PanTerra Gold (ASX: PGI) is currently in the process of transitioning to a gold and silver producer, and has arranged access to an additional A$8 million in working capital to support the early stages of production.
With cash costs estimated to be just US$331 per gold ounce equivalent, the Las Lagunas Gold-Silver Project in the Dominican Republic is expected to deliver a net present value (10%) of US$218 million and an internal rate of return of 55%, with a forecast payback period of 2.2 years and a projected mine life of 6.5 years.
This makes the project exceptionally robust financially at current gold prices and will allow it to easily handle higher borrowings that form part of the additional working capital it is seeking.
Besides A$2.5 million of advances in the form of unsecured Loan Notes or Convertible Notes that several existing shareholders have committed to provide, PanTerra has also concluded negotiations for a A$2.5 million 12 month unsecured credit facility from the Dominican Government owned Banco de Reservas as well as a A$3 million private share placement.
The Notes bear interest at 10% per annum with options or conversion rights at A$0.175 per share prior to maturity on December 31, 2014 while the credit facility and private share placement have yet to be documented.
Brian Johnson, PanTerra's executive chairman, said it was prudent to establish access to additional working capital as the Las Lagunas Gold-Silver Project in the Dominican Republic enters early
PanTerra had yesterday said that it was nearing the successful conclusion of the testing of the Albion oxidation process, which is functioning to expectations, bringing it close to the stripping of the metals and production of doré bars - consisting of 10% gold and 90% silver - to complete the extraction process.
Las Lagunas production
The Las Lagunas project is expected to produce about 69,000 ounces of gold and 630,000 ounces of silver per annum.
Pilot plant testwork demonstrated expected recovery of 435,360 ounces of gold and nearly 4 million ounces of silver over a six and a half year mine life utilising a standard CIL plant together with Xstrata Technology's Albion oxidation process.
This will generate free cash flow of nearly US$100 million within 18 months, in addition to repaying Macquarie Bank's $37.5 million project loan.
Another bonus for PanTerra is the company will recover its investment in the project of around $90 million to 30 June 2012 under the profit sharing agreement with the Dominican Republic Government.
The Government will then receive 25% of operating profits, but PanTerra will not pay any income tax on its profits.
At a gold price of around US$1,400 per ounce and a silver price of about US$28 per ounce, Las Lagunas could generate around $300 million in surplus cash over the next six and a half years.
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