Business Context and Reporting Period
This Form 6-K filing by Alamos Gold Inc. (the "Guarantor") relates to a Credit Agreement dated July 21, 2005, filed on August 19, 2005. The agreement establishes a revolving credit facility for the Guarantor's wholly-owned subsidiary, Minas de Oro Nacional, S.A. de C.V. (the "Borrower"), to fund the development of the Mulatos gold mine project in Mexico. The facility is guaranteed by Alamos Gold Inc.
Key Financial Metrics and Facility Terms
- Facility Amount: US$10,000,000 revolving credit facility.
- Interest Rate: LIBOR plus an Applicable Margin of 2.75% per annum.
- Commitment Fee: 0.75% per annum on the undrawn portion of the facility.
- Term: 364 days from the agreement date, with options for two 364-day extensions subject to bank approval and a US$25,000 fee per extension.
- Financial Covenants (Guarantor):
- Current Ratio: Minimum 1:1.
- Tangible Net Worth: Minimum US$65,000,000.
- Equity Component: The Guarantor issued 350,000 common share warrants to the lender (Standard Bank PLC) exercisable at C$5.80 per share for 24 months.
- Existing Debt: The agreement references 5.50% Convertible Unsecured Subordinated Debentures maturing February 15, 2010.
Material Changes and Unusual Items
The filing discloses a material litigation matter involving the Borrower (Minas de Oro Nacional). On June 23, 2005, a Mexican court ruled in favor of the Borrower against Gilberto Ocana Garcia regarding a breach of an exploration agreement and the assignment of a mining concession (Title number 190634). While the time to appeal the judgment expired on July 14, 2005, the filing notes the defendant may still launch an "Amparo" suit based on constitutional rights. The Borrower represents that this matter will not adversely affect the Mulatos Project mine plan.
Guidance, Risks, and Covenants
Use of Proceeds: Funds are designated for general corporate purposes, including capital expenditures, investments, working capital, and acquisitions related to the Mulatos Project.
Hedging Restrictions: The Borrower is restricted from hedging more than 70% of projected gold production or proved and probable reserves. Hedging contracts cannot be margined or used for speculation.
Events of Default: Include failure to pay, breach of covenants, bankruptcy, cross-defaults, and a material adverse change in the Mulatos Project or the financial condition of the Borrower/Guarantor.
Reporting Requirements: The Borrower must provide monthly construction progress reports (pre-completion) or operating reports (post-completion) and quarterly financial statements. The Guarantor must provide audited annual financial statements and quarterly certificates regarding Tangible Net Worth and Current Ratio.
Investor Verification Checklist
- Verify the current status of the "Amparo" suit mentioned in Schedule 6.6 and any potential impact on the Mulatos Project timeline.
- Confirm the Guarantor's compliance with the US$65,000,000 Tangible Net Worth covenant as of the most recent reporting period.
- Review the utilization rate of the US$10,000,000 facility to assess liquidity needs and interest expense.
- Check the status of the 5.50% Convertible Debentures and any potential conversion activity.
- Monitor the Mulatos Project construction progress against the budgeted costs reported in the monthly updates required by the agreement.