Marathon Gold Corp. [MOZ-TSX, OTC-MGDPF] on Tuesday said it has entered into an exclusive non-binding indicative term sheet with Sprott Resource Lending Corp. for a senior secured project financing facility of US$185 million.
Proceeds from the credit facility will be used to fund construction at the company’s Valentine Gold Project in central Newfoundland.
The credit facility is structured as a term loan with a 6.5-year tenor. Conditions precedent to closing include the completion of technical, legal and environmental and social due diligence, the receipt and review of the project’s final development budget and schedule, the completion of definitive documentation, and the receipt of applicable environmental permits, operating licenses and regulatory approvals.
Closing is scheduled for not later than March 31, 2022.
Marathon Gold shares advanced on the news, rising 0.33% or $0.01 to $3.06 on volume of $226,230. The shares trade in a 52-week range of $3.61 and $2.03.
“We are very pleased to announce this significant milestone in our project financing efforts for the construction of the Valentine Gold Project,’’ said Marathon President and CEO Matt Manson.
“Sprott Resource Lending is an experienced and well-regarded project financing partner to the mining industry, and we are excited to be working with them to develop what we anticipate will be Atlantic Canada’s largest gold mining operation,” he said.
“Detailed engineering, staffing and procurement for the Valentine Gold Project is underway, supported by our strong treasury. Construction is scheduled to commence in early 2022, subject to timely receipt of all necessary permits and approvals.’’
Marathon recently published a feasibility study for the project, demonstrating robust economics for a conventional open pit mining operation and a low initial capital cost and high rate of return. The feasibility study estimates an initial capital cost of $305 million.
The feasibility study also envisages a 13-year mine life, a 22-months construction and commissioning schedule assuming a construction start in January, 2022, with a first gold pour anticipated by October, 2023.
The study also forsees annual gold production of 173,000 ounces per year and $119 million of annual average free cash flow between 2024 and 2033 from the processing of high-grade mill feed. Proven and probable reserves stand at 2.05 million ounces.
Marathon recently reported a maiden resource estimate for the Berry Zone which is located within the six-kilometre-long Sprite Corridor, is situated between the project’s Leprechaun and Marathon deposits.
Marathon has said the Berry estimate will not be included in Marathon’s core development plan at Valentine, which is based on two open pits at Marathon and Leprechaun and a central 2.5-4.0 million tonne per year mill.
However, it has said that at some stage in the future Berry could provide options for mine-life extensions or future grade sequencing (pending future permitting).