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Toro Energy Secures A$12M In Funding From Macquarie Bank

Toro Energy (ASX: TOE) looks set to maintain its lead over its fellow uranium players with its securing of A$12 million in funding through a convertible debt facility from Macquarie Bank.

This increases the company's available working capital to A$19.5 million, putting it in a strong financial position to fund completion of the Wiluna Uranium Project Definitive Feasibility Study and finalise the process of negotiation with potential joint venture or funding partners.

"Toro welcomes Macquarie Bank as significant new stakeholder and looks forward to working with
Macquarie in moving the Wiluna Uranium Project forward through the financing phase," managing director Greg Hall said.

The Wiluna project team is currently undertaking a project update, which include a capital and operating cost re-estimate. This is expected to be announced when completed in November.

Financing Terms

The Facility is a three year secured loan from initial drawdown that is expected to occur in the first half of 2013.

The first tranche of A$8.0 million is available following the completion of documentation and satisfaction of standard conditions precedent while the remaining funds will be available after receipt of Federal Government approval for the development of the Wiluna Uranium Project, which is expected by the end of 2012.

The loan carries an interest rate at the Australian bank bill rate plus fixed margin.

Toro will also issue tranches of 3 year options to Macquarie at an exercise price set at a 20% premium to Toro's 30 day volume weighted average share price at various stages which, were they to be exercised, would raise funds equal to the A$12m face value of the facility.

The first 25% of these options (24,390,244) will be issued on 2 November while the remaining 75% of the options are to be issued on a pro-rata basis if and when Toro makes drawdowns under the facility.

Under the terms of the Facility, any proceeds from the exercise of the options must be directed towards the repayment of the outstanding loan balance, if any.

In the event that Toro issues equity at a price below the exercise price of the options within 18 months of first drawdown or undertakes an in-specie distribution, the exercise price of the existing options will be adjusted in accordance with ASX Listing Rules.

Toro may also issue replacement options, pay cash, issue shares or new options to compensate Macquarie if it is unable to make an exercise price adjustment.

Wiluna Uranium Project

The Wiluna Uranium Project comprises two uranium resource deposits near Wiluna in Western Australia, which currently has no operating uranium mines.

The project would process 1.3 million tonnes per annum of ore to produce about 820 tonnes of uranium oxide concentrate, with first sales targeted for the 2014-15 financial year.

Toro now awaits the completion of the Federal Government's assessment of the project, which is expected prior to the end of this year.

Global Uranium Market

The spot price for uranium at the end of the September quarter was US$46.50/lb U3O8. However, the long term price remains at US$60 to $61/lb U3O8.

While Toro expects the short term market softness to continue, longer term interest is increasing, with China planning the re-start of nuclear approvals.

China is now seeking to steadily resume approval and construction of new nuclear power plants and is planning to approve a small number of new nuclear power projects by 2015.

Other positives to note: Japan is also refusing to rule out nuclear for future power generation; the Queensland Government changing its uranium mining policy, and the Indian - Australian Government bi-lateral talks on a safeguards agreement are commencing.

Analysis

Toro is already well ahead of other uranium players in Western Australia and the Macquarie funding just serves to fuel its engines further.

As such, the company is likely to be the next Australian uranium producer - one of few new projects in the world capable of production in 2014-15.

While Toro's share price has reflected these achievements, having risen to a high of A$0.14 earlier this week from A$0.083 in early October, Proactive Investors believes the road ahead presents further growth for the company.

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