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An agreement announced Wednesday with Orion Mine Finance has brought Red Eagle’s goal of funding activities at San Ramon even closer. The company revealed that day a US$65-million construction financing that includes a private placement of common shares, as well as a $60-million credit facility.
Resource Investing News last touched base with Red Eagle Mining (TSXV:RD) in February, when it made the 2015 TSX Venture 50 list. At the time the company was having a quiet 2015, but that’s definitely not true anymore.
Case in point: earlier this month, Red Eagle reached a major milestone when its Colombia-based San Ramon gold mine was formally granted an environmental license. Explaining the significance of the license, CEO Ian Slater said, “San Ramon is now fully permitted and close to being fully financed to meet the planned capital expenditure of US $74 million including contingencies.”
An agreement announced Wednesday with Orion Mine Finance has brought Red Eagle’s goal of funding activities at San Ramon even closer. The company revealed that day a US$65-million construction financing that includes a private placement of common shares, as well as a $60-million credit facility.
Following the private placement, Orion will own 19.9 percent of Red Eagle; as long as it owns at least 15 percent of the company’s issued and outstanding shares, it will have the right to appoint a director to Red Eagle’s board.
Confirming that the project is now nearly set to go ahead, Slater reiterated that San Ramon is “close to being fully financed to meet the planned capital expenditure of US $74 million including contingencies.” He added that construction is set to begin midway through this year, with production anticipated in 2016.
San Ramon is a gold deposit located at Red Eagle’s Santa Rosa project, and it will be the first area of the project to be developed. A feasibility study was completed for San Ramon last fall, and it points to a 1,000-tonne-per-day operation that will produce an average of 50,000 ounces over a mine life of eight years. Cash costs are set at $596 per ounce, and, as mentioned, initial capex clocks in at $74 million. Net present value at a 5-percent discount is $104 million, while the internal rate of return is 53 percent. Those numbers are based on a long-term gold price of $1,300 per ounce.
In terms of what’s in the ground, reserves sit at 2,424,000 tonnes at 5.2 g/t gold for 405,000 ounces.
While Wednesday’s news from Red Eagle is good for the company and its shareholders, it’s also positive for the gold industry as a whole. Though analysts and thought leaders continue to emphasize that it’s possible for good projects to receive funding, it can definitely sometimes be tough to believe in today’s tough price environment. Red Eagle’s deal with Orion has thus likely provided a much-needed breath of fresh air for many.
At close of day Wednesday, Red Eagle’s share price was sitting at $0.31, up 5.05 percent. Year-to-date the company is up a more modest 3.33 percent.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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