Ron Little

Mining firm Orezone Resources Inc. is getting a US$330-million loan to develop its Burkina Faso gold mine after receiving final credit approvals.

The Ottawa-based company said German bank Bayerische Hypo- und Vereinsbank AG (HVB) and The Standard Bank of South Africa Ltd. are now able to fully underwrite and provide US$300 million in project debt and a US$30-million cost overrun facility for Orezone's Essakane gold project in West Africa.

Orezone had originally expected to receive US$250 million when it announced the loan agreement in July.

The loan helps the company take another big step forward with its main project, as Orezone in July began constructing its Burkina Faso mine after receiving approval from His Excellence Abdoulaye Abdoulkader Cisse, the country's Minister of Mines and Energy.

The Essakane project is expected to incur US$420 million in capital expenditures, with Orezone having already spent approximately US$40 million as of June 30, 2008.

"The combined facility has increased by over 30 per cent, on reasonable terms, during one of the most difficult credit markets," said Orezone CEO Ron Little in a statement. "This clearly demonstrates the robust nature of the project, the quality of our development team and should attract attention to Orezone, Burkina Faso, our lenders and advisers. We have not seen a financing of this magnitude in our sector for some time."

HVB will underwrite a US$175-million commercial tranche with a seven-year term, while Standard Bank will arrange for an eight-year, US$125-million export credit insurance corporation tranche. As well, both banks have committed US$15 million each to the cost overrun facility.

The company noted that at current market rates, the overall annual interest rate for the combined facility, including political risk insurance premiums, is expected to be below eight per cent.

Standard Bank has also agreed to provide Orezone with a five-month, US$40-million bridge loan facility at an interest rate of LIBOR (London interbank offered rate) plus four per cent.

As part of the deal, Orezone has agreed to sell its gold at a fixed price, which based on the current gold market will result in the total number of ounces sold being 25 per cent or less of the Essakane project's measured and indicated resources. The fixed-price arrangement can be unwound at any time if the loan is repaid.

Despite the positive news, Orezone watchers on the Toronto Stock Exchange were fairly subdued, with the stock touching a high of $1.03 on Thursday morning before falling to 98 cents per share, down two cents, although it was up from the opening price of 96 cents.