Gryphon Gold, who sold roughly 1.58k ounces of gold (32 tons of loaded carbon) during fiscal 2012 via their Borealis Oxide Heap Leach Operation in Nevada, reported entry today into an agreement package with Waterton Global Value L.P. and one of its subsidiaries to expand this extremely productive operation via a joint venture.
Waterton will obtain a 60% ownership interest in GYPH's operating subsidiary, Borealis Mining Company, via the agreement, which will see Waterton converting the lion's share currently outstanding under the Senior Credit Facility ($17M, or roughly two-thirds). This brings the amount in the Senior Credit Facility down to only $8M, shearing monthly debt payments (starting Jan 31) from $1.4M to an easily manageable $0.4M and creating a robust capital structure from which to engage production expansion efforts at Borealis.
This is great news for GYPH, which was lucky to find and quickly get a new boiler in at their ADR plant (adsoption, desorption, and recovery) after the old one failed recently (reported Jan 15). The ADR facility, able to strip four tons of carbon per day, was completed back in May of 2012, and thanks to a quick turnaround with the boiler, GYPH has managed to sell 3,280 gold equivalent ounces in Q1 of FY13. This JV will help up the output at Borealis a great deal, thanks not only to the capital support enabling additional crushing capacity expansion and hauling equipment purchases, but because Waterton brings a "wealth of technical expertise and successful gold mining experience" to the table, according to CEO and Interim CFO of GYPH, James T. O'Neil Jr.
O'Neil assured markets that this JV would strengthen the Borealis operation considerably and lead to an increased overall mining/production effort. In conjunction with this important move to shore up debt and form a new tactical front via the JV, Gryphon Gold and Waterton have entered into an operational and financial obligation arrangement with several key stipulations:
Gryphon shall pay $4M compensation to the JV to settle extant obligations incurred prior to the deal, as well as their share (40%) of the contemplated initial $4M capital contribution
» Waterton will advance $5.6M to Gryphon ($3M already in) to cover initial capital contributions to the JV (to be repaid with escalating interest by July 31)
» Borealis ownership percentage will determine each parties required obligation for ongoing capital contributions, with all determinations going through the Borealis board of managers
» Dilution of ownership will be the consequence of failure to meet financial obligations by either party, in addition to which Gryphon, if failing to meet monthly Senior Credit Facility obligations, shall incur the same dilution penalty as per terms of the associated Credit Agreement
Portfolio Manager at Waterton, Cheryl Brandon, summed it all up nicely noting that a combination of near-term output upgrade initiatives being undertaken at Borealis and Waterton's added financial/logistical muscle should jack up both recovery rate and mine life parameters. A solid, solid move for GYPH, who can now focus confidently on material aspects of the operation, impelled by these new dynamics and better able to wring out improved returns from the Borealis site for their shareholders.
For more information on Gryphon Gold, visit GryphonGold.com
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