TORONTO (miningweekly.com) – Vancouver's Quadra Mining has finalised the terms of a $12,5-million convertible loan to Centenario Copper, which the smaller firm will use to continue construction of its Franke mine, in Chile.
The financing is an interim measure, to keep development of the mine moving until Quadra completes a friendly takeover of Centenario, and will be available for drawdown until the acquisition is either completed or terminated.
The loan will replace earlier plans for a $3,5-million loan and $6,5-million private placement, which were conditional on Quadra first restructuring Centenario's existing loan facilities.
The companies decided it was prudent, in light of the limited availability of senior debt financing, to renegotiate the interim funding plan, so that the project development can continue in the meantime.
“Now that we have in place alternative financing and more clarity with respect to overall funding requirements, we are comfortable advancing these interim funds which will allow progress to continue at the Franke mine and in particular, for mining to commence," said Quadra CEO Paul Blythe.
The 70-million pounds a year Franke sulphur-extraction/electrowinning heap-leach project is “essentially mechanically completed”, but, because of Centenario's cash shortages over the last few months, several core development milestones have been delayed.
Mining areas need to be opened up, leach pad inventories built up and testing and commissioning has yet to begin.
As a result, Quadra expects that first production will be delayed from Centenario's original start-up plan.
Centenario had some $60-million of obligations to construction and operations contractors, as well as other suppliers, and Quadra estimates that another $30-million will be needed to complete development and bring the Franke project to a cash flow positive position.
Another $20-million will likely be needed to retire Centenario's senior debt, net of hedge proceeds and cash on hand, but, assuming the acquisition is completed, Quadra fully expects to be in a position to fund all of Centenario's requirements.
Quadra has received a commitment letter for $37,5-million, in connection with a syndicated $50-million project loan for Franke, and also announced a week ago it would sell 16,2-million shares to raise C$75,33-million, which will be earmarked to refinance Centenario's project debt, and to fund the completion of the Franke project, including making payments owed to project contractors.
Quadra operates two copper mines in the US - the Carlota operation in Arizona, where it started production in December last year, and the Robinson mine, in Nevada, which it bought from BHP Billiton and restarted in 2004.
