Leagold unveils financing news ahead of Brio close

Leagold Mining Corp. [LMC-TSX; LMCNF-OTCQX] on Wednesday announced that the following debt and equity financings have been arranged, subject to the completion of its acquisition of Brio Gold Inc. [BRIO-TSX].

Leagold’s existing $150 million senior secured credit facility has been amended to provide an additional $100 million tranche of funding. The $100 million tranche will have a term of 18 months and will be used to fully repay Bio’s $75 million senior secured credit facility and the drawn amounts of Brio’s $22 million of debt with a group of Brazilian banks.

Orion Resource Partners, through a fund it manages, has agreed to subscribe for, on a private placement basis, $45 million worth of Leagold common shares at $2.7143 per share. This investment is expected to result in Orion’s current ownership in Leagold being maintained at approximately 16%.

Wednesday’s financing news comes just three weeks after Leagold Mining shareholders voted in favour of the proposed acquisition of Brio Gold. Under the arrangement, Leagold will acquire all of the outstanding shares of Brio in exchange for 0.922 of a Leagold share and 0.4 of a Leagold warrant for each Brio share outstanding. Each warrant will entitle the holder to purchase one Leagold share at $3.70 for a period of two years following completion of the transaction. When terms of the friendly transaction were announced on February 16, 2018, Leagold valued the transaction at US$279 million.

Leagold is building a mid-tier gold producer with a focus on opportunities in Latin America.

Its key asset is the Los Filos Mine, which is located 230 km south of Mexico City, Mexico. The open pit mine started commercial production in 2008. Brio Gold is an established Canadian mining company with significant gold producing, development, and exploration-stage projects in Brazil. The company’s portfolio includes three operating gold mines, and a fully-permitted, fully-constructed mine (Santa Luz) that was on care and maintenance and currently is in development to be restarted at the end of 2018.

With the addition of Leagold’s Bermejal Underground project at the Los Filos Mine and the restart of Brio’s Santa Luz Mine, the combined operations have the potential to produce over 700,000 ounces of gold annually in 2020 at an all-in sustaining cost of US$850 an ounce.

With the diversification benefit from multiple jurisdictions, Leagold will have a strong platform to expand within both Mexico and Brazil, the company has said.

“We are very pleased with the strong support from Leagold’s current lenders – Orion, Societe Generale and Investec – in providing an 18-month debt package that refinances the existing debt of Brio and increases our working capital,” said Leagold CEO Neil Woodyer.

Leagold shares eased 0.74% or $0.02 to $2.69 in late morning trading on Wednesday. The 52-week range is $3.48 and $2.27.

Upon completion of the Brio acquisition and including the Orion private placement, Yamana Gold Inc. [YRI-TSE, AUY-NYSE] and Goldcorp Inc. [G-TSX, NYSE-GG] are expected to hold approximately 20.5% and 12.2% of the outstanding shares of Leagold respectively.