Standard Tolling (TON.V) has announced it is planning to raise $2.25M in debt of which the majority ($2M) will be used to fund future ore purchases for its newly-acquired toll milling plant in Peru. The remaining $250,000 will be spent on the construction and installation of a carbon stripping phase at the mill.
The debentures will be issued at par and carry a fixed interest rate of 10%, payable quarterly in arrears. The initial term will be three years but Standard Tolling has the right to repurchase the bonds at 110% of the face value and could be tempted to do so further down the road as the 2% net revenue interest when the plant reaches commercial production is a very nice sweetener for potential participants. Using the operating margins of its competitors, this 2% net revenue interest could be very interesting and has the potential to increase the total yield on the bonds to around 20%.
The bonds will be issued in tranches of $1000 with a minimum investment of $50,000. Per $1000 debenture, the debentureholders will also receive 500 warrants to acquire new shares of Standard Tolling at C$0.25 per share.
This debenture will allow Standard Tolling to start sourcing and purchasing ore to process at its new mill. We are looking forward to see some kind of status update on the project but we still expect the plant to be in commercial production before the end of this year.
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Disclosure: The author holds a long position in Standard Tolling. Standard Tolling is a sponsor of the website. Please see our disclaimer for current positions.
