THE BOURSE WHISPERER: Saracen Mineral Holdings (ASX:SAR) has restructured its hedging program and reduced the amount of its debt facilities.

The company indicated restructuring was undertaken to align with reduced expenditures it had previously announced in a strategic review of its business in May that is aimed at reducing ‘all in’ sustaining cash costs to $950 per ounce.

The hedging restructure will result in Saracen’s hedged ounces in FY2014 increase from approx. 42 per cent (46,800 ounces) to approx. 60 per cent (66,300 ounces) of the company’s forecast production of 110,000 to 120,000 ounces of gold.

Saracen’s average hedged price in FY2014 is $1,640 per ounce.
 
In FY2015, hedging remains at 48 per cent (57,800 ounces) of forecast production (115,000 to 125,000 ounces).

The average hedged price in FY2015 is $1,689 per ounce with 52,500 ounces remaining post FY2015, until July 2016, at an average price of $1,724 per ounce.

The company explained its hedge program has been restructured by bringing forward 19,500 hedged ounces from the period August to December 2016 to increase hedging to 5,850 ounces in each month over the period July 2013 to April 2014 inclusive.

The total number of ounces hedged remains the same at 176,600 ounces.

“Bringing forward hedged ounces from FY2016 to FY2014 provides additional protection, in light of the volatility seen in the gold price over the past few months,” Saracen Mineral Holdings managing director Raleigh Finlayson said in the company’s announcement to the Australian Securities Exchange.

“Approximately 60 per cent of Saracen’s production for the FY2014 is hedged at $1,641 per ounce, significantly above the prevailing gold price.

“We are one of few global gold producers that can boast a viable business plan under most gold price environments courtesy of our hedge book of in excess of 176,000 ounces.

“The book will provide a significant cash windfall should the gold price fall markedly.

“Alternatively our significant resource inventory, of in excess of four million ounces, provides significant leverage to a higher gold price environment.

“We plan to use our hedge book to our advantage and remain nimble with our strategic plan to ensure that we remain viable under difficult economic conditions.

“For example, bringing forward these hedges increases our cashflows in FY2014 by approximately $3.5 million.”
 
Saracen’s comprehensive review also included the suspension of the plant expansion, which has resulted in a fall of the company’s total funding requirements, allowing it to reduce its debt facility to $45 million from the previous figure of $50 million.

The company has drawn $22 million of the debt facility to date, which are scheduled to be fully repaid by FY2015.

THE BOURSE WHISPERER: Northern Minerals (ASX: NTU) has secured a further $4 million in interim funding.

The investment has come from Australian Conglin International Investment Group (ACIIG), which is an entity controlled by the company’s major shareholder Mr Yue.

The funds will allow a work program currently underway at the company’s Browns Range Heavy Rare Earth project to continue uninterrupted.

Source: Company announcement

A 20,000 metre drill program is being carried out at Browns Range targeting the expansion of the current JORC-compliant resource at the Wolverine deposit, and new resources at Gambit West and Area 5.

Northern Minerals said it expects results of the program in October 2013.

Other activities are also underway as part of the Browns Range Scoping Study, including work on environmental and native title approvals, process flow sheet optimisation, and project design.

This loan is in addition to the non-recourse interest free $4 million loan provided by ACIIG to Northern Minerals in April and is repayable on 20 December 2013.

“The additional interim funding is required due to Northern Minerals decision to extend its fundraising timetable by seeking shareholder approval in regards to the current Rights Issue to raise approximately $26.5 million,” Northern Minerals said in its ASX announcement.

“A meeting of Northern Minerals shareholders will be held on 28 June 2013 to vote on the proposed underwriting of the rights issue by ACIIG.”

The company said the funding ensured the work program would remain on schedule, and reinforced ACIIG’s commitment to fast-tracking the Browns Range project toward production.

Funds from the additional loan from ACIIG are scheduled to be provided to Northern Minerals by 25 June 2013.

The loan does not accrue any interest, unless the resolution in relation to the rights issue underwriting is not passed at the General Meeting on 28 June 2013.

If the resolution is not passed, interest will accrue from the date of the General Meeting at a rate of 5 per cent per annum.

The loan will be secured against the assets of the company excluding all Joint Venture tenements.

THE BOURSE WHISPERER: Cleveland Mining Company (ASX: CDG) has signed a $10 million Investment Facility with Boston-based Investment Manager, Baycrest Capital.

The facility provides Cleveland with the ability to draw down funds at its discretion over a three year term, providing well-priced capital that will facilitate the further development of the company’s Brazilian portfolio.

Cleveland said it was pleased to have flexible access to capital through Baycrest, particularly in the current climate where obtaining finance in the resource sector is proving difficult.

“The Facility shows solid support for Cleveland’s continuing development,” Cleveland Mining managing director David Mendelawitz said in the company’s announcement to the Australian Securities Exchange.

“We are set apart from other juniors in that we are a gold producer with multiple options to further expand our production and resource supply base.

“This new source of funding gives the company confidence to continue its Brazilian development, which includes the optimisation of the Premier JV Mine and plans to start mining at the nearby and soon to be gazetted, O Capitão deposit.

Baycrest director, Douglas Leighton said his company was excited to be able to provide the financing for Cleveland Mining through the Investment Facility and that Baycrest looks forward to a long relationship with the company and its management.”

Key Terms of the Investment Facility include:

A limit of $10m based on individual tranches of up to $500,000 each, or any such amount agreed between the parties;

Each draw-down will be matched by an issue of ordinary shares priced at 100 per cent of a weighted average market price formula;

The facility provides Cleveland with the right, with no obligation, to draw down on the facility. The
company is free to assess its optimal funding sources going forward and is not bound by minimum periodic draw-downs; and

An initial 2 per cent fee paid in Cleveland shares on the total funding commitment and a 5 per cent commission fee for each tranche drawn.

Baycrest Capital is an investment management firm managed by Dutchess Capital, that provides finance to public companies.

The Investment Facilities provided by Dutchess are a flexible financing structure by which publicly traded companies can raise capital quickly, efficiently and with less dilution than most traditional offerings.

THE BOURSE WHISPERER: Volta Mining (ASX: VTM) has told the market it is in advanced discussions with an ‘industry participant’ with respect to formalising collaborative agreements.

According to Volta discussions are well underway between both parties with regards to entering into agreements (binding and non-binding) with respect to project finance, drilling services, access to infrastructure, and other collaborative efforts to expedite the development of each parties’ respective corporate objectives.

“We believe the discussions are a critical step forward in the growth of the company,” Volta Mining managing director David Sumich said in the company’s announcement to the Australian Securities Exchange.

‘‘We are pleased with the progress of discussions achieved to date and look forward to successfully concluding arrangements for the introduction of a strategic partner to aid in the advancement of our projects.

‘‘Such collaboration makes commercial sense as the resulting agreements will better equip us, through collaborative efforts, to attaining our goal of becoming the first iron ore producer in Gabon, thus enabling Volta Mining to generate significant value for its shareholders and the Republic of Gabon.”

THE BOURSE WHISPERER: The South Australian Chamber of Mines and Energy (SACOME) has welcomed South Australian budget announcements of $6 million over four years to support a Mining and Petroleum Services Centre of Excellence; an additional $4 million over two years to extend the PACE initiative; and over half a million to fund an Eyre Peninsula Land Use Support program to help foster positive relations between explorers and landholders.

The funding will assist the mining and energy sector in South Australia continue its growth, improve confidence and establish the State as a significant global jurisdiction for research and innovation in the resources sphere.

“The establishment of a Mining and Petroleum Service Centre of Excellence will add to our impressive portfolio of world class research centres and help to cement South Australia’s reputation in this area,” SACOME chief executive Jason Kuchel said in an announcement.

South Australia already hosts several organisations conducting exceptional innovation and research activities in the resources field, and DMITRE’S (The Department of Manufacturing Innovation, Training, Resources and Energy) geosciences database ranks number one in the world.

According to Kuchel SACOME looked forward to working closely with the State Government in regards to the Eyre Peninsula Land Use Support program.

“It is absolutely essential to the sector and to the State’s economy that resource companies and landholders are able to coexist productively,” he said.

“Mining and farming can together support each other and grow two of the most important sectors to the State economy.

“SACOME has long recognised this and taken a proactive role in addressing the challenges faced by exploration companies and landholders in recent years, including holding numerous workshops and seminars and establishing both a Code of Practice for Community and Stakeholder Engagement together with a Code of Conduct for Mineral and Energy Explorers on rural land in conjunction with Primary Producers SA.”

Kuchel said South Australia must continue to be viewed as an attractive place to invest and a well-resourced government department and leadership that prioritised innovative and forward thinking initiatives in the resources field was essential in fostering this.

“The State Government’s continued commitment to the successful PACE program is to be applauded,” he said.

Mr Kuchel said the reduction in payroll tax for smaller businesses was also warmly welcomed.

“The reduction in payroll tax will positively impact many of our members,” he said.

“Most resources companies in this State are not the big players and this reduction, although small in comparison to the high costs and risks involved in exploring, is a welcome extra for companies doing it tough.”

Kuchel said although the State budget announcements reflect forward thinking, significant changes are required at Federal level to boost flagging investment into the sector nationwide.

“Investor sentiment, particularly in regards to mineral exploration, is at its lowest level in more than a decade” he said.

“Both major federal parties must commit to implementing policies to turn this around, in particular with the introduction of an exploration tax credit similar to the scheme operating in Canada, which is credited with much of that country’s exploration investment attraction.

“Our Federal government needs to recognise the importance of this sector to the economy and take the necessary steps to ensure it continues to prosper.”