JOHANNESBURG (miningweekly.com) – West Africa-focused Avocet Mining has completed the buy-back of its entire hedge position with Macquarie Bank, transforming the gold mining and exploration company into a fully unhedged gold producer.

The company announced in October that it had closed and drawn down a five-year 30-billion CFA franc (CRAfr) loan facility with Ecobank Burkina Faso, which would enable it to remove all existing hedge commitments.

The Ecobank loan, which had no hedge requirement, was provided to the company’s 90%-owned subsidiary Société des Mines de Bélahouro SA (SMB), which owned the Inata mine, in Burkina Faso.

The company had used around $29-million of the loan proceeds, in addition to $12-million of funds previously restricted by Macquarie, to buy back its entire outstanding hedge commitment of 111 980 oz at $938/oz, for a total consideration of some $41-million.

“Following the hedge buy-back and the final debt repayment in the third quarter, all obligations under the Macquarie finance facility have now been discharged. The company is now an unhedged gold producer in respect of the presently
defined eight-year mine life at Inata,” said Avocet.

The Ecobank facility had a five-year term, bearing an interest rate of 8% a year, and was secured against certain of the assets of SMB.

The first repayment would be made in November and equal monthly repayments of 631-million CRAfr, or $1.3-million, comprising interest and principal, would continue for the 60-month duration of the loan.

The facility required that an amount equal to two months’ payments be held in a debt-service reserve account.

Subject to the debt-service reserve account requirement, there were no restrictions on SMB’s use of loan proceeds or cash flow generated, including the transfer of funds from SMB to Avocet for corporate purposes.