Aurcana Silver seeks $25 million in funding to satisfy restructuring

By Mary-Katherine Stinson

Lexington, Ky., April 11 – Aurcana Silver Corp must acquire at least $25 million in additional liquidity by May 31 either through issuance of additional equity or in a manner not restricted by its debt facilities including, without limitation, a sale of assets, royalties or a stream agreement with assets excluding the Revenue-Virginius mine.

The company stated it has hired a financial adviser and continues to evaluate alternatives to satisfy the conditions of the restructuring agreements regarding the company’s outstanding $28 million five-year secured term loan and associated hedging package with a subsidiary of Mercuria Energy Group Ltd., according to multiple press releases.

Aurcana and Mercuria have agreed to certain standsill and restructuring agreements that went into effect as of March 8 in order to support the company’s previously announced efforts to restart full production at the Revenue-Virginius mine and to provide increased financial medium-term flexibility while necessary operational work on the mine is completed.

The agreements provide key benefits to Aurcana including a standstill providing for deferral of current principal and interest payments and elimination of the company’s current hedging obligations which allows Aurcana to fully participate in any near-term silver price appreciation but includes a commitment to rehedge at a mutually appropriate time following the completion of the #1 Alimak hoist installation. It also includes an ability to satisfy the close-out amount under the new hedge package.

Specifically, the restructuring agreements include:

• A waiver of all current events of default and a standstill agreement until May 31 to allow the company time to achieve certain conditions precedent including acquiring at least $25 million in additional liquidity to restart the mine production;

• A deferral of the principal and interest payments previously due March 7;

• A deferral of the principal repayments until Sept. 7 with the March and June principal payments being rolled into the balance of the scheduled four-year principal payments with the term of the loan unchanged provided Aurcana has satisfied all the conditions precedent on or before May 31;

• A close-out of the existing hedge package with a mutual agreement to re-establish hedging at a later date with the close-out amount accruing interest at 10.5% until hedging is re-established;

• The close-out amount and interest will be repaid through discounts to the market price and/or other derivative positions in the new hedge structure and;

• Upon the conditions being completed, a $1.5 million payment of Aurcana common shares as a restructuring fee to Mercuria, and Aurcana’s immediate payment of the interest due on March 7 along with accrued interest on the deferred payments.

As previously announced on Dec. 9, 2020, the company entered a five-year $28 million term loan and associated hedging package with indirect wholly owned subsidiaries of Mercuria Energy Group.

Together with the term loan, the purpose was to fund the restart of the Revenue-Virginius silver mine.

The first initial principal payment under the term loan was due in early March.

Aurcana is a guarantor under the facilities.

The company also reported the results of its updated feasibility study by SRK Consulting which places the value of the mine at the after-tax net present value 5% of $108.8 million and assumes five months of operations are needed to complete the #1 Alimak hoist to be followed by finalization of development of four full mining faces before full production can resume.

The study states that total costs to make the mine operational will be approximately $20 million, with the significant majority being pre-production operating costs associated with completing the underground development.

The Vancouver, B.C.-based company owns the Revenue-Virginius silver mine in Ouray, Colo. and the Shafter-Presidio Silver Project in Texas.

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