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7/4/18

The small print

From the latest set of financials of a junior mining company. Potentially useful reference material.

On August 11, 2017, the Company entered into an amendment to the US $60,000 credit facility (the “Amended Credit Facility”). Under the terms of the Amended Credit Facility, principal repayments were to commence on April 1, 2018, in equal monthly amortization amounts of $1,600 with a maturity date of April 1, 2019, at which time the remaining balance was due. The Amended Credit Facility bears interest at a rate of the higher of LIBOR or 1%, plus 11%, compounded monthly, and the interest is capitalized. The Amended Credit Facility continues to include a production payment of $30 per ounce payable on the first 405,000 ounces of gold produced. The Amended Credit Facility is secured by all of the Company’s property and assets. As at March 31, 2018, considering the various features of the Amended Credit Facility, the effective interest rate is approximately 14%.
The 2017 amendment was accounted for as a modification of debt. Under IAS 39, the effect of the modification was deferred and amortized over the remaining life of the credit facility on an effective interest rate basis. The impact of the modification was adjusted on adoption of IFRS 9 to record the impact of the changes on the carrying value of the debt at the original effective interest rate of approximately 14.5%
Subsequent to March 31, 2018, the Company entered into the Forbearance Agreement with the Lenders, pursuant to which the Lenders deferred the Company’s requirement to make the April 1, May 1, and June 1, 2018, amortization payments and agreed to refrain from exercising any rights or remedies under the Amended Credit Facility until June 15, 2018. The Company is currently working with its Lenders to amend the terms of the Amended Credit Facility.
For the three months ended March 31, 2018, the Company capitalized $2,996 of interest on the Amended Credit Facility to construction work in progress in property, plant and equipment.


The Company is required to maintain the following financial covenants, commencing July 1, 2018:
a) as of the end of each fiscal quarter, Debt Service Coverage Ratio on a rolling four fiscal quarter basis of at least 1.5:1;
b) as of the end of each fiscal quarter, EBITDA to Interest Coverage Ratio on a rolling four fiscal quarter basis of at least 5:1; and
c) as of the end of each fiscal quarter, Debt to EBITDA Ratio on a rolling four fiscal quarter basis of no greater than 2:1.