobilization and construction of the infrastructure, mining
and processing facilities. The mine management team will be assembled and put in
place to coincide with the commissioning of the mine and processing plant.
In parallel, studies will be undertaken to expand production and extend the mine
life through a carefully detailed exploration program. There is a pending
feasibility study for a parallel heap leach plant to treat a significant
resource of low grade mineralization (Measured and Indicated Resource totalling
6.8 million tonnes, at 0.8 g/t Au containing 168,000 ounces). Once into
production, MIRL Patagonia will embark on an aggressive exploration and
drill-out program to provide the basis for expanding and extending the mine life
beyond the current Proven and Probable Reserves of 1.2 million tonnes grading
5.1g/t Au containing 197,000 ounces Au.
Governance and Management
MIRL Patagonia will be governed by a Board of Directors consisting of 3 members
from Minera IRL and 2 members from CIMINAS. The development and operation of Don
Nicolas, as well as the exploration program, will be managed by Minera IRL.
About CIMINAS
The main shareholders of CIMINAS are part of a consortium of Argentine well
established industrial companies.
CIMINAS' shareholders are focused on projects in Argentina with high medium and
long-term growth potential, with a main focus on generating export revenue
and/or substitution of imports of spare parts, products and services.
Conference Call
Minera IRL plans to host a conference call at 9:00 am Lima time, 10:00 am
Toronto time and 3:00 pm London Time on Monday, 19 August 2013. To participate
in the call please dial:
Toll Free International: (800) 6578-9898
Toll Free North America: (866) 225-6564
Other International Locations: +1 (416) 340-8427
A live webcast may be accessed at: http://www.gowebcasting.com/4801.
The webcast will be archived on the Mineral IRL website (www.minera-irl.com) and
a playback of the conference call may be accessed until 2 September 2013 by
dialing:
Toll Free International: (800) 3366-3052
Toll Free North America: (800) 408-3053
Other International Locations: +1 (905) 694-9451
The passcode is 3158747
Minera IRL Limited is the AIM traded, TSX and BVL listed holding company of
precious metals mining and exploration companies focused in Latin America.
Minera IRL is led by an experienced senior management team with extensive
industry experience, particularly operating in South America. The Group operates
the Corihuarmi Gold Mine and the advanced gold projects Ollachea in Peru and Don
Nicolas in Argentina. For more information, please visit www.minera-irl.com.
The Toronto Stock Exchange neither approves nor disapproves the information
contained in this News Release.
Some of the statements contained in this release are forward-looking statements,
such as estimates and statements that describe the Company's future plans,
objectives or goals, including words to the effect that the Company or
management expects a stated condition or result to occur. Since forward-looking
statements address future events and conditions, by their very nature, they
involve inherent risks and uncertainties.
While these forward-looking statements, and any assumptions upon which they are
based, are made in good faith and reflect our current judgment regarding the
direction of our business, actual results will almost always vary, sometimes
materially, from any estimates, predictions, projections, assumptions or other
future performance suggestions herein. Except as required by applicable law or
regulation, Minera IRL Limited does not intend to update any forward-looking
statements to conform these statements to actual results.
Competent Persons Statement
The preparation of the technical information contained herein was supervised and
reviewed by Courtney Chamberlain, Executive Chairman of the Company, BSc and MSc
Metallurgical Engineering, a Fellow of the Australian Institute of Mining and
Metallurgy (AUSIMM) and Donald McIver, VP Exploration of the Company, MSc
Exploration and Economic Geology, a Fellow of the Australian Institute of Mining
and Metallurgy (AUSIMM), who are recognized as Qualified Persons for the
purposes of National Instrument 43-101, and who have reviewed and approved the
technical information in this press release.
Quality Assurance and Quality Control Procedures Disclosure
The Company has implemented and maintains a quality assurance/quality control
(QA/QC) protocol on all Minera IRL projects to ensure best industry practice in
sampling and analysis of exploration and resource samples. The insertion of
field duplicates, certified standards and blank samples into the sample stream
form part of the Minera IRL procedure (these act as an independent check on
contamination, precision and accuracy in the analytical laboratory).
Assay results are reported once the results of rigorous QAQC procedures have
been approved.
Independent Audit Programmes
Towards maintaining compliancy with international standards as they pertain to
the minerals industry resource evaluation and estimation procedure, Minera IRL
regularly contracts the services of industry experts to conduct detailed audits
of established QAQC procedures.
Cautionary Non-GAAP and Non-IFRS Statements
The Company believes that investors use certain indicators to assess gold mining
companies. They are intended to provide additional information and should not be
considered in isolation or as a substitute for measures of performance prepared
with Generally Accepted Accounting Policies ("GAAP") and International Financial
Reporting Standards ("IFRS").
The terms "cash operating costs per ounce" as used in this press release are
non-GAAP and non-IFRS terms typically used by gold mining companies to assess
the level of gross margin available to the Company by subtracting these costs
from the unit price realized during the period. These non-GAAP and non-IFRS
terms are also used to assess the ability of a mining company to generate cash
flow from operations. These terms do not have any standardized meanings
prescribed by GAAP or IFRS and there may be some variation in the method of
computation of these terms as determined by the Company compared with other
mining companies. In this context, "cash operating costs per ounce" reflects the
cash operating costs allocated from in-process and dore inventory associated
with ounces of gold sold in the period. Cash operating costs per ounce are
exclusive of exploration costs and royalties. These terms should not be
considered in isolation as a substitute for measures of performance prepared in
accordance with IFRS, and are not necessarily indicative of operating costs
presented under IFRS.
APPENDIX I
TERMS OF THE EQUITY INVESTMENT
The $45 million equity investment for 45% of MIRL Patagonia consists of 4
components ("Tranches") which are described as follows:
1. Tranche I (Minera IRL Ordinary Shares) - $3 million - CIMINAS will
subscribe for 9,146,341 ordinary shares of the Minera IRL (the "Shares")
and as consideration CIMINAS will contribute $3 million to MIRL
Patagonia toward the development of Don Nicolas. The Shares will be
issued pursuant to a prospectus supplement to the Company's base shelf
prospectus dated July 12, 2012 and are subject to regulatory approval
including, without limitation the approval of the Toronto Stock
Exchange.
2. Tranche II - $7.3 million, representing a 7.8% interest in MIRL
Patagonia. These shares have no preferred rights.
3. Tranche III (Accelerated Payback) - $15.0 million, preferred shares
representing a 16.1% interest in MIRL Patagonia. These shares will have
preference on dividend payments (doubled to 32.2% based on expected cash
flows) until the accumulated dividend paid under Tranche III totals $15
million. At which point the preferred equity held by CIMINAS will be
converted to common shares representing a 16.1% interest in MIRL
Patagonia. Additionally to receiving double dividends, this Tranche will
receive 60% of the escrowed funds set in Tranche IV to further
accelerate the pay back of Tranche III, until the accumulated amount
paid by dividends and escrowed funds under Tranche III totals $15
million.
4. Tranche IV (Secured) - $19.7 million, preferred shares representing a
21.1% interest in MIRL Patagonia. These shares will have an annual
secured return of 12.5% during the option period. At the end of year 3,
4 and 5 of production, CIMINAS will have the option to request repayment
of $6.7 million (one third of the amount of the Tranche) or convert
these preferred shares into common shares that represent 7% of MIRL
Patagonia. At each of these option dates CIMINAS can convert all the
outstanding preferred shares of Tranche IV into common shares. As
guarantee for this Tranche, the Company will pledge in favour of CIMINAS
its 51% stake in MIRL Patagonia. Additionally there will be an Escrow
account and a Reserve account to guarantee each payment. The Reserve
account will be funded from MIRL Patagonia's free cash flow exceeding
the dividend distribution capacity. The Escrow account will be funded by
60% of Minera IRL's dividends received from MIRL Patagonia, while the
accumulated amount paid by dividends and escrowed funds under Tranche
III has not reached $15 million. Once Tranche III is converted to common
shares, the Escrow account will receive 80% of Minera IRL's dividends
received from MIRL Patagonia, until the totalling amounts in the Reserve
and Escrow accounts reach $6.7 million. At this point Minera IRL will
receive 100% of the dividends corresponding to their 51% stake in MIRL
Patagonia.
An additional 4% equity interest in MIRL Patagonia has been provided to an
Argentine based company, as compensation for arranging the combined equity/debt
financing for the development of the Don Nicolas Gold Project.
APPENDIX II
TERMS OF THE CREDIT FACILITY
The terms of the Credit Facility are as follows:
Issuer: Minera IRL Patagonia S.A.
Lender: Compania Inversora en Minas S.A.
Amount: Up to $35 million
Commitment period: 18 month from closing of Agreement
Commitment Fee: 2.0% per annum on non-disbursed
funds
Original Tenor (OT): 1 year from first disbursement
Amortization schedule OT: Bullet, both interest and principal
payments at maturity
Option for Extended Period (EP): 2 years from maturity of Original
Tenor
Amortization schedule EP: 3 annual instalments, the first at
the beginning of extended period
Interest Rate for Original Tenor: 360-day LIBOR + 8%
Interest Rate for Extended Period: 180-day LIBOR +8.5% with a 0.5% step
up of per quarter, (last quarter of
loan Libor + 12%)
Interest Payments for Original Tenor: At maturity
Interest Payments for Extended Period: Semi annually
Ranking: Senior debt
Use of Proceeds: Capital expenditures related to the
development of Don Nicolas Project
Security: First Mortgage on MIRL Patagonia
mining rights and properties.
Guarantee Trust and share pledge
Covenants: Customary to similar project
financing (restriction on sale of
assets, dividends, change of
control, debt incurrence, restricted
payments among others).
Governing Law: Argentine law
Jurisdiction: Arbitration in Argentina
FOR FURTHER INFORMATION PLEASE CONTACT:
Minera IRL
Trish Kent
Vice President, Corporate Relations
+511 418 1230
www.minera-irl.com
Canaccord Genuity Limited
(Nominated Adviser & Broker, London)
Andrew Chubb
Emma Gabriel
+ 44 (0)20 7523 0000
finnCap (Co-broker, London)
Geoff Nash (Corporate Finance)
Matthew Robinson (Corporate Finance)
Elizabeth Johnson (Corporate Broking)
+ 44 (0)20 7600 1658
RBC Europe Ltd (Co-broker, London)
Stephen Foss
Martin Eales
+44 (0)20 7653 4000
Buchanan (Financial PR, London)
Bobby Morse
Gordon Poole
Louise Mason
+44 (0)20 7466 5000
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