Kingsgate Consolidated Secures $35 Million Financing to Enhance Gold Mining Operations
KCN (KCN) Share Update July 2024 Monday 15th
Kingsgate Secures $35 Million Financing to Boost Chatree Gold Mine Operations
Kingsgate Consolidated Limited (ASX:KCN) has announced a significant financing agreement with Nebari Gold Fund 1 and Nebari Natural Resources Credit Fund II. This $35 million term facility aims to support the company's ongoing operations and expansion at the Chatree Gold Mine.
Instant Summary:
- Kingsgate secures a $35 million term facility with Nebari.
- Funds will be used to refinance existing debt and purchase new mining equipment.
- The facility includes the issuance of up to 9,315,452 unlisted warrants to Nebari.
- Interest rate set at SOFR plus a margin of 7.75% per annum.
- Facility maturity dates are 36 months for Tranche 1 and 30 months for Tranche 2.
Financing Agreement Details
Kingsgate Consolidated Limited has successfully entered into a definitive loan agreement for a $35 million term facility with Nebari Gold Fund 1 and Nebari Natural Resources Credit Fund II. The funds will be available for drawdown once the standard conditions precedent are met.
The facility is divided into two tranches: Tranche 1 with a commitment of $22 million and Tranche 2 with a commitment of $13 million. The facility is secured by all current and future tangible and non-tangible assets of Kingsgate's Australian subsidiaries.
Utilization of Funds
The primary purposes of this new facility include consolidating existing debt by refinancing Kingsgate's existing bridge facility with NGF 1 and repaying Preference Shareholder loans. Additionally, the funds will ensure the timely delivery of new mining equipment and support the expansion of near mine and regional exploration programs.
Moreover, the facility will help upgrade the existing resource base at the Chatree Gold Mine and provide necessary headroom as mining operations continue to ramp up. Kingsgate also plans to undertake capital restructuring, provided the facility is maintained in good order.
Warrant Issuance
As part of the agreement, Nebari will be issued with up to 9,315,452 unlisted warrants in Kingsgate. Initially, 6,986,589 nil premium warrants will be issued, with the potential for an additional 2,328,863 warrants depending on the amount owed to Nebari 18 months after the facility is funded.
Each warrant allows Nebari to subscribe for one new share at an exercise price of A$2.07, with an expiry date 30 months from the closing date of the loan documentation. These warrants will not be quoted on ASX and are not transferrable without Kingsgate's consent.
This financing agreement is expected to provide Kingsgate with enhanced balance sheet flexibility and support its growth initiatives at the Chatree Gold Mine. The refinancing of existing debt and purchase of new mining equipment will likely improve operational efficiency and production capacity.
The issuance of unlisted warrants to Nebari could lead to potential dilution of existing shares, but the overall positive impact on the company's financial health and operational capabilities may outweigh this concern.
Investor Reaction:
Kingsgate's Managing Director and CEO, Jamie Gibson, expressed confidence in the new facility, emphasizing its role in supporting the company's growth through exploration and production ramp-up at Chatree. Nebari's Managing Director, Roderik van Losenoord, also highlighted the strong partnership with Kingsgate and their commitment to supporting the company's ongoing operations.
Conclusion:
Investors should view this financing agreement as a positive development for Kingsgate, providing the necessary funds to enhance operations and support growth initiatives. Monitoring the company's progress in utilizing these funds effectively will be crucial for assessing long-term impacts on shareholder value.