Strategic Alliance between Cluff Gold and Samsung
Cluff Gold plc, the dual AIM/TSX listed West African focused gold mining company, is pleased to announce that it has signed a Memorandum of Understanding for a long term strategic partnership with Samsung C&T Corporation ("Samsung"). This alliance commences with an unhedged US$20m facility to provide additional funding to Cluff Gold to further the development of its portfolio of assets. The Memorandum of Understanding provides a general framework for the potential long term funding of Baomahun and other development opportunities.
The initial facility forms part of a wider strategic alliance between Cluff Gold and Samsung which is a global trading company. Cluff Gold has a producing mine, Kalsaka in Burkina Faso, and a strong pipeline of development assets which is expected to generate a long term production profile. Through this long term partnership Samsung will have access to a reliable supply of gold bullion, underpinned by the Company’s strong operational and management team whilst Cluff Gold will benefit from Samsung’s financial support. The relationship is expected to result in a significant financing in Cluff Gold’s Baomahun project, subject to the outcome of the feasibility study, together with an ongoing commitment to jointly assess other opportunities in the region.
Under the terms of the agreement signed today, an initial US$20m of debt finance will be drawn immediately, supported by the Company's interest in its Kalsaka/Sega project. These funds will be used to strengthen the Company’s balance sheet and ensure the Company remains well funded during the development of Sega to continue the ongoing exploration and development work across its asset portfolio.
Subject to the outcome of the feasibility study, the alliance envisages a further substantial financing for the development of Cluff Gold’s Baomahun project in Sierra Leone, which has 2.1Moz of indicated resources (25.6Mt at 2.5g/t)[i]. Baomahun is fully permitted, with work ongoing to complete a feasibility study.
The Memorandum of Understanding does not require any exclusivity between Samsung and the Company in respect of further financing and is not binding on either party in that respect. Negotiations with other debt providers will continue in parallel with the due diligence undertaken by Samsung.
John McGloin, Chairman of Cluff Gold, commented:
“We are very pleased to have formed an alliance with Samsung as we develop our project portfolio. This agreement provides immediate financing support on competitive terms compared to other recent financings without the requirement to hedge any of our current or future gold production. More importantly, it also offers a framework for a cornerstone financing in the Baomahun project or other development opportunities, capable of satisfying a significant portion of the total Baomahun financing needs. The initial US$20m drawdown provides us with the balance sheet flexibility to use existing cash flow to fund our exploration programmes whilst maintaining development momentum at Sega and Baomahun. We look forward to working with Samsung as we deliver our Company strategy to grow into a mid-tier producer through the development of our existing portfolio whilst looking at other accretive growth opportunities in the region.”
Samsung Facility – Key Terms and Conditions
The key terms of the initial US$20m facility drawn down today are as follows:
· Initial term of 22 months, repayable evenly over the final 12 months from the Sega asset’s cash flow
· Interest payable of 2.5% above US LIBOR
· Cluff Gold to sell 1,929 ounces of fine gold per month to Samsung at a 2.25% discount to the London Gold AM/PM LBMA dollar gold fixing price on the day prior to delivery. There are no hedging requirements as the price of gold is not fixed in advance in any way under the facility
· Facility secured by a charge over the shares of Cluff Gold’s subsidiary company, Cluff Mining (West Africa) Limited, which holds the Company’s interest in the Kalsaka/ Sega project.
A 1.75% facilitation fee is payable immediately on draw down of the first tranche of the facility. The total cost of the facility is estimated at 10% per annum.
About Cluff Gold
Cluff Gold is a gold developer-producer with assets in West Africa. The Company generates significant cash flow through its Kalsaka gold mine in Burkina Faso, where the production profile has been enhanced by the recent acquisition of the neighbouring Sega project. The Company remains focused on its objective of becoming a mid-tier producer through the development of its wholly-owned Baomahun project in Sierra Leone, which is expected to contribute an additional 135,000oz of gold per annum, with significant exploration potential along strike. In addition, the Company is also exploring the significant sulphide potential at its Yaoure project in Côte d’Ivoire. With its experience of bringing new mines into production and a project pipeline spanning Burkina Faso, Côte d’Ivoire and Mali, the Company aims to further increase its production profile with its highly prospective exploration work across all assets.