RE:Marathon Gold Closes US$185M Credit FacilityTD Flash Note
Marathon Gold Corp. (MOZ-T) C$2.71 Closes US$185mm Credit Facility Arun Lamba, CFA Event Yesterday after market close, Marathon announced that it has closed a 6.5 year US $185mm term loan credit facility with a non-bank lender. The proceeds of the credit facility are to be used for the construction, development, and working capital requirements of Marathon’s Valentine Gold Project located in central Newfoundland.
Impact: NEUTRAL As a reminder, Marathon initially announced that it had entered into a non-binding US$185mm agreement in July 2021. Details of the agreement were not previously provided.
With this credit facility, management believes it has now achieved the debt component of financing for building Valentine.
Recall, the March 2021 Feasibility Study (FS) at Valentine estimated initial capex of $305mm. In an effort to be conservative, we currently model initial capex of $375mm to account for the very high cost inflation impacting new development projects industry-wide currently.
Marathon last reported ~$87mm in cash (as at December 31) and no debt. We currently model the company raising an additional $75mm (at $3.00/share) of equity.
Key Terms The credit facility will be funded into in two tranches (US$125mm at close and US$60mm on December 31, 2022. Subject to the Project’s release from federal environmental assessment (company anticipating in mid-2022), the perfection of security, a construction decision by Marathon’s Board of Directors, and certain other customary covenants and terms.
A fee of US$4mm is payable upon the Initial Advance. The Facility will bear an interest of 7.75% plus the greater of (i) 3-month LIBOR, and (ii) 0.50% per annum, payable quarterly. The Initial Advance Fee and 75% of the interest accruing to the end of the Availability Period (March 31, 2025) shall be capitalized.
US$15/ounce will be payable on the first 1 Moz of payable gold. No other commitment or arrangement fees apply.
The credit facility is to be repaid in ten quarterly principal repayments equal to 5.0% of the outstanding balance commencing on December 31, 2025, with the remaining 50% due at the Maturity Date (June 30, 2028).
Anticipated Timeline Exploration Results — Ongoing
Possible Release from Federal EA Process — Mid-year 2022
Updated Resource — Mid-year 2022
Start of Construction — Q3/22 (company estimate)