Substantial Cash Flow Projected
Lake Victoria Gold Ltd. (TSX-V: LVG; FRA: E1K) intends to fully finance the required capital expenditure of approximately $12 million USD for the commissioning of the Imwelo Mine in Tanzania through the delivery of 7,000 ounces of physical Gold from future gold production. As the company announced today, a non-binding term sheet for a so-called Prepaid Forward Agreement (the “PPF”) was already signed with Monetary Metals & Co. on November 30, 2024!
This non-dilutive financing – a plus for shareholders – is structured to secure the essential resources for the commissioning and development of the mine and adjust repayment to cash flow and gold production plans. The exact amount of the available loan sum will depend on the gold price at the time of final closing, which is expected – after successful due diligence – for next spring. If the gold price moves up or down, the effect per $100 USD for 7,000 ounces is an amount of $700,000 USD. At the current gold price of $2,640 USD, the amount of the forward loan would be $18.4 million USD.
Marc Cernovitch, President CEO of Lake Victoria Gold Ltd, commented: “This agreement represents a significant milestone for Lake Victoria Gold. With the non-dilutive structure of the PPF and the offtake agreement, we can fully finance the capital expenditure required for the construction of the Imwelo Mine. This financing secures the essential resources for the commissioning and development of the mine and aligns repayment with our cash flow and gold production plans.”
Substantial Cash Flow Projected
Simon Benstead, Executive Chairman CFO at Lake Victoria Gold, added: “We are pleased to share this milestone with our stakeholders who have patiently waited for the transfer of the Imwelo mining license and our financing plan for construction. Upon completion of this Prepaid Forward Facility (PPF) and together with our already secured financing commitments, LVG will have a clear, fully funded path to production with substantial projected cash flow. With our recently extended 10-year mining license, LVG is well-positioned to achieve sustainable value creation for our shareholders.”
The PPF includes a forward purchase of 7,000 ounces of gold to support the commissioning and ongoing development of the Imwelo Mine in Tanzania. Additionally, Monetary Metals is entitled to an offtake of 100% of LVG’s approved export production, up to 100,000 fine ounces, at a 2.0% discount to the market price. The complete and final terms will be set out in a definitive PPF agreement, subject to customary conditions, including TSX Venture Exchange (the “TSX-V”) approval, completion of due diligence, and regulatory approvals.
Under the PPF, Monetary Metals will purchase gold from LVG at a predetermined price discount, set at 99.70% of the London PM Fix price on the day of delivery. LVG has also agreed to a quarterly cash sweep mechanism, allowing the company to use positive cash flow from the project to adjust future delivery obligations. As part of the consideration for the pre-financing and subject to TSX-V approval, the company will issue 2,500,000 bonus share purchase warrants. Each warrant entitles Monetary Metals to acquire one common share of the company at an exercise price set at the market price, subject to TSX-V approval, for a period of three years from the date of loan issuance.
Conclusion: Lake Victoria Gold’s idea of using gold-based financing for its Imwelo project strikes a chord with gold investors. One wonders why not many more aspiring gold producers make use of this option. This may be due to the fact that the capital requirements for a new gold project are usually much higher. This is precisely where the advantage of the Imwelo project lies. The expected investment costs of around 12 million USD are relatively manageable, and production is expected to start in about a year. These are exactly the reasons why the project is suitable for a gold forward loan. The decisive milestone that probably made the agreement with Monetary Metals possible in the first place was certainly the recent transfer of the Imwelo mining license by the Tanzanian government. Due diligence is already in full swing: A representative from Monetary Metals has already been to Tanzania and was able to see the conditions on-site. It should have a positive effect that Lake Victoria will engage Taifa Mining, the largest private service provider in Tanzanian mining. Taifa Mining also works for Petra, De Beers, Barrick, and AngloGold Ashanti. Additionally, Taifa Mining is a shareholder in Lake Victoria and should increase its position shortly.
