Metals-Ex-mining-accessPreparing access roads to the open pit at the Runruno Gold Project.
Metals-Ex-mining-accessPreparing access roads to the open pit at the Runruno Gold Project.

METALS Exploration has entered, via its subsidiary FCF Minerals Corporation, into a senior secured project financing facility for up to US$83 million. The debt facility, along with existing equity funding available to the company, will be applied to ongoing development and construction of the Runruno Gold Project and is forecast to provide sufficient funds to achieve production.

In the second half of 2013 FCF appointed Hong Kong and Shanghai Banking Corporation Ltd (HSBC) as coordinator and mandated lead arranger to secure a suitable debt financing solution sufficient to take the group through the development and construction phase of the Runruno project and into commercial production. HSBC was joined subsequently by BNP Paribas as joint mandated lead arranger following which due diligence was completed, terms finalized and the facility agreement signed on May 28.

Initially Metals Ex will guarantee the facility and the guarantee will fall away on project completion. The guarantee will be supported by limited recourse security over the company’s shares in FCF, together with certain other limited recourse securities over its Philippine assets. The facility is for 55 months maturing on December 31, 2018 and bears a competitive commercial rate of interest consistent for a project financing of this nature.

Additionally, FCF will hedge about 40% of the interest rate exposure under the facility and, subject to the gold price achieved, enter into a gold forward sales program representing a maximum of 35% of the annual forecast gold production over the term of the facility. It is envisaged that a program of about 90,000-105,000 ounces, or about 30% of gold production over the term of the facility, will be entered into by way of forward sales.

The forecast capital expenditure program for Runruno is US$182.8 million to practical completion, inclusive of project contingency. At the end of April 2014, the remaining capital expenditure committed or yet to be incurred (including the residual storage impoundment) is US$87.3 million which will be funded by way of cash at bank (equivalent of US$28.8 million) and the debt facility.

The project is being constructed under a ‘self‐manage’ strategy by assembling an owner’s construction team to manage the activities, using specialist contractors and sub-contractors to execute the outstanding works.

Metals Ex executive chairman and FCF president Ian Holzberger says, “It is an outstanding achievement for a company of our size, particularly as it was completed against the backdrop of a challenging finance environment for small capitalized mining companies.”

As at the debt facility announcement on May 28, project construction was about 67% complete and commissioning of the processing plant leading to first gold production is expected to commence in the first quarter of 2015.

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