Carpathian signs project financing mandates for up to US$97 million

Carpathian Gold is pleased to announce that its Board of Directors has approved and the Corporation has signed a mandate letter with Macquarie Bank Limited for it to arrange a project financing facility of up to US$75 million to be used to partially fund the development of the Corporation’s Riacho dos Machados Gold Project, Brazil.

In addition the Corporation has also mandated Caterpillar Financial Services Corpgold stamp mill for saleoration (Cat Financial) to arrange an equipment leasing facility for up to US$ 22 million for the Project.

The mandate letters have been signed on the basis of­ indicative term sheets that have been agreed upon between the Corporation and Macquarie Bank and Cat Financial, respectively.

The indicative project finance facility term sheet submitted by Macquarie Bank sets out detailed indicative terms and conditions, which include:

• Market interest rates for pre and post project completion based on facilities of this size and nature;


• Security over the Project assets excluding leased equipment and the Corporation’s Romanian assets;


• A scheduled tenor of six (6) years for the Project finance facility;


• Prepayment of the facility at any time without penalty;


• A put-call gold collar structure for a small proportion of gold production and a Brazilian Reais forward purchase program both of which will be priced at the time of closing based on the then current market conditions. On the basis of current pricing and the Preliminary Economic Assessment dated August 12, 2009, both programs are expected to significantly boost project cash flows, and;


• Customary covenants and conditions precedent for financings of this nature.

The provision of the Project finance facility is subject to a number of conditions including delivery of the final Feasibility Study, additional legal and technical due diligence and internal credit approval by the lenders and approval by the Board of Directors of the Corporation.

The indicative lease term sheet submitted by Cat Financial sets out detailed terms and conditions which include:

• A floating interest rate based on Libor plus a margin dependent upon the final lease term;


• Execution of a maintenance and repair contract agreement for ongoing equipment maintenance;


• Security on the leased equipment through a first ranking charge on such equipment; and


• Customary covenants and conditions precedent for lease financings of this nature.

The finalization of this agreement will be subject to completion of the Feasibility Study, legal and technical due diligence, final internal credit approval by Cat Financial and approval by the Board of Directors of the Corporation.

The Project financing and leasing facilities total up to US$ 97 million and are in addition to the US$ 30 million gold sale agreement that closed with Macquarie Bank on May 21, 2010.

“These mandates are an important further step in the development of the Riacho dos Machados Gold Project and brings the Corporation closer to achieving its goal of becoming a mid-tier gold producing company”, said Dino Titaro, President and CEO of Carpathian. “We are very pleased to continue our relationship with Macquarie Bank given its familiarity with the Project and the Corporation resulting from the gold sale agreement that was completed earlier this year and the ongoing working relationship. In addition, having Cat Financial involved through a leasing arrangement for the initial mining equipment adds to the project financing package and brings extremely high quality mining equipment to the Project”.

Dino Titaro went on to add, “the put-call gold sale collar structure with maximum put and call strike prices for a small portion of the production allows the Corporation to retain significant upside participation on the collared gold ounces while protecting a minimum sale price expected to comfortably exceed US$ 1,000 per ounce at prevailing spot gold prices. Additionally, the currency-hedging program is expected to yield a fixed Brazilian Reais / US Dollar rate that could be significantly more favourable than the prevailing spot rate. This program will protect the Corporation from exchange rate fluctuations that could have an impact on the project particularly in its early years”.