Sailfish Royalty Corp. (TSX-V: FISH) (OTCQX: SROYF) is pleased to announce that that it has entered into a loan agreement with Mako Mining Corp. dated August 27, 2021, pursuant to which the Company agreed to provide a US$8 million unsecured gold-linked term loan to Mako.
The proceeds of the Term Loan will be used by Mako to refinance existing short-term debt, specifically, the repayment of all outstanding principal and accrued interest totaling approximately US$6.2 million owing to Nebari Resources Credit Fund I, LP and approximately US$1.8 million of principal owing to funds managed by Wexford Capital LP.
As compensation for making the Term Loan available to Mako, Sailfish shall be entitled to certain cash compensation based on the prevailing price of gold. Mako will make 24 monthly cash payments to Sailfish on account of the principal amount of the Term Loan and the Lender Compensation, which shall equal the cash equivalent of 205 ounces of gold multiplied by the preceding month’s average gold price with a floor of US$1,750 and a ceiling of US$2,000 pursuant to the terms of the Loan Agreement. The Term Loan does not have any operational negative covenants or balance sheet covenants, and there are no restrictions on dividends and/or share repurchases.
Upon the occurrence of an event of default under the Loan Agreement, all outstanding amounts, including applicable premiums become immediately due and payable and interest on such amounts will accrue at a rate of 12% per annum, accruing daily and payable to the Company on demand.
The Company has sufficient cash on hand that it does not anticipate the advance of the Term Loan to have a material effect on the Company’s business and affairs.
Cesar Gonzalez, Chief Executive Officer of Sailfish states that, “this gold-linked loan is a win-win for both companies. Sailfish receives an attractive yield with downside protection and upside potential that supports the Company’s plans to begin paying a dividend; while Mako is able to refinance its existing short-term debt and pursue a more aggressive exploration budget, especially at Las Conchitas and surrounding targets where Sailfish has a 2% NSR.”
Multilateral Instrument 61-101
Wexford, Wexford Spectrum Trading Limited and Wexford Catalyst Trading Limited, hold either directly or through an affiliate, in the aggregate, a majority of the outstanding common shares of the Company and Mako and, consequently, the Term Loan is a “related party transaction” under Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions. The board of directors of the Company has determined that the Term Loan will not be subject to the formal valuation requirement of MI 61-101, as it is not a related party transaction as described in paragraphs (a) through (g) of the definition of “related party transaction”, and further, the Term Loan will be exempt from the minority shareholder approval requirements in MI 61-101 in reliance on the exemption set forth in sections 5.7(1)(a) of MI 61-101, and in connection therewith the Board has determined that the Term Loan does not exceed 25% of the Company’s market capitalization. Each of Cesar Gonzalez and Akiba Leisman, as directors and/or officers of the Company, abstained from voting on the resolutions of the Board approving the Term Loan. The Company did not file a material change report more than 21 days before the expected closing of the Term Loan as the terms of the Term Loan were not settled until shortly prior to closing and the Company and Mako wished to close the Term Loan on an expedited basis for sound business reasons.
Sailfish is a precious metals royalty and streaming company. Within Sailfish’s portfolio are two main assets in the Americas: a gold stream equivalent to a 3% NSR on the San Albino gold mine (~3.5 sq. km) and a 2% NSR on the rest of the area (~134.5 sq. km) surrounding San Albino in northern Nicaragua; and an up to 3% NSR on the multi-million ounce Spring Valley gold project in Pershing County, Nevada.
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We acknowledge the [financial] support of the Government of Canada.