CANADA’S Otterburn Resources and K92 Holdings International have secured a loan of US$15 million from metals trader Auramet Trading, repayable by delivery of gold by 31 December 2016.
Otterburn had acquired the Kainantu Mine Project, which covers 50,000 hectares in Papua New Guinea’s Eastern Highlands, through a share agreement with K92 in August, with the deal to see Otterburn wholly acquire the company.
Funds from the loan will be provided to K92 for it to use to re-start the Kainantu mine, with the debt to be repayable to Auramet by monthly deliveries of gold from September 2015 through to December 2016.
There will be no penalty for early repayment of the loan, which is conditional on Otterburn successfully raising at least another US$15 million.
The company announced plans in September to raise at least US$10 million through the issue of 20 million subscription receipts at a price of $0.50 each – each receipt entitling the subscriber to an Otterburn share.
Otterburn and Auramet were set to decide on the number of gold ounces to be delivered to Auramet by 19 December, 2014, the company said – adding that it would be based on the then-current spot price of gold, less an agreed discount.
“In addition, it is expected that Auramet will receive 1 million share purchase warrants with a $0.65 strike price and a three year term, as well as structuring and drawdown fees totalling 3 per cent of the Facility amount,” an Otterburn announcement said.
K92 will also sell gold to Auramet at market rates for a period of time up until 31 December, 2016, under a new purchase and sale agreement, the company said.
K92 chief executive Ian Stalker said the loan was a vote of confidence in the project from an experienced mining lender.
“Accessing this financing will minimise shareholder dilution while giving K92 the funds to deploy our business plan for this exceptional opportunity,” he said.
“K92 will retain full upside exposure to the gold price on all ounces not used to repay the Auramet Facility. We look forward to working with Auramet and to bringing the Kainantu Mine Project back into production, on time and on budget.”