West African gold producer Avesoro Resources announced on Monday that its wholly-owned subsidiary Bea Mountain Mining Corporation has entered into equipment finance facility agreements with Mapa İnşaat ve Ticaret - a related party of the company - to facilitate the purchase of heavy mining equipment totaling $6.1m.
The AIM-traded firm said it followed its announcement on 11 October of an updated mineral resource and mineral reserve estimate for the New Liberty Gold Mine, and details of the new mine plan for New Liberty, which required the procurement of additional equipment.
Avesoro said it had sought quotes for the equipment from a number of providers, however due to Mapa's purchasing power it could secure "more competitive terms" than could be achieved by the company directly.
Mapa is part of the MNG group of companies owned by the company's non-executive chairman, Mehmet Nazif Gűnal, and as a result entering into the finance agreements constituted a related party transaction under the AIM Rules.
"Once the expanded mining fleet is complete, the company expects to be able to ramp-up to a quarterly gold production rate of 36koz during 2018," Avesoro's board said in its statement.
The finance agreements, totaling approximately $6.1m, related to two Sandvik 1500i drill rigs, one Komatsu PC1250 excavator and four Komatsu HD785 haul trucks.
Delivery to New Liberty is expected to occur in late October.
The loan principal of the agreements included a markup of 2.5% over the cost incurred by Mapa in procuring the equipment.
Avesoro said BMMC expected to enter into further agreements with Mapa, on "substantially similar" terms to the agreements announced on Monday, to facilitate the purchase of additional new equipment including three Komatsu PC1250 excavators and eight Komatsu HD785 haul trucks, along with some auxiliary equipment, for delivery to New Liberty throughout Q4 2017 and Q1 2018, as required under the updated mine plan.
"A further announcement will be made as appropriate if those additional finance agreements are entered into," the board said.
The equipment finance loans under each of the finance agreements are unsecured, with interest charged at 6.5% per annum on the dollar-denominated loan amount of approximately $3.7m and 5.5% per annum on the euro-denominated loan amount of approximately 2.0m - equivalent to approximately $2.4m.
Avesoro said the loans are repayable in cash in eight equal semi-annual instalments, the first of which will fall due six months after utilisation of the loan.