Was Lakeshore obligated to enact this line of credit?....And for Sprott to make use of the share warrents wont they have to by shares at around 1.40/ share? I admit I do not fully understand all of this and I thought I had heard sometime back that some of the money would be used to pay off Franco nevada?
Anyone out there understand all the legal stuff??
Lake Shore Gold Enters Agreement for Credit Facility of Up to $70 Million With Sprott Resource Lending
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TORONTO, ONTARIO -- (MARKETWIRE) -- 04/12/12 -- Lake Shore Gold Corp. (TSX:LSG)(NYSE Amex:LSG) ("Lake Shore Gold" or the "Company") today announced that the Company has entered into an agreement (the "Agreement") with Sprott Resource Lending Partnership ("Sprott") for a credit facility (the "Facility") totaling up to $70 million. The Facility involves two components, a $35 million gold loan (the "Gold Loan") maturing on May 31, 2015 and a standby line of credit (the "Standby Line") for an additional $35 million. The Standby Line matures on December 31, 2014.
Tony Makuch , President and CEO of Lake Shore Gold, commented: "Our agreement with Sprott represents a pivotal development for Lake Shore Gold. With this financing, we will have the funds to bring the Timmins West Mine to full production, to complete our mill expansion, and to advance underground work at Bell Creek Mine. Based on our current development plans, we are within 12 to 18 months of Timmins West Mine becoming a significant free cash flow generator, and the debt we have arranged with Sprott will ensure we have the funding to get us to that point, while maintaining a strong and flexible treasury. In our view, Lake Shore Gold's share price has been adversely affected by market concerns around our balance sheet and capital funding. We have now addressed these concerns and have done so in a manner that involves very little dilution to our shareholders."
Under terms of the Gold Loan, the Company will receive $35 million from Sprott upon closing. Repayment of the loan will be through 29 monthly cash payments linked to the gold price on the day prior to the closing of the transaction. For example, assuming the current spot price of US$1,650 per ounce, monthly cash payments would be calculated on 924 ounces of gold per month (with the total repayment equal to the cash value of 26,800 ounces over the life of the Gold Loan). The actual number of ounces will be determined at the time of closing. The first payment will be made on January 31, 2013, with the final payment to be made on May 31, 2015.
In consideration for entering into the Gold Loan, the Company will make a payment to Sprott of 5,000,000 common share purchase warrants (the "Gold Loan Warrants"). Each of the Gold Loan Warrants shall entitle Sprott to acquire one common share in the Company for a period of 60 months at an exercise price of $1.30 per share representing a 49% premium to today's closing share price on the TSX. The 5,000,000 common shares eligible for purchase through the Gold Loan Warrants equate to just over 1% of the Company's existing issued and outstanding common shares. The Gold Loan Warrants shall be subject to a four month hold period and be detachable from the Facility.
The Standby Line shall be for a maximum principal amount of $35 million at an interest rate of 9.75%, compounded monthly. The Standby Line will be made available through two drawdowns with a minimum amount for each drawdown of $10 million. A "Drawdown" fee of 2% will be charged on the principal amounts drawn. Drawdowns will be available upon closing until March 31, 2013. On December 31, 2013, the Company will pay a fee (the "Rollover" fee) representing 4% of the then outstanding principal amount to extend the drawdown period for an additional year. Both the Drawdown and Rollover fees can be paid in either cash or common shares at the option of the Company, subject to certain terms and conditions.
In consideration for entering into the Standby Line, the Company will make a payment to Sprott of 8,000,000 common share purchase warrants (the "Standby Line Warrants"). The Standby Line Warrants have the same terms and entitlements as the Gold Loan Warrants. The 8,000,000 common shares eligible for purchase through the Standby Line Warrants equate to approximately 2% of the Company's existing issued and outstanding common shares.
Closing of the Facility is subject to certain terms and conditions, including the completion of definitive creditor and inter-credit agreements and approvals, the completion of due diligence and the receipt of all applicable stock exchange and regulatory approvals.
The Facility will rank subordinate to the Company's existing bank debt with UniCredit of US$50 million.