Endeavour Silver unit draws down $60 million from secured debt facility

By Mary-Katherine Stinson

Lexington, Ky., April 10 – Endeavour Silver Corp.’s wholly owned subsidiary Terronera Precious Metals, SA de CV executed its first drawdown of $60 million from its senior secured debt facility for up to $120 million, according to a 6-K filing with the Securities and Exchange Commission.

The funds are earmarked for the construction of the underground mine and mill at the company’s Terronera Project in Mexico.

The company stated in the filing that the project is progressing and has satisfied all required conditions for the first draw, which involved executing the hedge contract terms.

Specifically, forward sales of 68,000 ounces of gold have been executed at $2,325 per ounce, representing 55% of planned gold production during the initial three years of operation, and forward purchases of $45 million equivalent Mexican peso over the remaining construction period have been hedged at $16.56 per $1.00.

Prior to the initial drawdown, Terronera was required to enter into a hedging program for managing exposure to the Mexican peso during construction. The program required about 75% of the remaining capital expenditure incurred in pesos to be hedged. Additionally, prior to initial production, the hedging program required that 50% of the projected operating costs incurred in pesos be hedged prior to completion.

Thereafter, the foreign exchange protection program for operations rises to 70% of the projected operating costs incurred in pesos.

There is no requirement to hedge silver sales.

Recap

As previously reported, the company announced it closed on the facility in an Oct. 10 press release.

Borrowings bear interest at SOFR plus 450 basis points prior to construction completion and at SOFR plus 375 bps post-completion.

The 8.5-year facility includes a two-year grace period during the construction phase of the project.

Cost overrun funding is required in the form of cash, letter of credit issued by a Canadian financial institution or a combination of both for up to $48 million.

A cash sweep will be applied to 35% of excess cash flow after debt service from completion onwards until a $35 million prepayment of principal is reached.

ING Bank NV and Societe Generale acted as joint lead arrangers.

ING Capital LLC is the administrative agent and documentation agent.

Societe Generale is the technical agent and environmental and social agent.

Bank of New York Mellon is the offshore collateral agent.

Artemis Capital Advisors acted as the financial adviser to the company.

Construction is expected to take 21 months, with initial production expected in the fourth quarter of 2024.

In April 2023, it was reported that Endeavour’s board had approved the construction of an optimized Terronera Project scenario, with an initial capital expenditure cost of $230 million, partially offset by a decrease in sustaining capital to $88.3 million over the life of the mine.

Based in Vancouver, B.C., Endeavour is a silver exploration company.

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