Kerr Mines Inc. (TSX:
KER, OTC: KERMF, FRA: 7AZ1) (“Kerr” or the
“Company”) is pleased to announce it has received
investment committee approval from and executed a term sheet with
Sprott Private Resource Lending (Collector) LP
(“
Sprott”), setting out the indicative terms upon
which Sprott is prepared, subject to certain conditions including
satisfactory due diligence, to provide up to US$25 million of
senior secured project financing (the “
Financing
Package”) to fund the development and production of gold
at the Copperstone Mine.
The Highlights of the Financing Package
include:
- US$2 million senior redeemable
convertible note (the “Note”) with an 9% coupon
repayable 18 months after closing
- US$2 million senior gold loan
facility (the “Gold Loan”) repayable 18 months
after closing
- US$21 million senior project loan
facility (the “Project Facility”) repayable 48
months after closing
- The Company will also raise US$2
million in equity as working capital
In order to align with the Company’s current
strategic and development plans for the Copperstone Mine, the
proposed financing has been structured to be completed and
advanced in two main phases, an initial phase of US$4 million
(“Phase 1”) , which is targeted to be completed on
or about November 23, 2018 subject to mutually satisfactory
documentation and other customer conditions precedent; and a second
phase of US$21 million which is targeted to be completed on or
about June 30, 2019 (“Phase 2”).
Phase 1 of the financing will be comprised of a
US$2 million Note and a US$2 million Gold Loan. The Note will bear
interest at a rate of 9% per annum payable semi-annually and
matures on May 31, 2020. The Note is convertible into common shares
of the Company at any time prior to maturity at a conversion price
of CDN$0.16 per share. The Company can redeem the Note at any time
by paying the outstanding principal amount in cash, or with the
agreement of the holder, in shares of the Company, together with
interest payable to maturity. The Gold Loan is repayable in
cash based on a notional amount of 2,160 oz of gold priced at the
greater of $1,200 and the spot price of gold one day prior to
maturity. The Gold Loan will mature on May 31, 2020, provided that
it will be consolidated into the Phase 2 financing if completed
prior to maturity.
The Company will issue Sprott one million
warrants in connection with the Note and two million warrants in
connection with the Gold Loan. The warrants will be
exercisable for a period of three years for common shares of the
Company at a price equal to a 15% premium to the lessor of the
closing price of the common shares one day prior to execution of
the term sheet and, the 20-day volume weighted average price of the
common shares prior to the date or dates of closing of the Note and
Gold Loan, as the case may be. The expiry of the Warrants can be
accelerated at the Company’s election if the trading price of the
common shares is higher than 2.5 times the exercise price for 30
consecutive trading days.
In addition to the Phase 1 financing, the
Company will be raising US$2 million in equity. Further, the
completion of Phase 1 financing is conditional on TSX approval, and
in respect to the Gold Loan, satisfactory metallurgical test
results and other customary conditions precedent.
The Phase 1 financing of US$4 million, together
with the US$2 million from the equity financing, will be used, to
fund a resource expansion and delineation drilling program designed
to convert a significant proportion of the current Measured,
Indicated and Inferred Resources into Proven and Probable Reserves
and to expand the known mineralized extents of the Copperstone and
Footwall zones. Further, during this phase the Company will
continue with its progression to production through continuation of
the permit modification, detailed engineering, mine planning,
metallurgical and procurement analysis.
Phase 2 of the financing will be comprised of a
US$21 million Project Facility with a term of 48 months. The
Project Facility will be repayable in cash over the last three
years of the facility in equal notional amounts of 7,560 oz of gold
(22,680 oz gold) priced at the greater of $1,200 and the spot price
of gold one day prior to each installment date, commencing June 30,
2021.
The Company will issue Sprott 21 million
warrants in connection with the Project Facility. The
warrants will be exercisable for a period of three years for common
shares of the Company at a price equal to a 15% premium to
the share price at the time of closing of the Phase 2 facility. The
expiry of the Warrants can be accelerated at the Company’s election
if the trading price of the common shares is higher than 2.5 times
the exercise price for 30 consecutive trading days.
The Phase 2 financing is subject to a number of
conditions including Sprott’s on-going due diligence and other
customary conditions precedent.
The Financing Package is expected to provide the
necessary capital to complete the funding of the capital
expenditures required to bring the Copperstone Mine back into
production.
“We are pleased to welcome Sprott as our funding
partner”, stated Claudio Ciavarella, CEO Kerr Mines. “The objective
of this phased program is to further de-risk the project, extend
mine life and cash flows and allow for a seamless progression to
production. The strategic vision that we have for this project is
congruent with the vision of our funding partner and reflects our
over-riding mission of creating shareholder value. With our
clear move forward strategy in place, we are able to commence our
on-site program immediately,” continued Ciavarella.
Further to our Press Release of July 18, 2018,
the Company has ended discussions with Pandion Mine Finance LP.
About Kerr Mines Inc. Kerr
Mines is an Emerging American Gold Producer currently advancing the
100% owned, fully permitted past-producing Copperstone Mine project
to production. Copperstone is a high-grade gold project located
along a detachment fault mineral belt in mining-friendly Arizona.
This gold project in Arizona demonstrates tremendous exploration
potential targeting multi-million ounce prospects within a 4,775
hectare (11,800 acres) land package.
About SprottSprott is an
alternative asset manager and a global leader in precious metal and
real asset investments. Through its subsidiaries in Canada, the US
and Asia, the company is dedicated to providing investors with
best-in-class investment strategies that include Exchange Listed
Products, Alternative Asset Management and Private Resource
Investments. The company also operates Merchant Banking and
Brokerage businesses in both Canada and the US. Sprott is based in
Toronto with offices in New York, Carlsbad and Vancouver and its
common shares are listed on the Toronto Stock Exchange under the
symbol (TSX:SII). For more information, please visit
www.sprottinc.com.
PDF Version of 43-101 technical report available:
http://kerrmines.com/wp-content/uploads/KerrCopperstone_PFS_43-101.pdf
YouTube: Copperstone Gold Mine KER:TSX 3 min.
Investor Tour Video
For further information
contact:Claudio Ciavarella Chief Executive
Officercciavarella@kerrmines.com416-855-9305
Cautionary Note Regarding Forward
Looking Statements This news release contains
forward-looking statements, including current expectations on the
timing of the commencement of production and the rate of
production, if commenced. These forward-looking statements entail
various risks and uncertainties that could cause actual results to
differ materially from those reflected in these forward-looking
statements. Such statements are based on current expectations, are
subject to a number of uncertainties and risks, and actual results
may differ materially from those contained in such statements.
These uncertainties and risks include, but are not limited to, the
strength of the Canadian economy; the price of gold; operational,
funding, and liquidity risks; the degree to which mineral
resource estimates are reflective of actual mineral resources; and
the degree to which factors which would make a mineral deposit
commercially viable are present; the risks and hazards associated
with underground operations. Risks and uncertainties about Kerr
Mines’ business are more fully discussed in the Company's
disclosure materials, including its annual information form and
MD&A, filed with the securities regulatory authorities in
Canada and available at www.sedar.com and readers are urged to read
these materials. Kerr Mines assumes no obligation to update any
forward-looking statement or to update the reasons why actual
results could differ from such statements unless required by
law. Neither TSX nor its Regulation Services Provider (as
that term is defined in the policies of the TSX) accepts
responsibility for the adequacy or accuracy of this release and no
stock exchange, securities commission or other regulatory authority
has approved or disapproved the information contained herein.