Canadian gold exploration company Sacre-Coeur Minerals says it has moved closer to signing a US$10 million loan to help prepare for the construction of its Million Mountain Zone 1 hard rock mine in Guyana.
The company announced on Thursday that it has signed a definitive term sheet for a US$10 million interest-free secured loan. Apart for the preparation of construction at the Million Mountain project, the funds will also be used to retire the company’s gold denominated bonds and to build and commission additional production units with “enhanced fine gold recovery capability” for its alluvial/elluvial mining operations in Guyana as well as general corporate purposes.
The mining company also said that it is continuing to work on additional funding in order to advance the project to production, consistent with its projected timelines.
The loan with the undisclosed lender will convert to a royalty interest in production from Sacre-Coeur’s Million Mountain block of properties. This will be tied to the company meeting certain conditions for full funding and advancement of Million Mountain Zone 1, Proactive investors reported. If not yet converted to a royalty interest, the loan will be payable on March 31, 2015. A binding agreement is still subject to the completion of due diligence by the lender, with the expectation of closing the deal in November.
In addition to the development of the Million Mountain hard rock mine, the company is already producing some low-cost gold from an alluvial operation, with annual proceeds in the millions of dollars. The company boasts all-in cash production costs of less than $500 an ounce at its alluvial/elluvial operations.
It will only add to production with the development of Million Mountain Zone 1, which hosts roughly 500,000 troy ounces of gold as currently tested. Since a report indicating more resources, the company has drilled an additional 40 holes on the outside of the resource body, with the estimate to be updated as part of the feasibility study in process.
Based on its internal analysis at the project, using a base case gold price of $1,500 an ounce, Sacre-Coeur is projecting a net present value of US$145.5 million from the project. Closing of the convertible loan will require that the company’s existing bond holders consent to escrowing all remaining ETF units or some other arrangement to permit the granting of a senior security interest to the lender of the proposed loan, Sacre-Coeur said.
The Canadian junior company owns about 860 square kilometres of both producing and development-stage properties in Guyana, including another eight targets at Million Mountain.
Stabroek News had reported last month that Sacre-Coeur is producing “some low-cost gold” from its alluvial operation in Guyana, with annual proceeds in the millions of dollars.
The Vancouver, Canada-based company is looking to produce between 6,000 to 8,000 ounces of gold this year from its Cuyuni/Mazaruni operation, which would be worth between US$8 million to $10 million. It also hopes to start a mine in the third quarter of next year. Sacre-Coeur had reported last year that for September 2012, it had produced and sold almost 597 troy ounces of gold, yielding US$986,373 in gross sales from its alluvial gold operations in Guyana. In March 2011, the company had said that it had started to sell gold produced at its Million Mountain operation here and initial shipments totalling 30 troy ounces were sold to the Guyana Gold Board that week. Subsequently, the company increased production.