Carpathian Gold Inc.

Carpathian Gold Inc.

September 21, 2010 06:00 ET

Carpathian Signs Project Financing Mandates for Up to US$ 97 Million for the Riacho dos Machados Gold Project, Brazil

TORONTO, ONTARIO--(Marketwire - Sept. 21, 2010) - Carpathian Gold Inc. (TSX:CPN) (the "Corporation" or "Carpathian") is pleased to announce that its Board of Directors has approved and the Corporation has signed a mandate letter with Macquarie Bank Limited ("Macquarie Bank") for it to arrange a project financing facility of up to US$ 75 million to be used to partially fund the development of the Corporation's Riacho dos Machados Gold Project (the "Project"), Brazil. In addition the Corporation has also mandated Caterpillar Financial Services Corporation ("Cat Financial") to arrange an equipment leasing facility for up to US$ 22 million for the Project.

The mandate letters have been signed on the basis of indicative term sheets that have been agreed upon between the Corporation and Macquarie Bank and Cat Financial, respectively.

The indicative project finance facility term sheet submitted by Macquarie Bank sets out detailed indicative terms and conditions, which include:

  • Market interest rates for pre and post project completion based on facilities of this size and nature;
  • Security over the Project assets excluding leased equipment and the Corporation's Romanian assets; 
  • A scheduled tenor of six (6) years for the Project finance facility;
  • Prepayment of the facility at any time without penalty;
  • A put-call gold collar structure for a small proportion of gold production and a Brazilian Reais forward purchase program both of which will be priced at the time of closing based on the then current market conditions. On the basis of current pricing and the Preliminary Economic Assessment dated August 12, 2009, both programs are expected to significantly boost project cash flows, and;
  • Customary covenants and conditions precedent for financings of this nature.

The provision of the Project finance facility is subject to a number of conditions including delivery of the final Feasibility Study, additional legal and technical due diligence and internal credit approval by the lenders and approval by the Board of Directors of the Corporation.

The indicative lease term sheet submitted by Cat Financial sets out detailed terms and conditions which include:

  • A floating interest rate based on Libor plus a margin dependent upon the final lease term;
  • Execution of a maintenance and repair contract agreement for ongoing equipment maintenance;
  • Security on the leased equipment through a first ranking charge on such equipment; and
  • Customary covenants and conditions precedent for lease financings of this nature.

The finalization of this agreement will be subject to completion of the Feasibility Study, legal and technical due diligence, final internal credit approval by Cat Financial and approval by the Board of Directors of the Corporation.

The Project financing and leasing facilities total up to US$ 97 million and are in addition to the US$ 30 million gold sale agreement that closed with Macquarie Bank on May 21, 2010.  

"These mandates are an important further step in the development of the Riacho dos Machados Gold Project and brings the Corporation closer to achieving its goal of becoming a mid-tier gold producing company", said Dino Titaro, President and CEO of Carpathian. "We are very pleased to continue our relationship with Macquarie Bank given its familiarity with the Project and the Corporation resulting from the gold sale agreement that was completed earlier this year and the ongoing working relationship. In addition, having Cat Financial involved through a leasing arrangement for the initial mining equipment adds to the project financing package and brings extremely high quality mining equipment to the Project".

Dino Titaro went on to add, "the put-call gold sale collar structure with maximum put and call strike prices for a small portion of the production allows the Corporation to retain significant upside participation on the collared gold ounces while protecting a minimum sale price expected to comfortably exceed US$ 1,000 per ounce at prevailing spot gold prices. Additionally, the currency-hedging program is expected to yield a fixed Brazilian Reais / US Dollar rate that could be significantly more favourable than the prevailing spot rate. This program will protect the Corporation from exchange rate fluctuations that could have an impact on the project particularly in its early years".

Feasibility Study Progress Update

As previously announced on July 26, 2010, the Corporation reported an updated NI 43-101 Resource Estimate ("2010 Resource Estimate") that contained 812,300 ounces of gold in the measured plus indicated categories and 692,900 ounces of gold in the inferred category. Of this total, the open-pit 2010 Resource Estimate contains 806,200 ounces of gold in the measured plus indicated category and 355,900 ounces of gold in the inferred category. The Corporation previously announced that it was conducting an in-fill drill program to convert inferred resource 'pockets' within the shallow portions of the open-pit as defined in the 2010 Resource Estimate to measured plus indicated in order to be included in the Feasibility Study. During this program the Corporation determined that it would be prudent to continue to convert additional inferred resources within the deeper levels of the open-pit whittle shell, as defined from the 2010 Resource Estimate, to the indicated category in order to extend the open-pit mine life in the Feasibility Study and ensure that this deeper mineralization could be extracted during the open-pit phase as opposed to an underground phase. To accomplish this the Corporation has completed an additional 56 drill holes for 8,018 m, all of which confirmed the gold grade models and the ability to upgrade to the indicated category. These results are now being incorporated into an open-pit mine design and the Feasibility Study. 

The engineering trade-off studies for optimization of the Project are complete and are awaiting the updated Resource Estimate and final open-pit design for the completion and release of the Feasibility Study. The Feasibility Study is incorporating a 7,000 tonne per day ore processing rate via a standard CIL circuit (as compared to 6,000 tonnes per day in the Preliminary Economic Assessment) and deepening the Preliminary Economic Assessment pit to add additional years of open-pit production at a nominal production rate of 100,000 recoverable ounces of gold per year. Further metallurgical test work has confirmed a gold recovery rate in the 90% - 92% range. It is anticipated that the Feasibility Study will be completed within the fourth quarter of 2010. During this final phase of completing the Feasibility Study, the Project lenders will conduct their technical due diligence so as to best match the timing of the release of the Feasibility Study and formal credit approval. 

The Corporation's Chief Operating Officer, located in Belo Horizonte, Brazil, has also identified the key mining staff required for the Project and is in the process of retaining these people. In addition, the Corporation is negotiating the purchase of an existing mill and set of crushers that meet the engineering specifications for the Project.

Corporate Activity

The Corporation is pleased to announce the appointment, subject to TSX approval, of Mr. David Danziger (B. Comm, CA) to the Board of Directors, effective September 17, 2010. Mr. Danziger is a senior assurance partner at MSCM LLP, Chartered Accountants which provide both audit and compliance advisory services to public companies, many of which are in the resource sector. Throughout his career, Mr Danziger has provided management consulting and business advisory services to companies in many different industries. This expertise and his public company board experience makes him a welcome addition to the Board of Directors as the Corporation advances itself towards being a mid-tier gold producer. Mr. Danziger currently serves as a director of Cadillac Ventures Inc., Chairman of the Board as well as President and CEO of Renforth Resources Inc., and is also a director, officer and founding shareholder of Eurotin Inc and Aumento Capital Corporation.

The Corporation is also pleased to announce the appointment of Mr. Guy Charette as Executive Vice President, Corporate. Mr. Charette is a founding director of the Corporation and has in the past provided valuable input towards the growth of the Corporation and will now be involved on a full time basis to help with the Corporation's ongoing development. Mr. Charette will be stepping down as a director in order to accommodate the appointment of Mr. Danziger to the Board of Directors. 

About Carpathian

The Corporation is an exploration and development company whose primary business interest is developing near-term gold production on its 100% owned Riacho dos Machados Gold Project in Brazil, which is currently in the feasibility study stage, along with progressing its exploration and development plans on its 100% owned Rovina Valley Au-Cu Project located in Romania. On a company wide basis, the Corporation currently hosts 43-101 resources of 3.88 million ounces of gold in the measured plus indicated categories and 4.58 million ounces of gold in the inferred category, as well as 759.1 million pounds of copper in the measured plus indicated category and 663.1 million pounds of copper in the inferred category. 

The Riacho dos Machados Gold Project, which is in the final phase of a Feasibility Study, is expected to produce approximately 100,000 ounces of gold per annum, with construction targeted by management to be initiated either later this year or early 2011. The Rovina Valley Project in Romania will enhance the Corporations growth profile as a mid-tier gold producer.

Mr. Titaro is the qualified person (as defined in National Instrument 43-101) overseeing the design and implementation of the present exploration programs. He is responsible for preparing the technical information contained in this news release.

Forward-Looking Statements: This press release includes certain statements that may be deemed "forward-looking statements". Forward-looking statements are frequently characterized by words such as "plan", "expect", "Project", "intend", "believe", "anticipate", "estimate", and other similar words, or statements that certain events or conditions "may" or "will" occur. All statements in this release, other than statements of historical facts, that address future exploration drilling, exploration activities and events or developments that the Corporation expects, are forward-looking statements. Although the Corporation believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, exploitation and exploration successes, continued availability of capital and financing, and general economic, market or business conditions. There can be no assurance that forward-looking statements will prove to be accurate, as results and future events could differ materially from those anticipated statements. The Corporation undertakes no obligation to update forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

The TSX does not accept responsibility for the adequacy or accuracy of this news release.

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