EPM.TO (European Minerals Corp) and the Count-Down to May 1:
Reading through the 2005 4Q Report published by EPM on March 31, I am somewhat spooked that the company has NOT YET announced signing in their new contractor SENET for the Varvarinskoye gold-copper mine (after the previous contractor MDM went bust last January). This is important because European Mineral's big cash needs to build the mine by June 2007 rely on their ability to draw down money from their Debt Facility, and one condition for access to their banker's coffers is that European Minerals MUST have a new contractor in place BEFORE MAY 1. If they don't, their bankers can withdraw the Debt Facility, which means that (a) European Minerals would lose $2 million in fees PLUS (b)"would be exposed for the full balance of any break costs associated with terminating the hedges (estimated, based on March 28, 2006 spot prices on the London Precious Metals index for gold, to be approximately $24.9 million)."
Their bankers are holding $20 million owned by EPM -- which EPM cannot access for use in operations as long as they haven't replaced their contractor. Also, the arranged Debt Facility, vital to developing the Varvarinskoye mine, is $75 million -- which EPM cannot access as long as they haven't replaced their contractor.
True, EPM notes "If the Debt Facility is not immediately available, the Company believes that, under existing market conditions, it would be able to access alternative facilities to fund the debt portion of the Project." -- meaning that, since they have a world-class resource in the ground, they could find another lender. But then they might lose those $25 million in hedging arrangements.
Right now, they have $56 million cash as unrestricted working capital (mostly from their recent financing). The project cost for the mine is $145 million. Of this, they'll need to fork out $80 million cash within 2006.
$145 million needed, $56 million already on the table. So they need another $91 million. $72 million could become available under the Debt Facility if... Naturally, there will have to be another financing, maybe by the end of 2006. And unless they want to lose $25 million to their present bankers , they must sign a new contractor before May 1, 2006.
In short: I expect NEWS within 17 days with some urgency. |
