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3/25/15

The Red Eagle (RD.v) news today

In IKN306 this weekend (well, Monday evening this time) I made mention of Red Eagle Mining (RD.v) and its Colombia gold project for what (I think) was the first time, mainly due to the permits it had received from the Colombian government. The very last line of that brief-ish note was...

"If the capex arrives and it's equity-friendly 
it may become a trade, but not before that."

...so today's news is more than interesting, because it's a massive step to getting the gig fully funded. In ballpark terms and what we'll be left with, assuming the side-by-side $15m placement happens correctly, is a company with around 140m shares out and all the cash it needs (approx $80m, which was my own best guess in IKN306) to build a mine. We've always got to be wary of the details in financing deals (there be devils a-lurkin') but this summary from today's NR is what we know so far:

The Credit Facility includes the following key terms:

  • Draw down of the Credit Facility is subject to Red Eagle Mining completing an additional equity financing of at least US $15,000,000 ("Equity Financing");
  • The Credit Facility will have a five year term with a principal holiday and capitalized interest for up to 18 months from the first advance;
  • Advances under the Credit Facility will bear interest at LIBOR +7.5%;
  • A Production Payment of US $30 per ounce produced is payable on the first 405,000 ounces of gold produced;
  • Granting of 5,000,000 warrants to purchase Shares to Orion exercisable for a five year term at a strike price determined in the context of the Equity Financing; and
  • Amounts outstanding under the Credit Facility will be secured against all of Red Eagle Mining's property and assets.

Interest on secured debt plus "production payment" plus juicy warrants, clearly the money people at Orion (the ex-Red Kite people) aren't giving their cash away here, as that's a financier-friendly deal if ever I saw one. What we the grunts at the bottom of the food chain need to decide is whether there's enough love left once the big money has been paid off to buy the stock at 30c and on that one I simply don't know yet, there's numberwork to do. But you can't fault RD.v for moving forward, something that hundreds of juniors have abjectly failed to do in the last few years.