Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Sacre-Coeur Within Close Reach Of Securing $10 Mln Financing For Million Mountain

Sacre-Coeur Minerals (CVE:SCM) has signed 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 company also told investors Thursday that it is continuing to work on additional funding in order to advance the project to production, consistent with its projected timelines. Shares of the Canadian junior were halted in advance of the news.

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.

Aside for the preparation of construction at the Million Mountain project, the new funds will also be used to retire the company's gold denominated bonds and to build and commission additional production units with "enhanced fine gold recovery capability" for its alluvial/elluvial mining operations in Guyana.

Indeed, in addition to the development of the Million Mountain hard rock mine, the company is already producing some low-cost gold from an alluvial operation, with annual proceeds in the millions of dollars. The company boasts all-in cash production costs of less than $500 an ounce at its alluvial/elluvial operations.

It will only add to production with the development of Million Mountain Zone 1, which 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.

Based on its internal analysis at the project, using a base case gold price of $1,500 an ounce, Sacre-Coeur is projecting a net present value of $145.5 million from the project at a discount rate of 5 per cent, and an IRR of 123 per cent.

Closing of the convertible loan will require that the company's existing bond holders consent to escrowing all remaining ETF units or some other arrangement to permit the granting of a senior security interest to the lender of the proposed loan, Sacre-Coeur said.

The Canadian junior company owns about 860 square kilometres of both producing and development-stage properties in Guyana, including another eight targets at Million Mountain.

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