Ora Banda Mining has beefed up its already bulging wallet by locking in a secured two-year, $50 million revolving credit facility with ANZ and the Commonwealth Bank.
The newly established credit has been structured as a two-year term with an optional one-year extension clause. The move has supercharged the company’s war chest to more than $100m, including $58m sitting in its coffers.
Armed with improved firepower, Ora Banda now has the financial flexibility to pay for the expansion of its booming Davyhurst gold project in WA as it moves toward a production target of 150,000 ounces of gold next year.
The funding agreement has been set under competitive terms, including standard financial covenants and normal third-party consent provisions.
Ora Banda Mining managing director Luke Creagh said: “While Ora Banda has a strong balance sheet and we have been generating strong operating cash flows, we feel it is important to have the added financial flexibility which this low-cost revolving debt facility provides us.”
Although the new facility does not need to be hedged, the company will use the surging gold price to buy a one-year put option at $4400 per ounce over the future sale of 100,000 ounces of the yellow metal.
Management says if the price of gold falls during the next 18 months, the hedging facility will come in very handy to cover a significant portion of next year’s expanded production profile.
The put option has a price tag of $14.2m or $142 per ounce of gold and will provide Ora Banda with a safety net against falling gold prices while keeping the door wide open for gains if prices surge.
The premium will be paid in manageable monthly instalments of $1.18m through the 2026 financial year to minimise the impact on the company’s cashflow.
The Davyhurst project, 120 kilometres northwest of Kalgoorlie in WA’s Eastern Goldfields, has enjoyed a remarkable renaissance in the past 2.5 years.
Prior to ex-Northern Star resources general manager Luke Creagh stepping up as managing director of Ora Banda, the company’s flagship Davyhurst mine was limping along at 50,000 ounces of gold per year with grades peaking at 1.5grams per tonne (g/t) and was considered by many as being long past its prime.
Ora Banda has since turned things around by opening up the high-grade underground resources at the company’s Riverina and Sand King mines.
Wind the clock forward and today’s numbers tell the true story.
The company’s total inventory stands at 1.925 million ounces grading 2.7g/t with the latest drilling success likely to see grades and ounces grow quickly.
The project has doubled the company’s annual production to 100,000 ounces and put it on course to hit 150,000 ounces of gold next year. The head grade has also lifted a remarkable 200 per cent to 4.5g/t and its all-in sustaining costs are forecast to run at a very manageable $2125 per ounce this year.
Ora Banda has a fortified balance sheet and a clear strategy for leveraging market conditions. It appears well-positioned to navigate the gold industry’s notoriously volatile dynamics and hit its ambitious growth target of getting to 150,000 ounces of gold production by next year.
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By James Pearson
