LYDIAN ANNOUNCES $325 MILLION CONSTRUCTION FINANCING FOR AMULSAR GOLD PROJECT

Transcription

1 LYDIAN ANNOUNCES $325 MILLION CONSTRUCTION FINANCING FOR AMULSAR GOLD PROJECT Conference Call December 1, 2015 Lydianinternational.co.uk TSX:LYD

2 Cautionary Statements Forward Looking Statements & Other Disclaimers Certain information contained in this presentation is forward looking. All statements in this presentation other than statements of historical fact, that address events, results, outcomes or developments that the Company expects to occur are forward-looking statements. Forward-looking statements in this presentation include, among others, statements with respect to: (i) the Company s future operating results and economic performance; (ii) the expected use of proceeds from the financing transactions; (iii) the anticipated economic and feasibility parameters of the Amulsar Gold Project; (iv) the expected capital costs, operating costs and production for the Amulsar Gold Project; (v) the expected mining operations and plan, production and other attributes of the Amulsar Gold Project; and (vi) the expected pre-tax and after-tax NPV, IRR and payback period associated with the Amulsar Gold Project. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, using words or phrases such as expects, anticipates, plans, projects, estimates, assumes, intends, strategy, goals, objectives, schedule or variations thereof or stating that certain actions, events or results may, could, would, might, or will be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements. All forward-looking statements are based on the opinions and estimates made as of the date such statements and are made and are subject to important risk factors and uncertainties, many of which are beyond the Company's ability to control or predict. Such statements and information are based on numerous assumptions regarding present and future business strategies and the environment in which the Company will operate in the future, including the price of gold and other precious metals, anticipated costs and the Company s ability to achieve its goals. Certain important assumptions by the Company in making forward-looking statements include, but are not limited to: (i) the exchange rate between the Canadian dollar, the Armenian Dram, the British pound and the U.S. dollar being approximately consistent with current levels; (ii) the availability of certain consumables and services and the prices for energy and other key supplies being approximately consistent with current levels; (iii) labour and materials costs increasing on a basis consistent with current expectations; (iv) the timelines for exploration and development activities at the Amulsar Gold Project; (iv) assumptions made in mineral resource and reserve estimates, including geological interpretation grade, recovery rates, gold price assumption, and operational costs; (v) the receipt of funds under each of the components of the financing transactions, as well as the completion of the public equity offering and the establishment of an equipment financing facility; (vi) the receipt of shareholder approval for the equity private placement; and (vii) Lydian s ability to satisfy the conditions precedent to the financing transactions and each draw thereunder. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements. Such risks, uncertainties and factors include, without limitation: (i) significant capital requirements and availability of capital resources to fund such requirements; (ii) price volatility in the spot and forward markets for commodities; (iii) tax rates or royalties being greater than assumed; (iv) discrepancies between actual and estimated production, between actual and estimated reserves and resources and between actual and estimated metallurgical recoveries; (v) the speculative nature of mineral exploration and development; (vi) failure to receive regulatory approvals (including stock exchange), shareholder approval or other approvals or otherwise satisfy the conditions to the completion, effectiveness or availability, as the case may require, of each of the components of the Financing Transactions; (vii) the funds of some of the Financing Transactions not being available to Lydian International. Additional risk factors are discussed under Risk Factors in the Company s most recently filed Annual Information Form and also see Risk Factors in the Company s most recently filed Annual Management s Discussion and Analysis. Readers are referred to the technical report for the Amulsar Gold Project titled NI Technical Report, Amulsar Value Engineering and Optimization, Armenia dated as of November 20, 2015 (the Q Technical Report ). The following qualified persons, as that term is defined in NI , have prepared or supervised the preparation of their relevant portions of the technical information in this presentation and the related Q Technical Report: (i) Mr. Matt Bender, P.E., of Samuel Engineering, Inc.; (ii) Mr. Richard Kiel, P.E., of Golder Associates Inc.; (iii) Mr. Larry Breckenridge, P.E., of Global Resource Engineering Ltd.; (iv) Mr. G. David Keller, P. Geo., of AMC Consultants (UK) Limited; (v) Mr. Neil Prenn, P.E., of Mine Development Associates; and (vi) Mr. Charlie Khoury, P.E., of Samuel Engineering, Inc. This presentation does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The Company s securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the U.S. Securities Act ) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available. 2

3 Summary of the Transaction Comprehensive $325M Financing Committed financing from Orion Mine Finance ( Orion ) Resource Capital Funds ( RCF ) Comprehensive financing for Initial capital costs Financing costs and working capital Overrun contingency Multi-tranche debt stream equity strategy to maximize shareholder value through project development Remaining components $70M equipment financing from leading manufacturers and local lending sources vendor discussions initiated during value engineering US$25M of additional equity provides the opportunity for existing shareholders to participate alongside lead investors Carefully balanced to minimize equity dilution and cost of capital Equipment Financing $70 COF $25 Stream $60 Public Equity $25 Private Placement $80 Term Loan $160 3 Note: All amounts in US$ unless otherwise stated

4 Merits of the Financing Provides new and existing shareholders the following benefits Substantially funds Amulsar to production based on Q Technical Report Minimizes potential shareholder dilution compared to other financing scenarios Low proportion of equity funding vs. comparable precedent project financings Significant upside preserved No hedging requirements Stream limited to reserves only; no stream over resource upside Only 6.75% of gold production streamed over reserve life Includes financing buffer with $25 million cost overrun facility in addition to construction contingency of $38 million $25 million public equity financing allows existing shareholders to participate alongside Orion and RCF Significant upside potential for Lydian s shareholders 4

5 New Lower-Cost Mine Plan Improved Economics, Constructability, Operability and Sustainability Q Technical Report Technical Report Operating Information: Mine life years Average annual ore tonnes mined/processed Mtpy Strip ratio (W:O) Average gold grade g/t Average gold recovery - % Average annual gold recovered ozs 211, ,000 Total gold recovered ozs 2,113,000 2,130,000 Capital and Operating Costs: Pre-production capital $ millions $370 $426 Total cash costs (C2) $/oz $509 $642 All-in sustaining costs $/oz $585 $701 Value engineering critical to reducing overall financing requirement Maximizing early cash flows supports greater debt capacity Financial Results ($1,150 gold, unleveraged after-tax): NPV 0 $ million $577 N/A NPV 5 $ million $338 N/A Project IRR % 21.6 N/A Financial Results ($1,250 gold, unleveraged after-tax): NPV 0 $ million $718 $534 NPV 5 $ million $438 $306 Project IRR %

6 Financing: Achieved 75% of Funds Required Cost Overrun Provides Added Buffer Beyond Capex Contingency Uses: (US$M) Financing Requirement Sources: (US$M) Financing Package Development Capital Costs 1 $ 370 Term Loan Facility $ 160 Financing Costs and Working Capital 25 Equity Private Placements Stream 60 Cost Overrun Facility 25 Overrun Requirement $ 25 $ 325 Public Equity Offering 2, 3 $ 25 Equipment Financing 3 $ 70 Total Uses $ 420 Total Sources $ Development capital costs based on the Q NI Technical Report. Includes $38 million contingency. Orion and RCF are to provide US$80M, subject to US$25M in equity being raised in a public equity offering. Condition to funding subsequent portions of the Financing. Financing for project costs, financing costs, contingencies and working capital requirements 6

7 Stream Agreement Capped Deliveries Retain Upside on Growth Potential $60 Million Deposit for: 6.75% of refined gold, up to 142,000 ounces 100% of refined silver, up to 695,000 ounces Deposit Payable $25 million, subject to closing conditions (initial security) $35 million, 3 9 months post-closing (post equity offerings and shareholder approvals) Cash Payment upon Delivery $400/oz of gold $4.00/oz of silver Escalates 1% per annum beginning on 3 rd Anniversary Stream is 50% Callable $55 million on 2 nd anniversary of commercial production $50 million on 3 rd anniversary of commercial production Repurchase or Reduce if Shareholder Approval of Private Placement Not Obtained Security Shared with Term Loan Typical guarantees, share pledges and asset mortgages 7

8 Equity Private Placement Participating Alongside Public Equity Offering $80 Million Subscription Occurs when public offering is complete Non-brokered, but subject to 3% equity origination fee to subscribers Maximum price of C$0.35 a 35% premium to 5-Day VWAP (at Nov 27) Public Offering Uncapped If proceeds greater than $25 million 50% goes to reduce COF and Term Loan Investors to Receive Future participation rights Board representation Special Meeting Lydian to seek shareholder approval for equity private placement 8

9 Term Loan Facility Six Year Term Debt Funding $160 Million Project Debt Financing $50 million available through September 2016 $110 million available through September million warrants issuable to lenders on closing of public equity offering No hedging requirements No reserve accounts or cash funded overrun requirement Interest Libor (not less than 1%) + 6.5% margin Capitalized during construction and start-up through June 2018 (i.e. payment holiday) Paid quarterly thereafter Repayment Quarterly from June 2018 through September 2021 Aligned to cash flows Plus 30% sweep of excess cash No prepayment penalty Security Identical and shared pari passu with security for the stream obligations 9

10 Offtake & Cost Overrun Facility Cushion Beyond $38 Million Contingency in Pre-Construction Capital Costs Offtake Deliveries Capped at current reserves of 2.1 million ozs less stream ozs Prevailing price during quotational period Reduction of quotational period possible if certain milestones are met If shareholder approval of equity private placement not obtained, offtake remains at reduced quotational period $25 Million Cost Overrun Facility COF + other funds must be sufficient to finish construction Outside date for commercial production must be achieved by June million warrants issuable to lenders if drawn Interest Libor (not less than 1%) + 9.5% margin Capitalized during construction and start-up through June 2018 (i.e. payment holiday) Paid quarterly thereafter Repayment Quarterly from June 2018 through September 2020 Only from 30% sweep of excess cash Any unpaid balance due in full at September 2020 No prepayment penalty Security Identical and shared pari passu with security for the stream and term loan obligations 10

11 Next Steps Focus Toward Construction Financing Satisfy conditions of the Financing Move to mandates for equipment financing Complete the public equity offering of not less than $25 million Value Engineering Driving Amendments EIA and Mining Right amendments ESIA Amendment, disclosure and public consultation Continue Key Initiatives Environmental, biodiversity and social development Land Acquisition Wrap up Phases 1 and 2 (heap leach facility area) Initiate for Phases 3 and 4 (new conveyor corridor and buffers) Convert for industrial usage Continue Building Capacity Owner s team for engineering, environmental and social disciplines In-country employee and vendor teams Basic engineering to support Spring 2016 construction start Advance upside potential of Amulsar 11

12 Thank you Q&A Lydianinternational.co.uk TSX:LYD