| Debt | 14. Debt The table below shows the components of Debt, net as of March 31, 2024 and December 31, 2023 :
March 31, December 31,
Secured Debt Facility
Principal amount $ 42,500,000 $ 30,000,000
Unamortized debt discount ( 2,283,978 ) ( 2,411,532 )
Unamortized debt issuance costs ( 2,652,330 ) ( 2,394,168 )
Debt, net $ 37,563,692 $ 25,194,300
Convertible Debenture
Principal amount $ 20,000,000 $ 20,000,000
Unamortized debt discount ( 391,664 ) ( 414,854 )
Unamortized debt issuance costs ( 94,020 ) ( 99,587 )
Debt, net $ 19,514,316 $ 19,485,559
Total Debt, net $ 57,078,008 $ 44,679,859
Less current portion $ 21,700,000 $ 7,900,000
Non-current debt, net $ 35,378,008 $ 36,779,859 Secured Credit Facility On May 17, 2023, the Company entered into a credit and guarantee agreement (the “Credit Agreement”), by and among CORE Alaska, LLC as the borrower, each of the Company, LSA, Contango Minerals, as guarantors, each of the lenders party thereto from time to time, ING Capital LLC (“ING”), as administrative agent for the lenders, and Macquarie Bank Limited (“Macquarie”), as collateral agent for the secured parties. The Credit Agreement provides for a senior secured loan facility (the “Facility”) of up to US$ 70 million, of which $ 65 million is committed in the form of a term loan facility and $ 5 million is uncommitted in the form of a liquidity facility. The Credit Agreement will mature on December 31, 2026 (the “Maturity Date”) and will be repaid via quarterly repayments over the life of the loan. The Facility has an upfront fee and a production linked arrangement fee based upon the projected total production of gold ounces in the base case financial model delivered on the closing date, payable quarterly based on attributable production, with any balance due upon the maturity or termination of the Credit Agreement. The Credit Agreement is secured by all the assets and properties of the Company and its subsidiaries, including the Company’s 30 % interest in Peak Gold, LLC, but excluding the Company’s equity interests of LSA in respect of the Lucky Shot mine. As a condition precedent to the second borrowing, the Company was required to hedge approximately 125,000 ounces of its attributable gold production from Manh Choh. On August 2, 2023, CORE Alaska entered into a series of hedging agreements with ING and Macquarie for the sale of an aggregate of 124,600 ounces of gold at a weighted average price of $ 2,025 per ounce, which satisfied the condition of the second borrowing. The hedge agreements have delivery obligations beginning in July 2024 and ending in December 2026. See Note 16 - Derivatives and Hedging Activities in the Company's Form 10-KT for the six-month period ended December 31, 2023. Term loans, which can be made quarterly are to be used only to finance cash calls to the Peak Gold JV, fund the debt service reserve account, pay corporate costs in accordance with budget and base case financial model and fees and expenses in connection with the loan. Liquidity loans, which can be made once a month, are to be used for cost overruns. Any outstanding liquidity loans must be repaid on July 31, 2025. Loans under the Facility can be Base Rate loans at the Base Rate plus the Applicable Margin or Secured Overnight Financing Rate (“SOFR”) loans at the three month adjusted term SOFR plus the Applicable Margin. The type of loan is requested by the borrower at the time of the borrowing and the type loan may be converted. The “Base Rate” is the highest of Prime Rate, Federal Funds Rate plus 0.50 % or Adjusted Term SOFR for one month plus 1 %. “Adjusted Term SOFR” is Term SOFR plus a SOFR Adjustment of 0.15 % per annum. “Term SOFR” is the secured overnight financing rate as administered by the Term SOFR Administrator. The “Applicable Margin” is (i) 6.00 % per annum prior to the completion date for the Manh Choh Project and (ii) 5.00 % per annum thereafter, which will be payable quarterly. Interest is payable commencing on the date of each loan and ending on the next payment date. The interest payment dates prior to November 1, 2025 are the last day of July, October, January and April; thereafter the payment dates are the last day of March, June, September and December. The Company also will pay commitment fee on average daily unused borrowings equal to a rate of 40 % of the Applicable Margin. The commitment fee is payable in arrears on each interest payment date with the final on the commitment termination date, which is 18 months after the closing date of May 17, 2023. As of March 31, 2024, the Company had unused borrowing commitments of $ 22.5 million. Borrowings under the Facility carried an original issue discount of $ 2.3 million and debt issuance costs of approximately $ 1.6 million. As of March 31, 2024, the unamortized discount and issuance costs were $ 2.3 million and $ 2.7 million, respectively, and the carrying amount, net of the unamortized discount and issuance costs was $ 37.6 million. As of December 31, 2023, the unamortized discount and issuance costs were $ 2.4 million and $ 2.4 million, respectively and the carrying amount, net of the unamortized discount and issuance costs was $ 25.2 million. The fair value of the debt (Level 2) as of March 31, 2024 and December 31, 2023 was $ 42.5 million and $ 30.0 million, respectively. The Company recognized interest expense totaling $ 1.6 million related to this debt for the three months ended March 31, 2024 (inclusive of approximately $ 1.1 million of contractual interest, and approximately $ 0.5 million related to the amortization of the discount and issuance fees). There was no interest expense related to the Facility for the three months ended March 31, 2023 as the Facility was not yet in place. The effective interest rate of the term loan facility was 11.47 % as of March 31, 2024 and 11.58 % as of December 31, 2023. As of March 31, 2024 and December 31, 2023, the effective interest rate for the amortization of the discount and issuance costs was 6.2 % and 5.6 %, respectively. The Credit Agreement contains representations and warranties and affirmative and negative covenants customary for credit facilities of this type, including limitations on the Company and its subsidiaries with respect to indebtedness, liens, mergers, consolidations, liquidations and dissolutions, sales of all or substantially all assets, transactions with affiliates and entry into hedging arrangements. The Credit Agreement also requires the Company to maintain, as of the last day of each fiscal quarter, (i) a historical debt service coverage ratio of no less than 1.30 to 1.00, (ii) a projected debt service coverage ratio until the Maturity Date of no less than 1.30 to 1.00; (iii) a loan life coverage ratio until the Maturity Date of no less than 1.40 to 1.00; (iv) a discounted present value cash flow coverage ratio until the Manh Choh gold project termination date of no less than 1.70 to 1.00; and (v) a reserve tail (i.e., gold production) ratio until the Maturity Date of no less than 25 %. The Credit Agreement also includes customary events of default, including failure to pay principal, interest or fees when due, failure to comply with covenants, any representation or warranty made by the Company or any of its material subsidiaries being false in any material respect, default under certain other material indebtedness, certain insolvency or receivership events affecting the Company or any of its material subsidiaries, certain ERISA events, material judgments and a change in control, in each case, subject to cure periods and thresholds where customary. The Company is also required to maintain a minimum cash balance of $ 2 million. As of March 31, 2024, the Company was in compliance with, or has received waiver or consent from ING and Macquarie, all of the required debt covenants. As of March 31, 2024, the Company had drawn a total of $ 42.5 million on the Facility. The Company is scheduled to repay $ 7.9 million in 2024, $ 29.0 million by July 31, 2025 and the remaining $ 5.6 million to be paid quarterly thru December 31, 2026. Future draws on the term loan facility are subject to certain additional conditions being met. The Company entered into amendments to the Credit Agreement extending the time for the Company to satisfy the remaining conditions to a second borrowing on the Facility, and satisfied such conditions as of the date of this filing. In connection with entering into the Credit Agreement, the Company entered into a mandate lender arrangement fee letter (the “MLA Fee Letter”) with ING and Macquarie (collectively, the “Mandated Parties”) and a production linked arrangement fee letter (the “PLA Fee Letter”) with ING. Pursuant to the MLA Fee Letter, the Company paid the Mandated Parties on the date of the initial disbursement at the initial closing an upfront fee, calculated based on the principal amount of the Facility. Additionally, the Company paid the Mandated Parties an initial disbursement upfront fee, calculated based on the initial disbursement of $ 10 million. Pursuant to the PLA Fee Letter, the Company will pay ING a production linked arranging fee based on projected total production over the life of the Facility, as well as an agency fee for consideration of acting as administrative agent and collateral agent. Convertible Debenture On April 26, 2022, the Company closed on a $ 20,000,000 unsecured convertible debenture (the “Debenture”) with Queen’s Road Capital Investment, Ltd. (“QRC”). The Company used the proceeds from the sale of the Debenture to fund commitments to the Peak Gold JV, the exploration and development at its Lucky Shot Property, and for general corporate purposes. In connection with the closing of the Credit Agreement, the Company entered into a letter agreement with QRC (the “Letter Agreement”) which amended the terms of the Debenture. In accordance with the Letter Agreement, QRC acknowledged that the Debenture would be subordinate to the loans under the Credit Agreement, and acknowledged that the Company entering into the loans under the Credit Agreement would not constitute a breach of the negative covenants of the Debenture. QRC also waived its put right in respect of the Debenture that would require Contango to redeem the Debenture in whole or in part upon the completion of a secured financing or a change of control. In consideration for QRC entering into the Letter Agreement, the Company agreed to amend the interest rate of the Debenture from 8 % to 9 %. In accordance with the Letter Agreement the interest payment dates were modified to be the last business day of July, October, January, and April, prior to November 1, 2025 and thereafter the last business day of March, June, September, and December. The maturity date also changed from April 26, 2026 to May 26, 2028. The Debenture currently bears interest at 9 % per annum, payable quarterly, with 7 % paid in cash and 2 % paid in shares of common stock issued at the market price at the time of payment based on a 20-day volumetric weighted average price (“VWAP”). The Debenture is unsecured. QRC may convert the Debenture into common stock at any time at a conversion price of $ 30.50 per share (equivalent to 655,738 shares), subject to adjustment. The Company may redeem the Debenture after the third anniversary of issuance at 105 % of par, provided that the market price (based on a 20-day VWAP) of the Company’s common stock is at least 130 % of the conversion price. In connection with the issuance of the Debenture, the Company agreed to pay an establishment fee of 3 % of the Debenture face amount. In accordance with the terms of the related investment agreement (the "Investment Agreement"), QRC elected to receive the establishment fee in shares of common stock valued at $ 24.82 per share, for a total of 24,174 shares. The establishment fee shares were issued to QRC pursuant to an exemption from registration under Regulation S. In connection with the Investment Agreement, QRC entered into an investor rights agreement with the Company in connection with the issuance of the Debenture. The investor rights agreement contains provisions that require QRC and its affiliates, while they own 5 % or more of our outstanding common stock, to standstill, not to participate in any unsolicited or hostile takeover of the Company, not to tender its shares of common stock unless the Company’s board recommends such tender, to vote its shares of common stock in the manner recommended by the Company’s board to its stockholders, and not to transfer its shares of common stock representing more than 0.5 % of outstanding shares without notifying the Company in advance, whereupon the Company will have a right to purchase those shares. The Debenture carried an original issue discount of $ 0.6 million and debt issuance costs of approximately $ 0.2 million. As of March 31, 2024 and December 31, 2023, the unamortized discount and issuance costs were $ 0.5 million and $ 0.5 million, respectively. The carrying amount of the debt at March 31, 2024 and December 31, 2023, net of the unamortized discount and issuance costs was $ 19.5 million and $ 19.5 million respectively. The fair value of the Debenture (Level 2) as of March 31, 2024 and December 31, 2023 was $ 20.0 million. The Company recognized interest expense totaling $ 0.5 million related to this debt for the three months ended March 31, 2024 (inclusive of approximately $ 450,000 of contractual interest, and approximately $ 29,000 related to the amortization of the discount and issuance fees). The Company recognized interest expense totaling $ 0.4 million related to this debt for the quarter ended March 31, 2023 (inclusive of approximately $ 400,000 of contractual interest, and approximately $ 47,000 related to the amortization of the discount and issuance fees).The effective interest rate of the Debenture is the same as the stated interest rate, 9.0 %. The effective interest rate for the amortization of the discount and issuance costs as of March 31, 2024 and December 31, 2023 was 0.6 % and 0.6 %, respectively. The Company reviewed the provisions of the debt agreement to determine if the agreement included any embedded features. The Company concluded that the change of control provisions within the debt agreement met the characteristics of a derivative and required bifurcation and separate accounting. The fair value of the identified derivative was determined to be de minimis at March 31, 2024 and December 31, 2023 as the probability of a change of control was negligible as of those dates. For each subsequent reporting period, the Company will evaluate each potential derivative feature to conclude whether or not they qualify for derivative accounting. Any derivatives identified will be recorded at the applicable fair value as of the end of each reporting period. |
