THE BOURSE WHISPERER: Reed Resources (ASX: RDR) has finalised documentation for a $19 million syndicated finance facility with Credit Suisse.
The funds from the finance facility will be available to Reed for immediate use.
Reed indicated the funds will be used to meet working capital requirements for the company’s 100 per cent-owned Meekatharra gold project (MGP), located in the Murchison region of Western Australia.
The key features of the facility are summarised as follows:
– $19 million Senior Secured Term Loan Facility;
– Repayment in twelve months from first utilisation, with an option for Reed to extend by a further six months; and
– A hedging facility which includes 70,000 ounces in forward delivery contracts and 40,000 ounces in bought puts.
The deal involves Reed opting to participate in a Participating Forward Gold Hedging Structure to manage gold price risk.
This will involve selling 70,000 ounces of production as forward delivery contracts and purchasing put options over 40,000 ounces, with put-only protection in the first four months before forward deliveries commence in month five.
Reed said this agreed hedging structure will enable it to mitigate its risk should an unexpected gold price downturn occur, at the same time retaining some upside participation should the gold price increase.
Reed will achieve a gold floor price of approximately $1641 per ounce over 110,000 hedged ounces.
“While gold hedging is required under the facility, the combination of puts and forwards establishes a gold price floor which protects the MGP’s revenue base, effectively mitigating risk should the gold price deteriorate, whilst retaining some exposure to gold price upside,” Reed Resources managing director Luke Tonkin said in the company’s announcement to the Australian Securities Exchange.
Commissioning of the Meekatharra gold project is on schedule to start next month.
Refurbishment of the Bluebird mill is nearing completion following the commissioning of a new primary crusher in November.
“Installation of the new diesel-fired power station has commenced and is expected to be completed by early December whilst electrical terminations between the processing facility and the new power station remain on schedule for completion by mid-December,” Tonkin said.
“Given associated industry cost pressures it has been pleasing to deliver the MGP’s capital works program within budget.
“Dry commissioning of the plant will commence in mid-December with wet commissioning shortly thereafter.
“Circuit gold inventory will be established during commissioning whilst plant throughput is scheduled to increase throughout the fiscal third quarter as ore generated from the Bluebird open pit is mined.”