Sometimes, the right set of circumstances aligns for an investment in a difficult market – and investors need to be ready to seize the moment.
For Canadian company G Mining Ventures (GMIN), that’s precisely what happened. In October 2021, it closed its acquisition of the Tocantinzinho gold mine in Brazil, even though the investment firm had started operations barely a year earlier. Once the deal was closed, GMIN turned to the task of raising the funds to develop the project.
“After we bought Tocantinzinho, we spent four months reengineering the project to make sure we had the most up-to-date costs, estimates, and timelines for it. Once that was done, in February 2022, we decided to invite different groups to discuss the financing,” says Dušan Petković, the senior VP of Corporate Strategy at GMIN. “We had little time, as we wanted to be in construction within four to five months.”
GMIN, which had just recently realized a $45 million IPO, reached out to roughly a dozen commercial banks and private equity groups, receiving a number of proposals in what Petković describes as a highly competitive process. During the negotiations, the company obtained support from La Mancha, a private equity group which acquired a 25% stake in the firm. Eldorado Gold, the previous owner of Tocantinzinho, owns a 17.7% stake in GMIN.
“We were able to raise almost $500 million for a company that had a $200 million market cap at the time,” says Petković.
“We took three groups to the final due diligence phase, when extensive site visits were organized. We ended up going with Franco-Nevada, who offered a $250 million gold stream and a $75 million term loan. They also decided to support the company by buying 9.9% of the equity,” he recalls.
Between them, Franco-Nevada and La Mancha committed to investing up to $441 million in the construction of project, in a complex and unique financing package in the total amount of $481 million, including equity, debt, and streaming.
Petković stresses that the timing of the deal’s closing was extremely advantageous – and fortuitous: the US Federal Reserve embarked on its aggressive campaign of monetary tightening right shortly after the deal was signed.
“The cost of the gold stream and the term loan was below 5%,” he says. “As interest rates have gone from 0.5% to more than 5%, we were able to secure funding at a very attractive rate.”
Tocantinzinho was launched in 2010 by Eldorado Gold and is projected to start producing gold at low costs in 2024. It is expected to produce 1,834 koz of gold over 10.5 years.
GMIN decided to use part of its funding to build a 190 km transmission line to link the project to sustainable energy sources in the North of Brazil. The firm says that it is committed to the region and, once Tocantinzinho starts to generate cash flow, more investments are set to come.
“We are looking to grow our business and become a multi-asset gold producer over the next five to six years. We like Brazil and the rest of South America, as there are a lot of opportunities there,” Petković says. “We are buying about 90% of all of our equipment locally in Brazil. All the steel, most of our mining fleet, and more than 90% of our labour is all sourced there.”
Advisors to G Mining Ventures: Blake Cassels & Graydon, Mattos Filho, Stikeman Elliott
Advisors to Franco Nevada: Pinheiro Neto, Torys
Advisors to La Mancha: Norton Rose, Pinheiro Neto
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