Richmont Mines Secures Letter of Offer for Up to US$50 Million Senior Credit Facility from Macquarie Bank Limited

Richmont Mines Inc. (TSX:RIC,NYSEMKT:RIC) has secured a Letter of Offer for a Senior Secured Credit Facility for up to US$50 million from Macquarie Bank Limited. According to the terms of the Facility, the Corporation will issue call warrants for the purchase of 1,250,000 Richmont shares to MBL at closing of the Facility Agreement. At the option of the Corporation, the Facility may be provided in either US dollars or Canadian dollars, subject to an interest rate of USD LIBOR plus 700 basis points or CDOR plus 700 bps, respectively. In addition, the LIBOR rate may be fixed for the term of the Facility at the Corporation’s request, and the Facility may be prepaid, in whole or in part, at any time without penalty, subject to standard break costs.

As quoted in the press release:

The US$50 million Facility consists of three tranches, all of which are subject to certain conditions being met prior to drawdown.

• Tranche A: US$12.5 million. Available as a single drawdown until September 30, 2013, with an initial maturity of September 30, 2014. The maturity may be extended until June 30, 2016, subject to certain conditions being met, including establishing gold price hedging by no later than December 31, 2013, on a total of 40,000 ounces at a minimum price of US$1,300/oz, for the period from the tranche drawdown date through June 30, 2015.
• Tranche B: US$12.5 million. Available as a single drawdown until December 31, 2013, which may be extended by an additional 6 months to June 30, 2014, subject to the condition that the Corporation executes the gold hedging, as detailed in Tranche A. Drawdown of Tranche B requires an additional hedging program covering a total of 85,000 ounces at a minimum price of US$1,350/oz, for the period from the tranche drawdown date through December 31, 2017. The maturity date of this tranche is December 31, 2016.

Assuming Tranches A and B are fully drawn, and assuming a USD LIBOR rate of 0.3%, the annual interest rate to the Corporation would be 7.3%. The total annual cost of funds to maturity (including all fees) for the Corporation excluding the value of the warrants is estimated at 8.4%, and including the value of the warrants (Black and Scholes estimate) is estimated at 9.7%. Importantly, the initial 40,000 ounce and potential subsequent 85,000 ounce gold production hedges may be spread out over the period until December 31, 2017, representing an average hedge position of approximately 30,000 ounces per year.

• Tranche C: US$25 million. This tranche is subject to certain additional conditions, and has a final maturity of December 31, 2017. In order to have access to this tranche the Corporation must have fully drawn on tranches A and B, and would have to meet other conditions, including receipt of additional required MBL approvals.

According to the terms of the Facility, the Corporation will issue call warrants (“warrants”) for the purchase of 1,250,000 Richmont shares to MBL at closing of the Facility Agreement. The warrants have an exercise price of CAN$2.45 per share, and will expire 3 years from the original date of their issue to MBL. A total of 812,500 warrants will vest immediately upon closing of the Facility Agreement. The remaining 437,500 warrants will vest when the conditions to drawdown Tranche B are fully met by the Corporation.

Richmont Mines President and CEO Paul Carmel said:

We are very pleased to have obtained this offer of financing in this difficult gold market. It is testimony to the quality of our Project, an asset with significant future potential for the Corporation and our shareholders. With minimal dilution for our shareholders, this offer provides Richmont with additional flexibility and financial confidence to effectively advance the Project which is at the core of Richmont’s long-term strategy.

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