Equitas Resources Corp. Signs Long Term Funding Term Sheet with Cartesian Royalty Holdings Pte. Ltd. for a US$6.0M Revolving Gold Prepayment Facility and Equity Finance Package
– Momentum Public Relations – June 7th, 2016
Equitas Resources Corp. (“Equitas” or the “Company”) (TSXV: EQT) (US: EQTRF) (Frankfurt: T6UN) is pleased to announce that it has entered into a binding term sheet with Cartesian Royalty Holdings Pte. Ltd. (“CRH”), an affiliate of Cartesian Capital Group, consisting of a US$5 million revolving gold prepayment loan facility (“Gold Prepay”) and a US$1 million equity private placement investment (together the “Finance Package”).
Key Finance Package Points:
- This funding is intended to cover the projected development and acquisition expenditure of Equitas for up to 5 years.
- The equity portion raised is likely to be channelled towards exploration, grade control drilling, and other costs to prove up further gold resources at our flagship Cajueiro Project, and other prospects.
- The debt financing aspect of the Gold Prepay provides protection against shareholder dilution. CRH has committed to be a long-term partner while we develop the Cajueiro Project.
- The Finance Package is intended to help Equitas become cash-flow generative and to move towards its 5-year strategic goal of becoming a mid-sized gold producer.
- CRH will have board representation for as long as they have material involvement with Equitas. Equitas hopes to benefit from the breadth of their strategic and financial experience.
Chris Harris, President and CEO of Equitas, states “we are very pleased to have agreed to this innovative financing with Peter Yu and the CRH team. Upon closing, the funding provided should secure the near- and medium-term growth plans of Equitas, and help us towards our goal to become a profitable, cash-flow generating, self sustaining mid-tier gold producer in Brazil, with a potentially significant development portfolio. We look forward to working together with Cartesian on building the value of Equitas for its shareholders”.
“CRH and Equitas share a similar philosophy in developing highly scalable gold assets with near-term production and low all-in sustaining costs,” said Peter Yu, Founder and Managing Partner of Cartesian Capital Group. “We are excited to be partners with Chris Harris and the team at Equitas in this unique opportunity in Brazil, and look forward to helping grow the business with a focus on efficient and profitable gold production.”
The Finance Package: – Highlights
The package consists of a US$5 million revolving secured gold prepay facility with a 5-year term, and a US$1 million equity private placement agreement.
1. US$5 million revolving secured Gold Prepay.
The Gold Prepay is a secured loan to be repaid in gold at a pre-agreed volume and price. For every US$1 million drawn down by Equitas, repayment will require 2,100oz Au if within 1 year of drawdown, or 2,300oz Au if repayment takes longer than 1 year but within 3 years. If the full US$5 million is drawn, repayments would range between 10,500 ounces of gold and 11,500 ounces of gold.
Drawdown is permitted on meeting development milestones. The first drawdown shall be for US$250,000 and must be advanced within 90 days. It will be advanced with the first US$250,000 equity private placement. After the first drawdown, the minimum loan drawdown size will be US$1 million.
Each drawdown has up to 36 months to be repaid, with payments starting after 6 months. Any repayments made within 1 year of drawdown can be re-drawn again, providing Equitas with a “revolving” potential borrowing capacity of over US$5 million.
Security is over the existing assets of Equitas, and any new assets that are funded for development by the Gold Prepay. There are constraints over raising further debt, or selling assets, unless CRH gives its approval.
A 0.5{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} Net Smelter Royalty (“NSR”) shall be receivable by CRH from the earlier of 42 months following closing, and the full repayment of the gold prepay facility. The NSR is payable on production from the existing Equitas assets at financial close, and on any new assets acquired or developed with the gold prepay funds. The NSR is fully re-purchasable by Equitas in stages for a total of US$4 million.
2. US$1 million equity private placement
The private placement is for Equitas units, each of which comprises one Equitas share and one Equitas warrant. Pricing is CDN$0.07 per unit. Shares are subject to an 18 month lockup from June 6, 2016. Warrants have a 24-month expiry following the closing date, a strike price of CDN$0.117 per share and are not subject to a lockup.
Equity issue timing will be:
(i.) US$250,000 on first gold prepay drawdown, on completion of the gravity plant, and
(ii.) US$750,000 on second drawdown under the Gold Prepay for the first Carbon-in-Leach (“CIL”) plant.
An upfront loan establishment fee of 2{92d3d6fd85a76c012ea375328005e518e768e12ace6b1722b71965c2a02ea7ce} of the full finance package, i.e. an amount of US$120,000 will be issued to CRH in Equitas units on first closing.
3. Use of Proceeds:
The proceeds of the Gold Prepay will be focused on our near- and medium-term development programme, including the proposed CIL intended to be developed later this year, as well as overhead costs. The proceeds of the equity placement are intended to be applied to future exploration, overhead costs, and new projects.
The Gold Prepay and the equity placement are both subject to definitive documents being completed and to TSX Venture Exchange approval.
About Cartesian Capital Group
Cartesian Capital Group, LLC is a global private equity firm with proven expertise in assisting closely-held companies develop into global market leaders. Cartesian manages more than $2.4 billion in capital and has offices in New York, Sao Paulo, Shanghai, Warsaw, and Bermuda.