Gold mine developer Lydian International has reached a major milestone – agreeing a $325 million financing package to construct its Amulsar mine in Armenia, the company reports.
The definitive agreement is with two investment funds – Orion Mine Finance and Resource Capital Funds (RCF) – and consists of various components, including a gold and silver stream, a private placing and a loan facility.
Lydian’s president and chief executive Howard Stevenson told investors: “This financing is an important milestone in our commitment to all stakeholders to advance Amulsar to production.” He added: “Orion and RCF are highly-respected mining finance investment funds, and over and above their financial commitments, each group brings added experience to our team.”
It is also a big deal for Armenia and its economy. Prime Minister of the Republic, Hovik Abrahamian, said today: “The financing of the construction of the Amulsar Mine represents a significant step forward in the development of the mining industry in Armenia.
“The Government of Armenia is pleased that significant investors in the mining industry recognize Armenia as a mining investment destination. We look forward to the socio-economic contributions to Armenia that the Amulsar mine represents.”
Lydian highlighted that the financing provided more than 75% of the overall funding requirement – a strong achievement in the current financial market. “Furthermore, the structure greatly reduces dilution compared to traditional project finance structures, while allowing existing shareholders to participate alongside the significant equity commitments from Orion and RCF,” it said.
“Equipment financing discussions, which represent the final component of a fully financed project, have also been advancing throughout the value engineering stage.”
The commitments consist of a $60mln gold and silver stream, around an US$80 million equity private placement at a maximum of $0.35 per share and a $160 million term loan facility. There is also around a $25 million cost overrun facility.
This financing, not including the cost overrun facility, along with an anticipated equipment lease facility of $70 million and public equity offering of a minimum of $25 million, is expected to fully finance construction of Amulsar, which is put at a cost of $395mln.
Last month a new engineering study the Amulsar project indicated big cuts in upfront capital and production costs were possible and the estimated pre-production capital required was reduced by $56mln to $370mln.
The miner aims to produce 2.1mln ounces of gold from the current mine plan, and also sees strong opportunity for orebody-growth. Under the current mine plan, Lydian will produce an average 243,000 ounces per year during the first five years and an overall average of 211,000 ounces per year over the life of mine.
The net present value of the mine is $338mln based on a discount rate of 5% and a gold price of $1,150 per ounce.