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Amarillo Receives Drawdown from Gold-Linked Credit Facility

Amarillo Gold Corp. is pleased to announce that it has received the most recent drawdown from its gold-linked credit facility. The Company entered into the Facility in September last year. The Facility's purpose is to finance the Company through the current adverse resource market conditions in an innovative way.

It has consolidated many of the Company's obligations into a single structure and it provides a way for the Company to operate and continue with the mine permitting process at our flagship Mara Rosa project. By entering the Facility the Company has avoided raising funds via the market at a highly dilutive share price.

Under the Facility, the Company can borrow up to the value of 5,000 ounces of gold with tranches equal to 270 ounces of gold, as per the London Fix, at the end of the last business day of each quarter.

The most recent drawdown marks the fourth, using the Facility. There has now been a total of 3,391 ounces drawn to date. (The first draw down was larger to consolidate Company's obligations).

The creditors of the Facility are shareholders of the Company and we express our gratitude for their continued support.

Buddy Doyle CEO and President of the Company, commented, "The Gold Facility remains the most sensible financing alternative in this prolonged depressed market. Since publishing a positive PFS (Pre-Feasibility Study) in early 2012, the Company has focused work and funds to improve the Mara Rosa project. The PFS used a US $1200/troy ounce, price assumption and was economically robust at the time. Since then, there have been a number of significant improvements to the assumptions in the study. For example, a geotechnical study has raised the planned footwall pit slope reducing the strip ratio from 8.1:1 to 6.4:1 and further drilling intersected gold in an area previously treated as waste, extending the mineralization 150m to the north. The exchange rate has improved. A ratio of US $1: R$1.9 was used in the PFS; the current rate is US $1: R$3.0. It is notable that in terms of the local currency gold is at near record prices. The lower exchange rate has also made contract mining an attractive alternative to the original plan of a 100% owner fleet. The contract mining option would significantly cut the PFS capital expenditures. Not all changes have been positive; the price of electricity has increased. Also, it is likely that the tailings dam will have to be lined, adding cost. Our current focus is to obtain the LP ("license preliminary"), the first and most important part of the environmental permitting process. This process can alter the plan of the mine to satisfy the laws and requests of the state environmental department, SEMARH. It is therefore logical that a definitive Feasibility Study would only commence once mine plans are finalized within the LP. This Feasibility Study will incorporate and refine the improvements and changes to the project economics mentioned above. The Company would emphasize that obtaining the LP would be a major milestone for the Company. Having an economically robust permitted gold project in a stable, business-friendly jurisdiction that is build-ready, is indeed extremely rare".

More details on the terms of the Facility: It must be repaid on the earliest of

  1. A change of control of the Company,
  2. Three months following a declaration of commercial production at Mara Rosa,
  3. July 31, 2019, it can also be paid down anytime with cash or gold. If mining commences, there is a 5% NSR which extinguishes once the Facility is paid down. There is a right of first refusal on any financing below the price of $0.25.

The Facility bears a coupon of 12% and interest may be accrued in kind.

The Company will issue 239,302 warrants in association with the current drawdown as the Facility calls for 600 warrants to each lender for each $1,000 in value advanced. Each warrant entitles the holder thereof to acquire one common share in the capital of the Company. Each warrant has an exercise price of $0.25. The warrants and the common shares underlying the warrants are subject to a four-month hold period pursuant to Canadian securities laws. There are now 4,100,082 warrants in total issued in association with the Facility.

Source: http://www.amarillogold.com/

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