First Bauxite Corporation (FBX) has signed a second bridge loan agreement for additional financing of up to US$10 million to start construction of its mining and processing facilities at its Bonasika project site on the Essequibo River.
The agreement was signed on Friday with Resource Capital Fund VI LP (RCF VI), FBX President and Chief Executive Officer Alan Roughead announced in a news release.
FBX, a Canadian company, has formally notified the Guyana Geology and Mines Commission that proceeds of the second bridge loan will be used to start the construction as required under its mining licence.
“Initial construction activity is expected to include improvements in local infrastructure including the construction of a haul road, wharfs and roll-on/roll-off ramps on the Demerara River, and upgrades to the mine camp, all of which will utilise local contractors where possible,” Roughead was quoted as saying.
FBX currently employs 88 employees and contractors, of which more than 85% are from local communities.
When the Bonasika project is fully operational, Roughead explained, it is anticipated that in the second half of 2019, the project will create approximately 250 jobs, with more than 95% of them expected to be filled from local communities. Additional employment is expected to be created by local suppliers providing goods and services to support the ongoing operations of the Company.
The second bridge loan, Roughead said, will be disbursed in four separate advances. The first advance of up to US$2 million will be drawn on or after June 15th, the second of up to US$2 million will be available on or after July 1st, the third of up to US$2.5 million will be available on or after August 1st, and the fourth, an amount equal to the undrawn balance, will be available on or after September 1st.
The two bridge loans would become immediately due and payable in full on “the incurrence, creation or assumption by the company or any of its subsidiaries of any indebtedness or the establishment, sale or creation of any royalty, metal stream or similar arrangement in connection with financing the company’s Bonasika Project and the company’s bauxite mining and beneficiation plant in Guyana, in an aggregate amount of more than US$25 million.”
The company may pay or prepay the bridge loans in whole or in part at any time prior to the maturity date without penalty or premium. Interest will accrue at a rate equal to 10 per cent a year, which will immediately be increased by 3.5 per cent annually on the occurrence of an “Event of Default.” All accrued and outstanding interest on the bridge loans will be payable on the date of repayment of the bridge loans.
In consideration for establishing the second bridge loan facility, Roughead said FBX will pay RCF VI an upfront fee of US$300,000 on or before the first advance of the second bridge loan.
RCF VI and Resource Capital Fund V LP falls under the “common management” of RCF Management LLC. RCF LLC owns and controls 53,127,984 common shares of the RBX (about 45.19 per cent of the outstanding common shares of the company) and CDN$8 million and US$19,422,861 aggregate principal amount of convertible notes.
According to Roughead, additional funding will be required to complete the Bonasika project. Last Thursday, when the start of the project was announced, he said the project will involve expenditure of US$40 million to US$50 million.
The release noted that FBX is a Canadian natural resources company engaged in the exploration and development of bauxite deposits in Guyana. It said the company intends to produce and sell bauxite raw ore from its facility in Guyana and intends to produce sintered refractory products and ceramic proppants for the refractory and energy industries in the future.