Shanta Gold Ltd (LON:SHG) has unveiled a series of transactions that should utterly transform the Tanzania-focused miner.
It is acquiring Vancouver-based Helio Resource Corp for US$5.6mln; it is raising US$14mln from investors, and it has agreed a debt restructuring deal that significantly reduces the coupon on those borrowings.
The takeover first: Shanta has agreed to hand over 59.5mln shares in the company to take control of Helio, which owns the property next to its New Luika Gold Mine.
WATCH: Shanta Gold now set up 'for many years to come' after series of transactions
The area is host to an estimated 653,000 ounces of gold at an average grade of 2.4 grams per tonne of the yellow metal. That would represent a 77% increase to Shanta’s current resource.
The plan is to incorporate the newly-acquired area into the mine plan with the potential to expand the rate of production, while exploring for more gold.
The expansion will be supported by a US$14mln equity fundraiser, which has the backing of cornerstone investor Odey Asset Management, run by the hedge fund guru Crispin Odey.
At the same time the company has agreed to restructure its existing debt after receiving a commitment letter from Investec Bank for a US$50mln facility.
The new borrowings will replace an existing US$40mln debt deal of which just over US$35mln was drawn.
Lower coupon
The interest on the Investec money is 5.9% over the London Interbank Rate (LIBOR), compared with the existing terms coupon of 13.5%.
Chief executive Toby Bradbury said the fundraising, coupled with debt restructuring “significantly strengthen” the company’s financial position as progresses through to the underground mining phase at New Luika.
WATCH: Alastair Ford gives his view on the news
It also provides the business with a cushion while it waits for a US$12.5mln VAT repayment from the Tanzanian authorities.
And it allows Shanta to continue exploring the Singida deposit and targets within its “highly prospective” licence area within the Lupa Goldfield, the Shanta CEO added.
He went on: "The inclusion of the Helio resources into Shanta's portfolio strengthens the opportunity to deliver an expansion option for the New Luika Gold Mine and to also potentially extend mine life.”#
-- Adds videos --