Debt | 3 Months Ended |
Mar. 31, 2014 |
Debt Disclosure [Abstract] | ' |
Debt | ' |
9. Debt |
The following table summarizes the components of debt (in thousands): |
|
| | | | | | | | | | |
| | | 31-Mar-14 | | 31-Dec-13 | |
Debt, current: | | | | | | |
Capital lease and term loan obligations | | | $ | 58,748 | | (1) | $ | 58,435 | | (1) |
|
Term and Security Deposit loan | | | 18,557 | | (2) | 18,345 | | (2) |
|
| | | $ | 77,305 | | | $ | 76,780 | | |
|
Debt, non-current: | | | | | | |
Capital lease and term loan obligations | | | $ | 132,280 | | | $ | 146,347 | | |
|
8.75% Senior Notes due June 2019 (3) | | | 361,880 | | | 376,080 | | |
|
| | | $ | 494,160 | | | $ | 522,427 | | |
|
(1) Includes borrowings of $11.1 million and $5.7 million as of March 31, 2014 and December 31, 2013, respectively, for mine equipment included in Assets held for sale. |
(2) Entire borrowing is attributable to the third rope shovel which is included in Assets held for sale. | | | | |
(3) Effective interest rate of 8.375% after cross currency swap. | | | | |
Senior Notes |
In May 2012, the Company issued CDN $400.0 million of uncollateralized senior notes (the “Notes”). The Notes are denominated in Canadian dollars, pay interest semi-annually at the rate of 8.75% per annum, and mature in June 2019. Concurrently with the issuance of the Notes, the Company entered into a cross currency swap agreement based upon a notional amount of $400.4 million, which equaled the gross proceeds to the Company from the issuance, which fixed the interest rate at 8.375% as further described in Note 16 - Derivative Instruments. The Notes balance was $361.9 million based upon the U.S. dollar to Canadian dollar exchange rate on March 31, 2014. The Notes are guaranteed by most of the Company’s currently wholly-owned subsidiaries, including Hycroft Resources & Development Inc., which owns the Hycroft Mine and conducts mining operations. |
Capital Lease and Term Loan Obligations |
The Company’s capital lease and term loan obligations are for the purchase of mining equipment, bear interest at rates between 4% - 7% per annum, and primarily carry 60 - 84-month terms. The following is a summary of the future minimum payments under the Company’s capital lease and term loan obligations as of March 31, 2014 (in thousands): |
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| | | | | | | | | | |
Fiscal Year | Minimum Lease | | | | | | | |
Payments | | | | | | | |
2014 | $ | 54,459 | | | | | | | | |
| | | | | | |
2015 | 49,888 | | | | | | | | |
| | | | | | |
2016 | 47,383 | | | | | | | | |
| | | | | | |
2017 | 32,931 | | | | | | | | |
| | | | | | |
2018 | 11,875 | | | | | | | | |
| | | | | | |
Thereafter | 15,202 | | | | | | | | |
| | | | | | |
Less: interest | (20,710 | ) | | | | | | | |
Net minimum capital lease payments | 191,028 | | | | | | | | |
| | | | | | |
Less: current portion | (58,748 | ) | | | | | | | |
Non-current portion | $ | 132,280 | | | | | | | | |
| | | | | | |
Term and Security Deposit Loan Agreement |
In March 2013, the Company entered into a Term and Security Deposit Loan Agreement (the “Loan Agreement”) related to the purchase of three electric rope shovels. Under the Loan Agreement, the Company was made available up to $60.0 million ($20.0 million for each shovel) for scheduled advance security deposit payments pursuant to purchase agreements for the electric rope shovels and up to $90.0 million ($30.0 million for each shovel) in term loan financing to fund the purchase of the electric rope shovels once commissioned at the Hycroft Mine. Under the Loan Agreement, as electric rope shovels were commissioned, amounts previously advanced to the Company for security deposits, together with the remaining purchase price of each electric rope shovel, were converted to term loan obligations. The electric rope shovels secure all amounts borrowed by the Company under the Loan Agreement. |
During 2013, the Company commissioned two (of the three) electric rope shovels and, as such, amounts borrowed for these two shovels are included in capital lease and term loan obligations. Costs for the third electric rope shovel are included in Assets held for sale at March 31, 2014 and, as such, related amounts borrowed under the Loan Agreement are included in Debt, current as repayment will occur when the components of the third shovel are sold, which the Company believes will happen within the next twelve months. Advances for security deposits under the Loan Agreement bear an interest rate determined by an applicable rate plus the three month LIBOR, which approximated 4.7% at March 31, 2014. The two executed term loan obligations for the commissioned shovels carry seven year terms and bear interest at a fixed rate of approximately 6%. |
Revolving Credit Agreement |
In December 2013, the Company entered into a Second Amended and Restated Credit Agreement (the “Revolver”) which amended and restated the October 2012 Amended and Restated Credit Agreement (the “Previous Revolver”). The aggregate amount available to the Company under the Revolver is determined by a Borrowing Base (as defined in the Revolver) that makes up to $40.0 million available to the Company depending upon the value of the gold and silver in the Company’s ore on leach pads, in-process, and finished goods inventories less estimated remaining processing and selling costs. As of March 31, 2014, the full $40.0 million was available under the Revolver, which was reduced by $11.8 million for financial letters of credit issued to collateralize the cross currency swap (discussed in the following paragraph), resulting in remaining availability of $28.2 million. During the three months ended March 31, 2014, no cash amounts were borrowed under the Revolver. |
Two lenders under the Previous Revolver, who are not lenders under the Revolver, held (and continue to hold) a portion of the Notes cross currency swap which is no longer collateralized by the security they were granted under the Previous Revolver. As a result, the Company is required to collateralize the mark-to-market position of 22% of the $400.4 million notional amount of the cross currency swap held by the lenders under the Previous Revolver with cash, letters of credit, or a combination of the two. As of March 31, 2014, the Company had issued $11.8 million of financial letters of credit to collateralize the mark-to-market position of 22% of the cross currency swap’s liability position. |
Borrowings under the Revolver bear interest per annum at either LIBOR plus 450 basis points (“bps”) or at an Alternate Base Rate, as defined in the Revolver, plus 350 bps. Financial letters of credit and non-financial letters of credit bear interest per annum at 4.50% and 2.70%, respectively. The Revolver is collateralized by substantially all of the Company’s assets and matures on April 30, 2016, unless extended in accordance with the terms of Revolver. The Revolver contains an accordion feature which permits the credit available to be increased to up to $75.0 million through the addition of additional lenders. |
Debt Covenants |
The Company’s debt agreements contain representations and warranties, events of default, and covenants that are customary for agreements of these types. The Company’s Notes contain provisions that, among other things, restrict or limit the ability of the Company to redeem the Notes, incur or guarantee additional debt, pay dividends, and consolidate, merge or sell all or substantially all of the Company’s assets. The Company’s Revolver and certain capital lease obligations contain financial covenants related to Tangible Net Worth, Minimum Current Ratio, and Minimum Reserve Tail, as such terms are defined in the Revolver. The Company was in compliance with all debt covenants as of March 31, 2014. |
Interest Expense |
The following table summarizes the components of interest expense (in thousands): |
| |
| | | | | | | | | | |
| | | Three months ended March 31, | |
| | | 2014 | | 2013 | |
8.75% Senior Notes due June 2019 (1) | | | $ | 8,268 | | | $ | 8,268 | | |
|
Capital lease and term loan obligations | | | 1,544 | | | 1,599 | | |
|
Amortization of debt issuance costs | | | 632 | | | 622 | | |
|
Term and Security Deposit loan | | | 221 | | | — | | |
|
Revolver interest and standby fees | | | 204 | | | 288 | | |
|
Other interest expense | | | 160 | | | 107 | | |
|
Capitalized interest | | | (5,242 | ) | | (5,755 | ) | |
| | | $ | 5,787 | | | $ | 5,129 | | |
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(1) Effective interest rate of 8.375% after cross currency swap. | | | |