TSXV-listed Orezone Gold Corporation has secured US$182 million to fully finance the construction of its shovel-ready Bomboré gold project located in Burkina Faso, West Africa.
The project, which remains on track for first gold pour by Q3, 2022, is forecasted to produce 118 000 ozpa of gold over a 13+ year mine life at an all-in sustaining cost of $730/oz with an after-tax payback period of 2.5 years at an assumed gold price of $1 300/oz.
The $182 million project financing package is comprised of the following key terms:
- $96 million senior secured debt facility with Coris Bank International with interest rates of 8.0% and 9.0%.
- Coris Bank is one of the largest and fastest growing banks in West Africa.
- $35 million 8.5% convertible note with Resource Capital Fund VII L.P. (RCF) and Beedie Investments (Beedie Capital).
- RCF VII is part of Resource Capital Funds, a global mining private equity firm.
- Beedie Capital is the private investment arm of Beedie, the largest private industrial owner, developer, and property manager in Western Canada.
- $51 million bought-deal equity offering of 61 950 000 common shares of the company at a price of C$1.05 per common share for gross proceeds of C$65 047 500 co-led by Canaccord Genuity Corp. and CIBC Capital Markets.
“We are extremely pleased to announce this attractive financing package following a competitive selection process. We believe the financing package is a testament to the strong project fundamentals offered by Bomboré, says Orezone Gold President and CEO Patrick Downey.
“The debt package is structured to provide maximum flexibility for the company to complete future expansions including the staged Phase II Sulphide Expansion. Bomboré hosts a very large measured and indicated resource at shallow depths, has exciting exploration potential, and is open to further enhancement opportunities. We are now ready to ramp up construction activities at Bomboré with first gold pour scheduled for Q3,2022,” Downey adds.
The project financing package was the result of a competitive process conducted with the company’s financial advisor, Cutfield Freeman & Co. The senior debt facility with Coris Bank together with the convertible note facility with RCF and Beedie Capital were selected as they provided the best combination of operational flexibility and pricing for the company.
Senior debt facility
Orezone has received a credit-approved binding term sheet from Coris Bank International for a senior secured project-level debt facility that is divided into a medium-term loan and a short-term loan. The medium-term loan will fund construction costs while the short-term loan will fund the remaining capital spend and initial working capital at a lower interest rate.
Both loans are denominated in West African Communauté Financière Africaine francs (XOF), the official currency of Burkina Faso. The US dollar equivalents are shown using an exchange rate of 545 XOF per USD. As a portion of the project capital will be spent in XOF, the senior debt facility in XOF will provide a natural currency hedge during construction.
- Medium-term loan of $64 million (XOF 35 billion)
- Term of 5 years.
- Interest rate of 9.0% per annum.
- Availability period to 30 June 2022 with multiple drawdowns permitted and first drawdown by 30 December 2021.
- Deferral of principal repayments for the first 24 months.
- Early repayment permitted with a sliding scale prepayment penalty ranging from 2% to 3%.
- Short-term loan of $32 million (XOF 17.5 billion)
- Term of 12 months from first drawdown.
- Interest rate of 8.0% per annum.
- Availability period to 30 September 2022 with two drawdowns permitted.
- First drawdown is to commence after full drawdown of medium-term loan.
- First principal repayment by 31 January 2023.
The senior debt facility has no requirement for hedging, cost overrun reserve, or cash sweeps. A fee of 0.75% is payable should the company exercise early termination of the senior debt facility before first drawdown.
Conditions precedent to loan drawdowns include execution and delivery of the final senior debt facility documentation, local registration of project-level security, and other customary conditions.
Convertible note facility
Orezone has signed binding letter agreements for a convertible note facility issuance in the aggregate amount of $35 million.
Key terms include:
- Term of 5 years.
- Interest rate of 8.5% per annum.
- Interest is payable up to 75% in common shares at the option of the company.
- Availability period to 30 September 2021 in a single drawdown following the satisfaction of all conditions precedent.
- Convertible at the option of the lenders at any time at the conversion price of $1.08, representing a 30% premium to the equity offering price.
- Forced conversion at the company’s election at the conversion price for up to 50% of the outstanding principal when both of the following conditions are met simultaneously:
- Commercial production has been achieved; and
- If over 20 consecutive trading days, the VWAP of the company’s common shares exceeds a 50% premium to the conversion price.
- Non-callable with any outstanding principal due at maturity.
- No upfront fees.
Conditions precedent to drawdown include project expenditures of US$50 million to be funded by new equity, execution and delivery of the final convertible note facility documentation, and other conditions customary for a facility of this nature.
Pursuant to the policies of the TSXV, Orezone is required to seek shareholder approval for the convertible note facility to be issued to RCF. Shareholder approval will be sought at the company’s annual general and special meeting which is anticipated to be held in May 2021.
Orezone has entered into an agreement with Canaccord and CIBC to act as co-lead underwriters, on behalf of a syndicate of underwriters, pursuant to which the underwriters will purchase, on a bought deal basis, an aggregate of 61 950 000 common shares of the company at a price of C$1.05 per share for aggregate gross proceeds of C$65 047 500.
The Offering Price of C$1.05 per share represents:
- 7.1% discount to the closing price of C$1.13 per share on 20 January 2021; and
- 8.2% discount to the 10-day VWAP of C$1.14 per share to 20 January 2021.
The company has granted the Underwriters an over-allotment option to purchase up to an additional 9 292 500 common shares at the offering price exercisable in whole or in part, at any time and from time to time, up to 30 days from and including the closing date of the equity offering. If the underwriters’ option is exercised in full, an additional C$9 757 125 in gross proceeds will be raised pursuant to the equity offering and the aggregate gross proceeds will be C$74 804 625.
The company intends to use the net proceeds from the equity offering to advance Bomboré towards production, as well as for working capital and general corporate purposes.
Closing of the equity offering is expected to occur on or about 28 January 2021 and is subject to certain conditions including, but not limited to, receipt of all necessary regulatory approvals, including the approval of the TSXV and applicable securities regulatory authorities.