| LONG-TERM DEBT [Text Block] |
NOTE 9: LONG-TERM DEBT
Pursuant to a Credit Agreement dated and effective July 30, 2013 (the “Credit Facility”), the Company entered into a $20,000,000
senior secured credit facility (the “Facility Amount”) with Sprott Resource Lending Partnership and CEF (Capital Markets) Limited (collectively, the “Lenders”) under which:
-
initial funding of $10,000,000
was received by the Company upon closing of the Credit Agreement (the “Initial Advance”);
-
additional funding of $5,000,000
is available for draw-down by the Company on or before January 31, 2014, subject to certain conditions (the “Second Advance”); and
-
further additional funding of $5,000,000
is available for draw-down by the Company on or before July 31, 2014, subject to certain conditions (the “Third Advance).
The Credit Facility is non-revolving with a two-year term maturing on July 31, 2015, and subject to the following terms:
-
an interest rate of
8% per annum on the principal balance outstanding compounded and payable on a monthly basis;
-
a standby fee of
4% per annum on the undrawn balance of the Facility Amount payable on a monthly basis;
-
a structuring fee $175,000
payable upon closing;
- reimbursement by the Company of legal fees and certain due diligence expenses incurred by the Lenders;
-
issuance of bonus shares with a total value of $900,000
(determined at the first anniversary of the closing on the basis of a
10% discount to the five trading-day, volume-weighted average closing price of the Company’s shares at that time), or
4.5% of the Credit Facility,
407,239
shares were issued at closing to be held in escrow until the final number of shares is determined on the first anniversary of the closing;
-
issuance of bonus warrants comprised of
2,600,000
share purchase warrants, each warrant exercisable for one share of the Company at an exercise price of $2.50
per share over a three-year period, subject to accelerated expiry whereby, upon notification by the Company, the warrant holders will have
30
days to exercise should the
30
trading-day, volume-weighted average closing price of the Company’s shares equal or exceed $5.00
;
-
an annual fee $150,000
payable, at the Lenders’ option, in cash or shares of the Company, the price per share to be determined on a basis of a
10% discount to the five trading-day, volume-weighted average closing price of the Company’s shares at that time;
- monthly principal repayments equal to one twelfth of the principal balance then outstanding must commence on July 31, 2014; mandatory repayment obligations may also be triggered under certain post- closing events;
-
voluntary prepayments of the principal balance outstanding may occur on the last day of any month (on
10
days prior notice) provided that not less than six months interest has been paid to the Lenders;
- the Credit Facility is secured by security over the lease and related rights comprising the Hobson Processing Plant and the mineral and related rights comprising the Goliad Project; and
- conditions precedent for the Third Advance include security over the mineral and related rights comprising the Palangana Mine.
The Company will use the proceeds of the Credit Facility for the development, operation and maintenance of the Hobson Processing Facility, the Goliad Project and the Palangana Mine and for working capital purposes.
In connection with the debt financing, the Company incurred various fees and expenses totaling $418,477, which was recorded as deferred financing costs on the consolidated balance sheet. The current portion of deferred financing costs represents costs that will be expensed over the next twelve months.
The bonus warrants are valued using the Black-Scholes option pricing model with the following assumptions.
| Expected Life in Years |
|
3
years
|
| Expected Annual Volatility |
|
67.15%
|
| Expected Risk Free Interest Rate |
|
0.62%
|
| Expected Dividend Yield |
|
0.00%
|
At July 31, 2013, long-term debt consisted of the following:
| |
|
July 31, 2013 |
| Principal amount |
$ |
10,000,000
|
| |
|
|
| Discount on long-term debt - cash |
|
|
| Payments to lenders for fees and expenses |
|
(
594,054)
|
| Net proceeds received |
|
9,405,946
|
| Discount on long-term debt - non-cash |
|
|
| Allocated fair value of bonus shares |
|
(
1,065,400)
|
| Allocated fair value of bonus warrants |
|
(
1,237,910)
|
| Accrued annual fees |
|
(
150,000)
|
| Total discount on long-term debt |
|
(
2,453,310)
|
| |
|
|
| Long-term debt, net of discount |
|
6,952,636
|
| Accretion of debt discount |
|
4,583
|
| |
|
6,957,219
|
| Current portion |
|
833,333
|
| Long-term debt, net of current portion |
$ |
6,123,886
|
The aggregate yearly maturities of long-term debt based on principal amounts outstanding at July 31, 2013 are as follows:
| 2014 |
$ |
833,333
|
| 2015 |
|
9,166,667
|
| Total |
$ |
10,000,000
|
|