As the debt repayment begins on March 31, 2026, gold-linked note holders will continue to be paid 12% per annum on the remaining balance, until it is paid off on December 21, 2029.
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Global Stocks News – In a press release dated April 4, 2024, West Red Lake Gold Mines (TSXV:WRLG) (OTC:WRLGF) announced that it has closed a second and final tranche of its private placement of gold linked notes, bringing the total value of notes issued to US$27,165,631, equivalent to about $37 million CAD.
“Gold-linked Notes (GLNs) are a type of equity-based structured note,” states DBS Treasures, “Similar to Equity Linked Notes (ELNs), except the underlying [asset] is gold, rather than stocks.”
Each Offering Unit contains notes worth USD $1,000 and 710 warrants. Each warrant entitles the holder to purchase one share of WRLG at C$0.95 until March 19, 2029.
“The Notes represent unsecured obligations of the Company, bear a 12% per annum coupon, calculated and payable quarterly in arrears, and will mature on December 31, 2029,” states WRLG.
“The gold-linked notes are an unusual but innovative financing structure,” WRLG CFO Harpreet Dhaliwal told Guy Bennett, CEO of Global Stocks News (GSN). “The key advantage of this structure is that in depressed equity markets it allows us to raise money with minimum share dilution.”
“We evaluated 4-5 different financing options,” continued Dhaliwal. “And found the gold-linked notes to be the best option for our existing shareholders. Shane Williams, our CEO and I personally invested in the gold-linked notes.”
Dhaliwal explained to GSN that for the next two years, the gold-linked note holders will receive 12% interest per annum, about 280% higher than the yield on a Canada 2-year government bond.
As the debt repayment begins on March 31, 2026, gold-linked note holders will continue to be paid 12% per annum on the remaining balance, until it is paid off on December 21, 2029.
“With the gold-linked notes,” Dhaliwal continued, “You have five years expiry on the warrants. Our share price has risen about 27% since we closed the first tranche of gold-linked notes of March 20, 2024, to 94 cents. If West Red Lake Gold share price rises, say another 40% in the next five years, to $1.31, the warrants will be an additional significant sweetener”.
“If the gold price drops to $1,600/ounce you will still get the $1,800 minimum,” stated Dhaliwal. “So, there’s protection there. But if the gold price stays at $2,300, where it is now. That’s a delta of $500/ounce, which goes into the pocket of the investor. That’s a 27% premium, in addition to the 12% interest, and the .95 warrants.”
WRLG Gold-linked Notes Transaction Highlights
· Gold placed in escrow into a gold trust account
· Beginning March 31, 2026, principal reduced on a quarterly basis.
· Final payment on December 31, 2029.
· Notes will amortize based on a gold floor price of US$1,800/ounce.
· Excess proceeds (spot price - floor price) paid to investors as a premium.
The company’s flagship asset - The Madsen Gold Mine – is fully permitted, with a brand-new 800+ tonne per day mill, a tailings and water treatment facility. [ 1 ]
On April 5, 2024 WRLG announced the arrival of a second underground diamond drill at the Madsen Mine.
“The addition of a second underground drill at Madsen will expedite our efforts in de-risking the resource and building a runway of high-confidence mineable inventory that will be critical during restart of mining operations,” stated Shane Williams, WRLG President & CEO.”
Previously announced highlights on the North and South Austin drilling can be viewed at the following links:
· West Red Lake Gold Intersects 27.15 g/t Au over 10.28m and 22.31g/t Au over 8.5m at North Austin Zone – Madsen Mine (November 21, 2023)
· West Red Lake Gold Intersects 47.44 g/t Au over 3.2m, 21.64 g/t Au over 7m and 296.83 g/t Au over 1m at South Austin Zone – Madsen Mine (December 5, 2023)
· West Red Lake Gold Intersects 9.15 g/t Au over 3.3m and 10.66 g/t Au over 2.6m at North Austin Zone – Madsen Mine (February 7, 2024)
· West Red Lake Gold Intersects 25.12 g/t Au over 5.5m, 39.46 g/t Au over 2m and 18.60 g/t Au over 4m at South Austin Zone – Madsen Mine (March 4, 2024)
“There were three good reasons to buy these gold-linked notes,” stated Dhaliwal. “1. You want the 12% return on your capital investment. 2. You believe the stock price of WRLG will rise above .95 cents and 3. You believe the spot price of gold will rise.”
“I’m an employee of WRLG, so my opinion is biased,” Dhaliwal concluded. “But, as an investor, it was not a difficult decision for me to participate in the gold-linked notes.”
References:
1. SRK Consulting. (2021). Independent NI 43-101 Technical Report and Updated Mineral Resource Estimate for the PureGold Mine, Canada (West Red Lake Gold Mines, Ed.) [Review of Independent NI 43-101 Technical Report and Updated Mineral Resource Estimate for the PureGold Mine, Canada.
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