Ascot Resources’ $40 Million Gamble to Revive Gold Mines and Resume Production in 2025
Ascot Resources (TSX: AOT) has provided a crucial update on its plans to secure approximately $40 million in financing to advance the development of the Premier Northern Lights (PNL) mine and restart the Big Missouri (BM) mine. This funding initiative marks a critical step forward for the Vancouver-based junior mining company as it prepares to resume operations at both sites, which have been in a state of temporary care and maintenance.
The funding arrangement comprises two key components: debt financing and equity financing. Ascot has entered into discussions with its secured creditors and a syndicate of agents to finalize these deals. The debt financing, facilitated by Sprott Private Resource Streaming and Royalty Corp., and Nebari Gold Fund, is expected to provide up to US$11.25 million in new senior debt, while the equity financing will be led by Desjardins Capital Markets and BMO Capital Markets, aiming to raise between $25 million and $35 million.
“This financing package will enable the Company to undertake the mine development activities necessary to advance PNL and BM in order to sustainably provide feed to the mill,” CEO Derek White stated in the announcement.
He acknowledged that while the company has faced challenges in recent months, particularly regarding the timeline and costs of these developments, the package is essential for ensuring the future profitability of the mill’s operations.
The debt component of the financing package includes several critical elements:
- Senior Secured Debt: The US$11.25 million will be provided as senior debt, which takes priority over other claims or obligations. This debt is expected to be secured by amending the company’s existing Cost Overrun Facility (COF) agreement.
- Interest Rates and Deferred Payments: The interest on Tranche 1 of the loan will increase from 10% to 10.5% above the SOFR (Secured Overnight Financing Rate). Tranche 2, which will provide the US$11.25 million, will carry an interest rate of 12% plus SOFR, with a SOFR floor of 3.5%. Both tranches will have deferred payments for interest and amortization until May 2025, when payments will commence in monthly installments.
- Conditions for Release: Tranche 2 of the debt financing will be held in escrow and only released upon meeting specific performance indicators, such as the satisfaction of regulatory approvals.
These terms reflect a strategic compromise aimed at allowing Ascot to meet its financial obligations while ensuring the company can focus on its immediate operational goals. However, the company has warned that there is no certainty that these conditions will be met or that the necessary funds will be raised.
The equity financing, which could raise up to $35 million, represents the bulk of the new funding. Shares will be offered at $0.16 per share, with major shareholders such as Ccori Apu S.A.C. indicating their commitment to participating in the equity raise.
For Ascot, the successful completion of the equity financing is a prerequisite for the debt financing. The cross-conditional nature of these two components adds a layer of complexity to the deal, as any delay or failure in the equity raise could jeopardize the entire financing package. Ascot has set a tentative closing date of November 18, 2024, pending regulatory approval from the Toronto Stock Exchange (TSX).
Ascot plans to use the proceeds from the financing package to kickstart development activities at the Premier Northern Lights and Big Missouri mines. Specifically, the funds will be directed toward:
- Mine Development: Ascot intends to develop 2,400 meters of underground mining at the Premier mine, focusing on accessing the Prew Zone Phase 1. This work includes creating a second egress for the mine, a regulatory requirement for safe operations.
- Mill Restart: The PNL mill will be restarted to process ore from both the Premier and Big Missouri mines. Ascot aims to resume milling operations in Q2 2025.
- Big Missouri Mine: The BM mine, which has been in a state of care and maintenance, will also undergo significant redevelopment to ensure it can supply sustainable ore to the mill.
However, in its announcement, the company made it clear that there are risks involved. “There is no certainty that the necessary mine development work will be completed or that the Company will be able to restart operations,” the press release noted.
While the company has set an ambitious timeline, targeting gold production by mid-2025, much depends on its ability to navigate regulatory hurdles and complete the necessary mine development work.
Ascot Resources last traded at $0.22 on the TSX.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
