Gascoyne Resources Ltd (ASX:GCY) has made a $10 million prepayment to major shareholder, Deutsche Balaton AG, reducing its debt under a convertible note facility by 50% on the back of strong gold production at Dalgaranga Project and a buoyant gold price.
The debt reduction will save Gascoyne $3.1 million in interest payments over the next 21 months, which is possible due to the flexible nature of its funding facility with Deutsche Balaton and record production in January.
GCY is on track to produce more than 21,000 ounces for the March quarter – an increase of 25% on the December quarter – having already secured 7,900 ounces in January and a further 6,867 ounces in February despite planned downtime for maintenance at the mill.
The funding from Deutsche Balaton allowed Gascoyne to end its hedged gold position and take advantage of the averaged realised gold price; A$2,582 per ounce for the March quarter to date.
“Greatly improved” cash-generating ability
“It is very pleasing that we are able to retire half of the convertible note through this $10 million prepayment to Deutsche Balaton AG,” Gascoyne Resources managing director and CEO Simon Lawson said.
“Dalgaranga’s strong production performance for the quarter-to-date, combined with an unhedged gold position, has greatly improved our cash-generating ability allowing us to make this payment.
“We have been able to back up the 7,900 ounces produced in January with another outstanding month in February with 6,867 ounces produced despite experiencing five days of downtime for a scheduled mill re-line and maintenance.
“This bodes well for the March quarter and puts us on track to deliver a +21,000-ounce quarter, an improvement of more than 25% on the December 2021 quarter.
“The improved levels of cash generation sets us up well for the rest of the 2022 calendar year as we continue to increase mine life at Dalgaranga through extensions at Plymouth and further delineation of the recent Gilbey’s North discovery, combined with the near-term development of deposits such as Archie Rose.
“Gascoyne would like to thank Deutsche Balaton Group for their continued support and, in particular, the provision of this flexible form of funding at an important time for the company.
“This funding enabled the company to eliminate its previous hedging position, providing welcome exposure to the buoyant spot gold market.
“We are grateful to Deutsche Balaton Group and all shareholders for their continued support and we look forward to updating the market as the company outlines further important growth plans in 2022 and beyond.”