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Platinum Group Metals has secured a US$110-million bought-deal financing. The company has also executed a term sheet for a US$40-million senior secured operating loan facility with Sprott Resource Lending Partnership.
Platinum Group has also executed a term sheet for a US$40-million senior secured operating loan facility with Sprott Resource Lending Partnership. Proceeds from the agreements will fund the completion of its Western Bushveld Joint Venture (WBJV) Project 1 platinum mine in South Africa.
The two agreements replace an earlier offering of $150,000,000 in senior unsecured notes, which was cancelled earlier on Tuesday. Investors may have been worried at first, as that release cites “general market conditions” as one of the reasons the offering was discontinued. Certainly, the resource sector has been hit hard over the past few months, and Platinum Group was not exempt — its share price has lost nearly 40 percent over the past three months.
However, Platinum Group also reassured investors that the company was “considering alternative transactions to fund the completion of the WBJV Project 1 platinum mine,” and indeed, it followed up on that promise less than half an hour later.
The agreements
Platinum Group first announced its US$40-million term sheet with Sprott Resource Lending Partnership for a senior secured operating loan facility. There are still a few terms and conditions that need to be met before this becomes a firm commitment, but all in all, the support from Sprott is no doubt a strong vote of confidence for the company.
The facility matures on December 31, 2017, and is intended to be available upon delivery and sale of first commercial concentrate from Platinum Group’s WBJV Project 1. That is expected to take place in the final quarter of next year.
Soon afterwards, the company said it has also locked down a US$110-million bought-deal financing agreement with a syndicate of underwriters, including BMO Capital Markets and GMP Securities. The offering is expected to close on December 31 2014, subject to regulatory requirements. With proceeds of the offering and its net cash on hand, Platinum Group expects to be able to “fully fund the completion of mill and concentrator construction at the WBJV Project 1 platinum mine.”
Add to that the senior secured operating loan, and Platinum Group will be able to take care of “peak funding” needs at Project 1 and continued exploration at Waterberg as well.
Bright spot
It’s been difficult for miners to secure funding for projects at all phases this year. However, it’s interesting to note that institutional investors are still taking an interest in mining projects. Precious metals investors will no doubt be watching Platinum Group as the company continues to develop its South African projects.
At close of day Tuesday, shares of Platinum Group Metals were up 1.47 percent, trading at $0.69.
Securities Disclosure: I, Teresa Matich, hold no investment interest in any of the companies mentioned.