Lake Victoria Gold: Forward sale of 7,000 ounces of gold to fully secure financing of Imwelo mine

Lake Victoria Gold Ltd. (TSX-V: LVG; FRA: E1K) intends to fully fund the approximately US$12 million of capital expenditures required to bring the Imwelo mine in Tanzania into production by delivering 7,000 ounces of physical gold from future gold production. As the company announced today, a non-binding term sheet for a prepaid forward agreement (the “PPF”) was signed with Monetary Metals & Co. on November 30, 2024. The non-dilutive financing is structured to secure the essential resources for the commissioning and development of the mine and to align repayment with cash flow and gold production plans.

The exact amount of the available loan will depend on the gold price at the time of the final closing, which is expected next spring after successful due diligence. The exact loan amount at 7,000 ounces is dependent on the gold price: if the gold price moves up or down, the effect per $100 at 7,000 ounces is $700,000. At the current gold price of $2,640, the amount of the forward loan would be $18.4 million.

Marc Cernovitch, President & CEO of Lake Victoria Gold Ltd, commented: “This agreement represents a significant milestone for Lake Victoria Gold. The non-dilutive structure of the PPF and offtake agreement allows us to fully fund the capital expenditures required to construct the Imwelo mine. This financing secures the essential resources to bring the mine into operation and develop it, and matches repayment to our cash flow and gold production plans.”

Substantial cash-flow forcasted

Simon Benstead, Executive Chairman & CFO at Lake Victoria Gold, added: “We are pleased to share this milestone with our stakeholders who have been patiently awaiting the transfer of the Imwelo mining license and our financing plan for construction. With the completion of this Prepaid Forward Facility (PPF) and combined with our previously secured financing commitments, LVG will have a clear, fully-funded path to production with substantial forecast cash flow. With our recently extended 10-year mining license, LVG is well positioned to deliver sustainable value to 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. In addition, Monetary Metals is entitled to offtake of 100% of LVG’s approved export production, up to 100,000 troy ounces, at a 2.0% discount to market price. The full and final terms will be set out in a definitive PPF agreement, which will be subject to customary conditions, including the approval of the TSX Venture Exchange (the “TSX-V”), completion of due diligence and regulatory approvals.

Under the PPF, Monetary Metals will purchase gold from LVG at a pre-determined discount, which has been set at 99.70% of the London PM Fix on the date of delivery. LVG has also agreed to a quarterly cash sweep mechanism that allows the Company to use positive cash flow from the project to adjust future delivery obligations. As part of the consideration for the pre-funding, and subject to TSX-V approval, the Company will issue 2,500,000 bonus share purchase warrants (the “Warrants”). Each Warrant will entitle Monetary Metals to acquire one common share of the Company (the “Warrant Shares”) at an exercise price to be set at the market price, subject to TSX-V approval, for a period of three years from the date of issue of the loan.

Conclusion: Lake Victoria Gold is certainly hitting a nerve with gold investors with the idea of gold-based financing for its Imwelo project. One wonders why many more prospective gold producers do not take advantage of this option. This may well be because 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 capital cost of around $12 million is comparatively manageable and production is expected to be only about a year away. These are precisely the reasons why the project is suitable for the proposed gold forward loan. The decisive milestone that probably made the agreement with Monetary Metals possible at all was certainly the recent transfer of the Imwelo mining license by the Tanzanian government. Due diligence is already in full swing: a representative of Monetary Metals has already been to Tanzania to inspect the site. It should have a positive effect that Lake Victoria will engage Taifa Mining, the largest private service provider in the Tanzanian mining industry. Taifa Mining also works for Petra, De Beers, Barrick and AngloGold Ashanti. On top of that, Taifa Mining is already a shareholder in Lake Victoria and should increase its position shortly.