ASCOT ARRANGES C$25 MILLION BOUGHT DEAL FINANCING AND US$50 MILLION ADDITIONAL FUNDING FOR COMPLETION AND RAMP-UP OF THE PREMIER GOLD PROJECT

Mining
Tuesday, January 23rd, 2024 4:35 pm EDT

Ascot Resources Ltd. has entered into non-binding term sheets for a total of approximately $50-million (U.S.) in additional financing from Sprott Resource Streaming and Royalty Corp. and/or its affiliates and Nebari Natural Resources Credit Fund II LP. Additionally, the company has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and Desjardins Capital Markets, pursuant to which the underwriters have agreed to buy, on a bought deal private placement basis, 56.82 million common shares of the company at a price of 44 cents per common share for gross proceeds of approximately $25-million. The proceeds from these additional financing sources will be used for the construction and operational ramp-up of the Premier gold project, to buy back existing royalties, for additional working capital, and for general corporate purposes.

The proposed financing package would consist of a royalty restructuring with Sprott Streaming for gross proceeds of $30-million (U.S.), a $20-million (U.S.) cost overrun facility with Nebari Credit Fund II and the $25-million (Canadian) offering.

Finance package highlights:

• Royalty restructuring: $30-million (U.S.) gross proceeds for Ascot to grant and sell to SRSR a new 3.10 per cent net smelter return royalty covering the PGP property package; until the end of 2026, up to 50 per cent of the new royalty can be repurchased for varying amounts depending on timing and cumulative production; $13.7-million (Canadian) of the gross proceeds will be used to buy back two existing 5-per-cent NSR royalties on various PGP property claims, resulting in net proceeds of approximately $20-million (U.S.);
• Cost overrun facility: $20-million (U.S.) from Nebari Credit Fund II to be drawn in full at closing, with maturity to be in June, 2027; the interest rate would be 10.0 per cent plus the greater of: (i) 3.5 per cent; and (ii) the three-month secured overnight financing rate (SFOR) per annum; Nebari Credit Fund II will also be granted warrants to purchase common shares, as described below;
• Nebari Gold Fund convertible facility amendments: in connection with the cost overrun facility, Ascot would amend certain terms of the credit agreement entered in June, 2023, with Nebari Gold Fund 1 LP, which consisted of a $14-million (U.S.) convertible facility; the conversion price would be amended to 53 Canadian cents;
• The cost overrun facility and the amended Nebari Gold Fund convertible facility will have a combination of senior and second-lien security for the total amount outstanding under the Nebari loans with a $20-million (U.S.) first-lien position pari passu with SRSR existing streams and amounts over $20-million (U.S.) having a second-lien position behind SRSR’s existing streams;
• Ascot’s strategic investor Ccori Apu SAC intends to participate in the offering to keep its pro rata share ownership of approximately 19.9 per cent;
• The three components of the proposed financing package, namely the royalty restructuring, the COF and the offering, are all cross-conditional, and are anticipated to close on or about Feb. 9, 2024, subject to successful negotiation and execution of definitive agreements and receipt of regulatory approvals, including Toronto Stock Exchange approval.

Derek White, president and chief executive officer of Ascot, commented: “Over the past year, the company, despite many challenges, has achieved significant progress in the construction and mining development of the Premier gold project, and we are excited about moving towards production in the very near term. Project construction was 86 per cent complete at the end of December, 2023, and as we complete this phase of the project, the company has been focusing its efforts to prepare for the initial production and ramp-up phase of the operation. It is paramount at this stage that the company is well financed, and I believe this funding package accomplishes this.

“Ascot has been very successful with its infill drilling activities over the past few years, and reducing the historical 5-per-cent NSR royalty rights on the initial mining areas is value accretive to the company. We are very pleased that our major financing partner SRSR has been supportive of the project and agreed to restructure the historical 5-per-cent NSR royalties. Our existing financing arrangements had contemplated a $20-million (U.S.) cost overrun facility, and we are pleased to progress this with our existing capital providers. We are also appreciative of the support from current and new shareholders as we continue our work to develop Canada’s newest producing gold mine.”

Royalty restructuring — Sprott Streaming

Ascot has entered into a non-binding term sheet with Sprott Streaming for a new royalty covering the PGP property. SRSR would purchase the Sprott royalty of 3.10 per cent on production from PGP for $30-million (U.S.). SRSR has substantially completed its technical and legal due diligence. The existing 5-per-cent NSR royalties covering the majority of the PGP property, including the Premier and Big Missouri gold deposits, will be repurchased and cancelled for $13.7-million (Canadian) pursuant to Ascot’s existing contractual rights.

Up to 50 per cent of the Sprott royalty may be repurchased until the end of 2026. The repurchase price would be payable in ounces of gold bullion or the equivalent value in cash, and is equal to 19,200, 21,600 and 24,000 gold equivalent ounces in 2024, 2025 and 2026, respectively, less the cumulative gold equivalent ounces delivered prior to the repurchase date, with the difference multiplied by the buyback percentage.

Cost overrun facility — Nebari Credit Fund II

Ascot has entered into a non-binding term sheet with Nebari Credit Fund II for a $20-million (U.S.) cost overrun facility, and technical due diligence has been completed. Ascot would also amend certain terms of the credit agreement entered in June, 2023, with Nebari Gold Fund 1 LP, which consists of a $14-million (U.S.) convertible credit facility. The conversion price under the Nebari Gold Fund convertible facility would be amended to 53 Canadian cents.

COF terms:

• Financed amount of $20-million (U.S.) drawn in one tranche, the proceeds of which will be used for the construction and working capital for the ramp-up of the project;
• Principal amount of $20.8-million (U.S.), which is subject to a 4-per-cent original issue discount to determine the advance;
• The maturity date shall be the same as that of the Nebari convertible facility, which is June 27, 2027;
• Interest rate of 10.0 per cent plus the greater of: (i) 3.5 per cent; and (ii) the three-month term SOFR per annum;
• An arrangement fee of 1 per cent of the advance is due to Nebari Credit Fund II upon closing of the COF;
• The COF will follow a progressive amortization schedule with interest and principal payments due monthly for the term of the facility, starting in July, 2024;
• Subject to the terms and conditions of the COF, Ascot may prepay the outstanding principal at any time, subject to a minimum prepayment amount of $1-million (U.S.) and Nebari Credit Fund II achieving a minimum absolute return of 15 per cent;
• Ascot would issue to Nebari Credit Fund II the number of common share purchase warrants equal to $4-million (U.S.) divided by the exercise price, which would be equal to the amended conversion price; the warrants shall expire on the maturity date;
• The COF and the amended Nebari Gold Fund convertible facility will have a combination of senior and second-lien security for the total amount outstanding under the Nebari loans with $20-million (U.S.) first-lien position pari passu with SRSR existing streams against the company’s Premier gold project and Red Mountain project; amounts over $20-million (U.S.) will have a second-lien position behind SRSR’s existing streams; in addition, while any second-lien security remains in place, Nebari shall be granted sole, unshared first-lien security on Ascot’s non-core assets: the Swamp Point aggregate project in northwestern British Columbia and the Mount Margaret Copper exploration project in Washington State, United States;
• The COF would also contain customary representations, warranties and covenants for a transaction of this nature;
• The amendments to the Nebari Gold Fund convertible facility and the grant of the warrants are subject to approval of the Toronto Stock Exchange.

The offering

Ascot has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and Desjardins Capital Markets, under which the underwriters have agreed to buy, on a bought deal basis by way of a private placement, 56.82 million common shares of the company at a price of 44 Canadian cents per common share for gross proceeds of approximately $25-million (Canadian).

In addition, the company has granted the underwriters an option, exercisable up to 48 hours prior to the closing of the offering, to purchase up to an additional 15 per cent of the number of common shares purchased pursuant to the offering.

Gross proceeds of up to $10-million (Canadian) will be sold on a private placement basis pursuant to the listed issuer financing exemption under Part 5A of National Instrument 45-106 (Prospectus Exemptions), and remaining gross proceeds will be sold on a private placement basis pursuant to applicable non-LIFE prospectus exemptions under applicable securities laws. The common shares issued as part of the private placement tranche, which will include any common shares issued in connection with the underwriters’ option, will be subject to a hold period under Canadian securities law expiring four months and one day after the closing date while common shares issued as part of the LIFE tranche will not be subject to a hold period under Canadian securities law.

The company intends to use the net proceeds of the offering for the construction and ramp-up of the project, for additional working capital, and for general corporate purposes.

The offering is expected to close on or about Feb. 9, 2024, and is subject to the company receiving all necessary regulatory approvals, including the approval of the TSX.

There is an offering document related to the LIFE that can be viewed under the company’s profile at SEDAR+ and at the Ascot website. Prospective investors should read this offering document before making an investment decision.

Qualified person

John Kiernan, PEng, chief operating officer of the company, is the company’s qualified person as defined by National Instrument 43-101, and has reviewed and approved the technical contents of this news release.

About Ascot Resources Ltd.

Ascot is a Canadian junior exploration and development company focused on restarting the past-producing Premier gold mine, located on Nisga’a Nation Treaty lands, in British Columbia’s prolific Golden Triangle. Ascot shares trade on the TSX under the ticker AOT. Concurrent with progressing the development PGP, the company continues to explore its properties for additional high-grade underground resources. Ascot is committed to the safe and responsible development of Premier in collaboration with Nisga’a Nation as outlined in the benefit agreement.

We seek Safe Harbor.