Marengo Mining’s largest shareholder Sentient Executive GP IV will buy 9% of the company’s unsecured convertible debentures to bring its total holding to 34.6%. Marengo has entered into a non-binding term sheet to complete a non-brokered private placement of US$18.8 million in the debentures, which are to be issued in two tranches.
Each US$1000 principal amount of debentures will be convertible at the option of Sentient into common shares of Marengo at a conversion price of Can$0.14 per common share. The debentures will mature on June 30, 2016, or three years following the closing date of the second tranche, whichever is earlier.
Marengo says it will use the net proceeds from the placement for development of the Yandera project, including completion of the feasibility study, finalizing the engineering, procurement and construction contract, and completion of a deep drilling campaign.
In addition to the private placement of US$18.8 million in debentures, the previously announced unsecured interest-bearing working capital debt facility of US$10 million provided by Sentient in February, including accrued interest, will also be converted into debentures.
Marengo says it will complete the placement in two tranches with the first US$12 million allotment issued in April and the remaining US$6.8 million in debentures to be issued, on the second closing date. The private placement and the conversion are awaiting approval of the Toronto Stock Exchange.
Sentient currently holds a 22% stake in Marengo and will increase this to about 34.6% of the common shares of the company once the conversion and private placement is finalized.
Marengo is also preparing to seek shareholder approval for the issue of the second tranche of debentures and the issue of debentures on conversion.