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Sacre-Coeur Minerals Seeks To Reduce Conversion Price For Gold Denominated Bonds

Sacre-Coeur Minerals (CVE:SCM) says it is seeking to restructure the agreement for delivery of ETF units for amortization, over the remaining term of its gold denominated bonds, moving the conversion price much closer to the current spot gold price.

The bonds were issued by a company subsidiary under a trust deed dated January 15 of this year. Sacre-Coeur is proposing to reduce the effective conversion price for the outstanding principal balance of US$5.38 million of bonds, in exchange for a rescheduling of the delivery of a corresponding number of ZKB gold ETF units over the remaining 13 straight quarterly deliveries.

The company is also looking for the consent of the bondholders to defer its interest payment due September 30 to October 15 and to eliminate its September obligation to redeem 6.25% of the bonds through the delivery of 265 ETF units. In exchange for this, the company has agreed to increase the number of units to be delivered on each of the remaining 13 payment dates, starting with December 31.

In its statement Tuesday, Sacre-Coeur said: "The company believes that the proposal advanced will be advantageous to both the bondholders and the company, as in the first instance, the conversion price will be much closer to current spot gold price than as currently provided under the Trust Deed, and in the second instance, the restructuring will assist in mitigating the company's working capital requirements until it can close on its recently announced royalty based financing."

Indeed, Sacre-Coeur recently announced it received a definitive term sheet for a US$10 million interest-free secured loan, helping the company to prepare for the construction of its Million Mountain Zone 1 hard rock mine in Guyana. The loan with the undisclosed lender will convert to a royalty interest in production from Sacre-Coeur's Million Mountain block of properties. This will be tied to the company meeting certain conditions for full funding and advancement of Million Mountain Zone 1.

If not yet converted to a royalty interest, the loan will be payable on March 31, 2015. A binding agreement is still subject to the completion of due diligence by the lender, with the expectation of closing the deal in November.

The company said it plans to apply a portion of the proceeds from such royalty financing to retire the remaining balance due on the bonds at an earlier date of January next year.

Million Mountain Zone 1 hosts roughly 500,000 troy ounces of gold as currently tested, including NI 43-101 compliant measured resources of 12.12 million tonnes grading 1.0 g/t gold, and indicated resources of 2.18 million tonnes grading 0.9 g/t gold. Since this report, the company has drilled an additional 40 holes on the outside of the resource body, with the estimate to be updated as part of the feasibility study in process.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.