Royal Helium Ltd (TSX-V:RHC, OTCQB:RHCCF) announced that it has executed a term sheet with an arm's length lender to provide the company with a US$20 million, three-year credit facility.
The helium project developer said proceeds from the credit facility will be used for development and production facilities at the Steveville helium field in Alberta, to begin purchases for Royal's production facilities in Saskatchewan, and for general corporate purposes.
“This project financing, once closed, covers the remaining costs for the Alberta processing plant, allowing Steveville to begin helium deliveries to our off-take partners by April 2023,” Royal Helium chief financial officer Jeff Sheppard said in a statement.
READ: Royal Helium closes exercise of over-allotment option to fund construction of Alberta helium production plant
“This credit facility enables the completion of our plant and equipment and our first sales without the reliance on the equity markets,” Sheppard added.
Royal Helium noted that an initial draw on the facility in the amount of US$10 million will be advanced to the company upon closing, which is anticipated to occur on or about December 12, 2022.
It added that amounts drawn under the facility are subject to an interest rate of 14% per year.
As well, Royal Helium said in consideration for the grant of the facility, it has agreed to pay the lender a 5% structuring fee and to issue share purchase warrants equal to 9.9% of the company’s issued share capital at closing, with each warrant being exercisable into one Royal Helium common share, at a price of C$0.35 per common share, for a three-year period.
The facility will be secured by a first charge on Royal Helium's assets pursuant to a general security agreement and will be subject to customary loan covenants, according to the company.
In addition, Royal Helium stated that it will have the right to voluntarily repay, at any time, the principal amount plus interest subject to a minimum interest amount.
Royal Helium controls over one million acres of prospective helium land across southern Saskatchewan and southeastern Alberta. The company intends to become a leading North American producer of this high-value commodity.
Contact Sean at sean@proactiveinvestors.com