Karora arranges $80 million credit agreement

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Karora Resources Inc. [KRR-TSX, KRRGF-OTCQX] has agreed to refinance its current credit facility with a lower-cost senior secured $80 million credit agreement with Macquarie Bank Ltd.

The credit agreement provides for a $40 million term loan and a $40 million revolving credit facility, both bearing an interest rate of +4.5% per annum on the drawn principal and standby fee of 1.5% annually on the undrawn credit facility.

The term of the credit agreement is 24 months with an option for annual renewal thereafter.

The company said proceeds will be used to refinance the company’s existing $30 million credit facility, which bears an interest rate of TD prime rate plus 6.05% per annum, and for general working capital purposes.

Karora has a portfolio of gold producing operations that include the Beta Huta Mine, the Higginsville Gold Operations (HGO), and Spargos Gold mine. All are located in Western Australia, approximately 60 kilometres from Kalgoorlie, along the prolific Norseman-Wiluna Greenstone Belt.

The company is working to complete a second decline at Beta Hunt gold mine. Recently Karora said estimated completion time has been brought forward to the first quarter of 2023 from mid-2023.

The second decline is integral to Karora’s production growth plan to double throughput at Beta Hunt to 2.0 million tonnes per annum and increase gold production to between 185,000 and 205,000 ounces by 2024.  The company previously said that target is expected to be achieved via a self-funded growth plan. The company has said the growth capital required is carefully phased over a 3.0-year period to allow for consistent free cash flow generation during the expansion.

Karora acquired the HGO operations in June, 2019. HGO consists of a central 1.6-million-tonne-per annum gold treatment plant, a large historical resource inventory and a substantial portfolio of gold tenements, including open pit and underground mines.

The treatment plant is fed by material form the Beta Hunt Mine, Higginsville mining operations, and Spargos Gold Mine, which was brought into production in late 2021.

The Beta Hunt land package includes significant exploration opportunities at Beta Hunt to add to the mineral resources alongside production. There are numerous gold zones at Beta Hunt, including Western Flanks, A Zone, Larkin, East Alpha and Fletcher.

Karora recently announced the proposed acquisition of the Lakewood Mill in Western Australia, a move that will add 1.0 million tonnes annually of capacity.

“We intend to refinance our outstanding $30 million credit facility while keeping the remainder as dry powder moving forward,’’ said Karora Chairman and CEO Paul Andre Huet. “The addition of a $40 million revolving credit facility will provide the corporation with significant additional financial flexibility as we continue to execute on our strategy towards a targeted annual gold production of 185,000 to 205,000 ounces by 2024,’’ he said.

On June 9, 2022, Karora shares closed at $4.09 and currently trade in a 52-week range of $7.54 and $3.03.

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