Dacian secures A$150m for WA gold project

JOHANNESBURG (miningweekly.com) – Gold developer Dacian Gold has completed and signed a syndicated facility agreement (SFA) to fund the development of its Mt Morgans gold project, in Western Australia.
 
Financial institutions Westpac Banking Corporation, Australia and New Zealand Banking Group Limited and BNP Paribas will each participate equally in the SFA, which resides with Dacian’s operating subsidiary Mt Morgans WA Mining. 
 
Dacian stated on Wednesday that the A$150-million SFA would take advantage of the current low interest rate environment, thereby ensuring there was sufficient funding for the debt component of the project finance and contingencies.
 
The SFA comprises A$140-million for project development and working capital during the construction, commissioning and ramp up stages of the project. It also contains a cost overrun tranche of A$10-million. Dacian said that both funding tranches were available to the company through to the completion of the ramp up and performance testing phase of the project as defined by the project financiers.
 
The gold developer stated that the pricing, terms and conditions agreed with the financiers were “highly favourable” and reflected the financiers’ detailed understanding of the project.

While the full terms of the SFA are confidential, some of its key points are that there is no requirement to fully draw down on the SFA and there are no financial penalties should the SFA not be fully drawn. Further, the five-year tenor has a fixed schedule of repayments starting September 2018 through to December 2021 and the SFA can be repaid early without restriction or financial penalty.

The surplus operating cash flows (after debt service) from September 2018 can be distributed from the project to Dacian, subject to certain conditions and providing cash for the company to use as it sees fit. There is no mandatory hedging required by the SFA; however, a discretionary hedging facility is available for gold and currency.

The SFA requirements includes that there be a minimal level of cash reserving and no mandatory cash sweeping and that security be provided via a fixed and floating charge over the assets of Mt Morgans WA Mining. Additionally, the facility requires that corporate guarantee provided by Dacian only during the period of construction, commissioning and ramp up, which falls away on achieving project completion.

The SFA also mandates the facility be drawn down in stages, when needed with interest payable only on the amounts drawn and that all due diligence requirements be completed and typical conditions precedent are required to be satisfied prior to first draw down, which is anticipated to occur in mid-2017. 
 
PERMITTING AND APPROVALS
The Western Australian Department of Mines and Petroleum (DMP) has approved the project’s native vegetation clearing permit that is required to start earthworks at Mt Morgans ahead of infrastructure construction. 
 
The company has also been notified by the DMP and the Department of Environment Regulation that the respective Mt Morgans mining proposal and works approval will likely be approved in the near-term. Additionally, the DMP has recently approved the grant of the remaining mining lease application required for the mining of gravel material to be used for the walls of the proposed tailings storage facility.
 
NEXT STEPS
Dacian executive chairperson Rohan Williams commented that the statutory permitting process was proceeding to schedule and subject to the receipt of the remaining permits, dewatering of the Westralia openpit ahead of the development of the Beresford underground mine, construction of the accommodation village and access roads would start early in 2017.
 
“The lenders have conducted extensive due diligence on Mt Morgans and their agreement to provide the SFA is a strong vote of confidence in the project. Our ability to secure project finance on such favourable terms from both domestic and international lenders also highlights the quality of Mt Morgans. With this facility in place, the project is on track to start construction early next year with first production scheduled to take place around March 2018,” he concluded.