Skeena Gold to refinance B.C. project with US$750 million note offering
Skeena Gold & Silver Resources Ltd.’s [SKE-TSX, SKE-NYSE] has announced details of a US$750 million senior secured note offering to refinance its Eskay Creek project in British Columbia. Part of the proceeds will also be used to fund a partial buyback of an existing gold stream.
The company said the use of proceeds from the related refinancing is intended to improve its future operating margins, increase its exposure to gold prices and future production, and enhance overall project economics for the Eskay Creek project, which is fully permitted and currently under construction.
Once in production, likely in the second quarter of 2027, its is expected to rank among the world’s highest-grade and lowest-cost open pit precious metals mines, with significant silver by-product production.
The notes will be fully and unconditionally guaranteed by certain of the company’s subsidiaries relating to its Eskay Creek project, including equity interests, the segregated accounts and interests in the Eskay Creek project.
Skeena said it intends to use approximately US$184 million of the proceeds to fund the stream buy-down; an estimated US$100 million to fund an interest reserve account, which is expected to contain an amount equal to the first three semi-annual interest payments due under the notes; and the remaining proceeds to fund a disbursement account with funds to be used to advance the Eskay Creek project, to pay certain fees and expenses and add cash to Skeena’s balance sheet, for among other things, general corporate purposes.
Pursuant to an agreement between Skeena and the stream purchasers under the company’s existing US$200 million gold stream, Skeena intends to buy down the stream agreement by making a lump-sum payment of approximately US$184 million to the stream purchasers in exchange for a reduction of the stream percentage deliverable from production at Eskay Creek to stream purchasers by 66.67%.
In connection with the offering and the stream buy-down, the company has entered into an amended stream agreement with Orion Resource Partners and certain of its affiliates to facilitate the offering and related transactions. The amendments include, among other things, the termination of the availability of the stream cost over-run facility and amendments to certain liquidity and reporting covenants.
In addition, the company said it intends to cancel its existing US$350 million senior secured term loan and cost over-run facility under the stream agreement concurrently with the completion of the offering and the stream buy-down. It said the term loan and cost over-run facility are currently undrawn, and the company does not expect to incur any fees in connection with he cancellations.
Completion of the term loan and cost over-run facility cancellations and stream buy-back are subject to the successful completion of the offering and each other.
On Tuesday, Skeena shares advanced on the news, rising 5.4% or $2.08 to $40.21. The shares trade in a 52-week range of $53 and $12.15.