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PanTerra Gold Maps Out Financing Strategy

PanTerra Gold (ASX:PGI) is planning a number of measures designed to better progress to the pre-development stage a project aimed at extending the life of its Las Lagunas project in the Dominican Republic.

These include a 10 to 1 share consolidation, a capital raising of up to A$10 million and refinancing its loans.

The company has also been invited by a major Chinese gold mining company to put forward a formal proposal for them to acquire a controlling interest in the Las Lagunas project and any mine developments that will be necessary to extend the project life.

The Chinese group have expressed interest in the application of the Albion oxidation process to mid-sized refractory deposits they hold in China.

PanTerra and Xstrata Technology have reached agreement on the two companies forming an alliance to pool the intellectual property they have each developed in relation to the Albion process, with the aim of exploring potential commercial opportunities for its application in China.

The company has been granted exclusive rights to Albion licences granted in China for the next five years.

It is currently carrying out a joint due diligence exercise with a North American mining company which owns the high grade refractory gold deposit.

This can produce a 90 grams per tonne to 100g/t concentrate amenable to economic gold extraction at the Las Lagunas operation.

Share Consolidation

The company will call a meeting of shareholder around 30th January 2015 for approval to consolidate the number of shares on issue from 846,215,609 to approximately 84,621,561.

It approved, this will make it easier to deal with the North American market, which has an aversion to small companies with an excessive number of shares on issue.

This market is important as it generally has a greater appreciation of why the company has persevered with the proving of the Albion oxidation process for refractory deposits hosting gold and silver, which are known by investors to be prevalent in North and South America, and of the potential for PanTerra Gold's business model going forward.

Capital Raising

The company will seek approval at the same meeting to raise A$10 million of additional capital within three months of the meeting date.

This will be achieved by the issue of shares at not more than a 15% discount to the VWAP over the last five trading days.

Of the funds to be raised, US$5 million will be applied to reduction of Macquarie Bank's US$22.7 million loan to the Las Lagunas project, on 31 March 2015. The balance will be applied to general working capital.

A North American Investment Bank which has expressed interest in the company's operations and objectives, will be engaged to effect the proposed capital raising in association with an Australian Stockbroker.

Current production trends at Las Lagunas should be reinforced by an additional two months of production which will permit a more reliable valuation of cash flows to be generated in the future, prior to the proposed share issue.

Restructuring of Share Register

Simultaneously with the capital raising program in February/March 2015, the same Investment Bank will endeavour to reduce the substantial overhang of the company's shares in the market.

It will place shares made available with clients having a medium to long-term interest in the company advancing its business model.

Macquarie Bank

PanTerra and Macquarie Bank (ASX:MQG) have negotiated a repayment schedule for the outstanding US$22.7 million loan balance commencing with a US$5 million payment on 31 March 2015, followed by US$1 million a month until 31 August 2016, and $700,000 on 30 September 2016.

This has yet to be formally approved.

Shareholder loans totalling A$3.4 million that are due for repayment on 31 December 2014 will not be able to be paid on this date as Macquarie will not permit shareholders to accept repayment of their loans under the formal Subordination Agreement.

The company will again approach Macquarie Bank for their consent to repay Shareholders Loans following further reductions in their project loan balance.

Refinancing

Negotiations are continuing with a major New York based group to provide a US$25 million first lien, term loan (five years) that would be applied to paying out the balance of Macquarie Bank's loan to the Las Lagunas project.

PanTerra is also considering an additional loan of up to US$10 million that could be applied to redeeming the preference shares held by the Central American Mezzanine Infrastructure Fund ("C MIF"), or replacement of any other debts.

If this consolidation of the company's financial obligations is successfully concluded in early 2015, it will probably reduce the capital raising planned for February/March 2015.

This will allow surplus cash flow to be applied in 2015-16 to predevelopment expenditure on a potential new project.

It could also resolve repayment of its shareholder loans.

Potential New Project

Due diligence is being carried out jointly with a North American miner that owns a high grade refractory gold deposit that can produce a concentrate amenable to economic gold extraction at the Las Lagunas operation.

The objective is to merge the two projects at fair value around mid-2015 within a jointly held holding company.

This is subject to a successful joint scoping study of the technical and economic viability of producing around 100,000 ounces of gold per annum for a minimum of 10 years from 2018.

PanTerra would be credited with the residual value of its process plant and the discounted cash flow attributable to the Las Lagunas project.

Because only 40,000 tonnes per annum of concentrate will be required to produce 100,000 ounces of gold at 85% recovery, it will be able to be fed to the 220,000Tpa Las Lagunas plant in batches until the existing feed is depleted.

The company is also reviewing other refractory resources that are effectively stranded, but with the potential to be developed as stand-alone projects or as suppliers of concentrate to Las Lagunas.

The Dominican Republic Government has indicated strong support for PanTerra Gold extending the life of the Las Lagunas project through the importation of refractory concentrate.

It has appointed a Vice Minister to head up a committee that is now engaged with the company on matters such as environmental approval, concentrate transport, utilisation of the 20 year capacity of the Government's tailings dam and the on-site limestone quarry, and other economic issues.

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