Royal Helium Ltd (TSX-V:RHC, OTCQB:RHCCF) announced that it has secured the funds necessary to finance the company to first helium production by the second quarter of 2023.
The company said it has signed term sheets with two leading Canadian lenders for a C$15 million non-revolving credit facility for development and production facilities currently under construction for the Steveville helium field in Alberta, Canada.
It also signed a bought deal convertible debenture private placement with Eight Capital for C$5.5 million total.
READ: Royal Helium closes exercise of over-allotment option to fund construction of Alberta helium production plant
The agreement was signed with the Business Development Bank of Canada (BDC) and a Schedule 1 Bank, which will also provide a revolving demand operating loan of C$2.5 million for working capital purposes with a floating interest rate of 2% per annum above Prime.
The C$15 million loan bears interest at a rate of 3% above the bank's prime lending rate.
Jeff Sheppard, Royal Helium’s CFO, told investors that the financing positions Royal to deliver helium to its space exploration off-take partner in the 2Q 2023.
“Securing debt financing in the traditional bank market through a Canadian Schedule 1 bank and BDC at such favourable rates alongside the bought-deal financing not only enhances returns to shareholders but also validates the quality and economics of our Steveville project,” Sheppard said in a statement.
“Furthermore, this initial project financing will simplify Royal's access to future production facility construction financing."
The debt facilities, combined, are subject to a one-time C$87,500 fee and an annual fee of C$6,000. Under a floating rate option, loans drawn on the credit facility can be repaid at any time without penalty. The facilities will be secured by a general security agreement and is subject to customary loan covenants.
Completion of the credit facility and operating line is subject to execution of definitive agreements and regulatory approvals and is expected to close in January 2023.
Bought deal convertible debenture private placement
As for the bought deal convertible debenture private placement, the company entered into an agreement with Eight Capital, pursuant to which Eight Capital has agreed to purchase for resale, on a bought deal private placement basis, 5,500 non-transferable subscription receipts exchangeable into unsecured convertible debenture units of Royal Helium, with a maturity date of December 31, 2025.
Each debenture unit consists of one 14% unsecured convertible debenture in the principal amount of $1,000 and 3,846 common share purchase warrants, which entitles the holder to purchase one share of Royal Helium at an exercise price of $0.32 for a period of 36 months, subject to acceleration.
The convertible debentures will be convertible at the holder's option into shares at any time prior to the close of business on the earlier of the business day immediately preceding the maturity date and the date fixed for redemption of the convertible debentures at a conversion price of $0.26 per share, representing an approximate 17% premium to the current price of the shares.
The gross proceeds from the convertible debenture offering shall be held in escrow pending execution of definitive credit agreements in connection with the credit facility, Royal Helium said. Interest will accrue starting on the escrow release date at a rate of 14% per annum and shall be payable semi-annually in arrears, beginning on June 30, 2023.
Royal Helium also said the previously-announced project financing of US$20 million has been cancelled.
Saskatoon, Saskatchewan-based Royal Helium controls over one million acres of prospective helium land across southern Saskatchewan and southeastern Alberta. All of Royal's lands are in close vicinity to highways, roads, cities and importantly, close to existing oil and gas infrastructure, with a significant portion of its land near existing helium producing locations. The firm intends to become a leading North American producer of the high-value commodity.
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