Debt | 9 Months Ended |
Sep. 30, 2014 |
Debt Disclosure [Abstract] | ' |
Debt | ' |
10. Debt |
The following table summarizes the components of debt (in thousands): |
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| | | 30-Sep-14 | | 31-Dec-13 | | | | | | | | |
Debt, current: | | | | | | | | | | | | | |
Capital lease and term loan obligations | | | $ | 53,366 | | (1) | $ | 58,435 | | (1) | | | | | | | |
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Term and Security Deposit loan | | | 17,791 | | (2) | 17,791 | | (2) | | | | | | | |
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| | | $ | 71,157 | | | $ | 76,226 | | | | | | | | | |
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Debt, non-current: | | | | | | | | | | | | | |
Capital lease and term loan obligations | | | $ | 110,284 | | | $ | 146,347 | | | | | | | | | |
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Revolving Credit Agreement | | | 5,000 | | | — | | | | | | | | | |
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8.75% Senior Notes due June 2019 (3) | | | 356,881 | | | 376,080 | | | | | | | | | |
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| | | $ | 472,165 | | | $ | 522,427 | | | | | | | | | |
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(1) Includes borrowings of $8.9 million and $5.7 million as of September 30, 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. See Note 18 - Derivative Instruments for additional detail. | | | | | | | | | | |
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. Concurrent 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 18 - Derivative Instruments. The Notes balance was $356.9 million based upon the U.S. dollar to Canadian dollar exchange rate on September 30, 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 September 30, 2014 (in thousands): |
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Fiscal Year | | | Minimum Lease | | | | | | | | | | | | |
Payments | | | | | | | | | | | |
2014 | | | $ | 22,499 | | (1) | | | | | | | | | | | |
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2015 | | | 49,898 | | | | | | | | | | | | | |
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2016 | | | 47,392 | | | | | | | | | | | | | |
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2017 | | | 32,941 | | | | | | | | | | | | | |
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2018 | | | 11,885 | | | | | | | | | | | | | |
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Thereafter | | | 15,421 | | | | | | | | | | | | | |
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Less: interest | | | (16,386 | ) | | | | | | | | | | | | |
Net minimum capital lease payments | | | 163,650 | | | | | | | | | | | | | |
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Less: current portion | | | (53,366 | ) | | | | | | | | | | | | |
Non-current portion | | | $ | 110,284 | | | | | | | | | | | | | |
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(1) Includes principal of $8.9 million for mine equipment included in Assets held for sale. | | | | | | | | | | | |
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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 September 30, 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 September 30, 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 May 2014, the Company entered into a Third Amended and Restated Credit Agreement (the “Revolver”) which amended and restated the December 2013 Second 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 $75.0 million available (an increase from the $40.0 million available under the Previous Revolver) to the Company depending upon 80% of the net realizable 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 September 30, 2014, the full $75.0 million was available under the Revolver, which was reduced by $11.4 million for financial letters of credit issued to collateralize the cross currency swap (discussed in the following paragraph) and $5.0 million in outstanding cash borrowings, resulting in remaining availability of $58.6 million. |
Borrowings under the Revolver bear interest per annum at either LIBOR plus 4.5% or at an Alternate Base Rate, as defined in the Revolver, plus 3.5%. 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. |
In December 2013, when the Company entered into the Previous Revolver, which amended and restated the October 2012 Amended and Restated Credit Agreement (the “2012 Revolver”), two lenders under the 2012 Revolver exited the credit facility. These two lenders are holders of a portion of the Notes cross currency swap which, in December 2013, ceased being collateralized by the security they held as lenders to the 2012 Revolver. As a result, the Company is required to fully collateralize any mark-to-market liability position for 22% of the cross currency swap, which is the portion held by these two lenders, with cash, letters of credit, or a combination of the two. As of September 30, 2014, the Company had remitted $0.5 million of cash and issued $11.4 million of financial letters of credit to collateralize the mark-to-market liability position of 22% of the cross currency swap. |
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, Minimum Reserve Tail, and Cash and Cash Equivalents balances, as such terms are defined in the Revolver. The Company is required to maintain a Tangible Net Worth of $437.0 million plus 25% of positive net income for each quarter ending after September 30, 2013, a Minimum Current Ratio of 1.25:1.0, and Cash and Cash Equivalents of $10.0 million in deposit accounts with the Revolver lenders which are restricted from use by the Company for the full term of the Revolver. The Minimum Reserve Tail covenant requires that at all times the Company will maintain more than 600,000 gold equivalent recoverable ounces in its heap leach reserves after maturity of the Revolver. The Company was in compliance with all debt covenants as of September 30, 2014. |
Interest Expense |
The following table summarizes the components of interest expense (in thousands): |
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| | | Three months ended September 30, | | Nine months ended September 30, |
| | | 2014 | | 2013 | | 2014 | | 2013 |
8.75% Senior Notes due June 2019 (1) | | | $ | 8,452 | | | $ | 8,452 | | | $ | 25,081 | | | $ | 25,219 | |
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Capital lease and term loan obligations | | | 2,124 | | | 1,989 | | | 5,943 | | | 5,441 | |
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Amortization of debt issuance costs | | | 740 | | | 664 | | | 2,047 | | | 1,909 | |
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Revolver interest and standby fees | | | 341 | | | 385 | | | 858 | | | 1,010 | |
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Term and Security Deposit loan | | | 226 | | | 755 | | | 671 | | | 1,105 | |
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Other interest expense | | | 141 | | | 368 | | | 424 | | | 592 | |
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Capitalized interest | | | (666 | ) | | (7,252 | ) | | (6,550 | ) | | (21,593 | ) |
| | | $ | 11,358 | | | $ | 5,361 | | | $ | 28,474 | | | $ | 13,683 | |
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(1) Effective interest rate of 8.375% after cross currency swap. See Note 18 - Derivative Instruments for additional detail. | | |