$35-million credit facility to finance Canamax projects

Toronto-based Canamax Resources has reached an agreement with National Westminster Bank of Canada to finance construction and development of Canamax’s three new gold mines.

They include the company’s Bell Creek mine northeast of Timmins, Ont., the Kremzar property near Wawa, Ont. and the Ketza River gold project south of Ross River, Yukon.

The credit facility gives Canamax access to $35 million through cash loans or letters of credit and up to an additional $10.5 million for what the company calls gold margin and hedging purposes.

As part of this arrangement, Canamax says it has also agreed to terms of a related gold loan facility with Mocatta Metals Corp. of New York. The first drawdown under the new facilities comes as a $22-million gold loan. According to Canamax, additional drawdowns are intended as development of the three mines progresses.

President John Hansuld said all of his company’s assets will initially form security for the loans. “After each mine achieves its completion test, a portion of the loans can be transferred to limited recourse status in amounts determined by loan coverage ratio tests based on projected mine cash flows,” he said.

“We are confident that starting early next year with the Bell Creek mine, all three mines will be transferred during 1988. That will free the company to secure financing for its non-producing and exploration projects.”

Canamax says it can also switch from gold loans to cash loans as circumstances, particularly gold prices, warrant.

Under a complicated arrangement, the facilities are revolving until the date when all loans are transferred to limited recourse or by Dec 31, 1988, when quarterly principal repayments are designed to ensure that all loans are repaid by Dec 31, 1992.