If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01.
| Entry into a Material Definitive Agreement
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On May 17, 2023, Contango ORE, Inc. (the “Company”) entered into a credit and guarantee agreement (the “Credit Agreement”), by and among CORE Alaska, LLC (the “Borrower”), each of the Company, Alaska Gold Torrent, LLC (“AGT”), and Contango Minerals Alaska, LLC (“CMA” and, together with the Company and AGT, the “Guarantors”), each of the lenders party thereto from time to time, ING Capital LLC, as administrative agent for the lenders (“ING”) and Macquarie Bank Limited, as collateral agent for the secured parties (“Macquarie”). 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 discretionary liquidity buffer facility. The Company drew $10 million on the term loan facility at the initial closing, with additional draws subject to certain final conditions being met.
Outstanding amounts under the Facility will bear interest based on the three-month adjusted term Secured Overnight Financing Rate (“SOFR”) plus (i) 6.00% per annum prior to the completion date for the Manh Choh gold project (“Manh Choh”) and (ii) 5.00% per annum thereafter, which will be payable quarterly. The Facility 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 Facility. The Facility 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 equity interests of AGT in respect of the Lucky Shot mine. As a condition precedent to the second borrowing, the Company is required to hedge approximately 125,000 ounces of its attributable gold production from Manh Choh. The hedges will be provided by ING, Macquarie or their affiliates.
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; or (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 foregoing is a summary only and does not purport to be a complete description of all of the terms, provisions, covenants and agreements contained in the Credit Agreement, and is subject to and qualified in its entirety by reference to the full text of the Credit Agreement, which is filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated into this Item 1.01 by reference.
Item 2.03.
| Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated into this Item 2.03 by reference.
Item 7.01.
| Regulation FD Disclosure.
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On May 18, 2023, the Company issued a press release announcing the entry into the Credit Agreement by the Company. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K. The information included herein and in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.
Item 9.01.
| Financial Statements and Exhibits.
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(d) Exhibits.
| Exhibit No. | Description of Exhibit |
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| 104 | Cover Page Interactive Data File (embedded with Inline XBRL document). |
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*
| Filed herewith.
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#
| Exhibits and schedules omitted pursuant to Item 601 (a)(s) of Regulation S-K. A copy of any omitted exhibit or schedule will be furnished supplementally to the SEC upon request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CONTANGO ORE, INC.
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| By: /s/ Leah Gaines
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| Leah Gaines
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| Vice President, Chief Financial Officer, Chief Accounting
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| Officer, Treasurer and Secretary
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Dated: May 19, 2023
