B2Gold: Fekola Mine Construction Now Fully Funded

B2Gold (TSX:BTO) has secured financing for the construction of its Fekola mine in Mali. The company has received approvals for gold prepaid sales financing agreements worth up to $120 million, signed a commitment letter to enter an $81 million term mining equipment facility and has increased the size of its Otjikoto equipment loan facility.
As quoted in the press release:

On March 14, 2016, the Company received approvals for Prepaid Sales Financing Arrangements of up to $120 million from members of its Revolving Credit Facility (“RCF”) Bank Syndicate, led by HSBC Bank USA, N.A. The Prepaid Sales, in the form of metal sales forward contracts, allow the Company to deliver pre-determined volumes of gold on agreed future delivery dates in exchange for an upfront cash pre-payment (“Prepaid Amount”).
Gold delivery volumes were determined based on the achievable forward price at the time of execution, net of average all-in-funding costs of 4.00%. The Prepaid Sales Arrangements have a term of 33 months commencing March 2016, and settlement will be in the form of physical deliveries of unallocated gold from any of the Company’s mines in 24 equal monthly installments during 2017 and 2018.
Initial Prepaid Sales contracts have been entered into for the delivery of approximately 43,100 ounces of gold in each of 2017 and 2018, for total cash Prepaid Amount proceeds of $100 million. The number of ounces to be delivered was based on an average forward price of $1,248 per ounce of gold. The ounces to be delivered represent approximately 7% and 5% of forecast consolidated gold production in 2017 and 2018 respectively. Proceeds from the Prepaid Sales will be used for the construction of the Company’s Fekola Project in Mali. The Company expects to enter into additional Prepaid Sales Arrangements totaling $20 million. The Company believes that with the receipt of cumulative cash Prepaid Sales funds of $120 million, closing of the $81 million Fekola Equipment Facility discussed below, and based on current assumptions, that the construction of the Fekola Project is fully funded and remains on schedule to commence gold production in late 2017.
The Company expects to record the Prepaid Amount as deferred revenue that will be amortized, and the revenue recognized, when the physical deliveries of unallocated gold are settled under the Prepaid Sales.
The Prepaid Sales are a flexible way of generating additional funding today from the Company’s existing operations. Execution of the Prepaid Sales with members of the Company’s RCF Bank Syndicate further reinforces the support the Company has received from and the working relationship the Company has developed with its core lending group.

In summary, the company stated:

B2Gold’s ability to secure funding for the construction of the Fekola Project on attractive terms without a dilutive equity financing, combined with a strong growth in the Company’s production profile, clearly demonstrates that the Company’s construction and growth strategy is effective and successful. It is this strategy that continues to strengthen the Company via accretive acquisitions, exploration success and the demonstrated ability to reduce operating costs. The Company’s Otjikoto Mine was a key contributor towards the Company’s overall production growth profile in 2015, and is projected to be the Company’s lowest cost producing mine in 2016. By adding what will be another low-cost producing mine to the Company’s production profile, the Fekola Project that is currently in construction and scheduled to commence production in late 2017, will enable the Company to further increase its production base and reduce its consolidated cash operating costs and all-in sustaining costs.
Based on current assumptions, the Company is projecting gold production in 2016 of between 510,000 to 550,000 ounces, increasing to between 800,000 to 850,000 ounces in 2018.

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