Locals gaze at Goldcorp's Los Filos mine, located next to Torex's Morelos project (Photo: subversiones.org)

Locals gaze at Goldcorp's Los Filos mine, located next to Torex's Morelos project (Photo: subversiones.org)

This morning, the long awaited financing piece for Torex's (TXG:TSX) Morelos project has been found. The company announced it has signed a commitement letter with six banks, including Bank of Montreal, BNP Paribas, SocGen, Commonwealth Bank of Australia, ING and Bank of Nova Scotia for a US$375 million, 8.25 year project debt facility.  This package fully-funds Torex to complete their 21 month build (15 months remaining) to production of their high-grade Morelos gold project in the Guerrero Gold Belt, Mexico.

The company recently closed a $148 million bought deal in February and had over $216 million cash at year-end.  They have raised over $500 million in equity in the past two years.  The company is roughly three quarters of the way through their $725 million build and so with the $300 million available plus the additional $364 of cash they have on hand, this should take them through to production.

There are also some 60 million $1.50 warrants that expire on August 12, 2014 (currently TXG is trading at $1.09).  The company does not need the potential proceeds of these to finish construction.

The facility is comprised of a $300 million project finance facility at LIBOR + 4.25% to LIBOR +4.75% and a $75 million cost overrun facility which bears interest at an additional 3%.  It is subject to the banks' acceptance of the updated Environmental and Social Impact Assessment (ESIA) which is expected by the end of May.  The project is fully permitted by the Mexican government.

As part of the conditions, Torex will have to hedge roughly 6% of LOM recoverable gold which is roughly 215,000 ounces.  They expect hedging to start 6 months after production starts.

Torex's Morelos property is in the heart of the Guerrero Gold Belt (Source: Torex Gold)

Torex's Morelos property is in the heart of the Guerrero Gold Belt (Source: Torex Gold)

Fred Stanford, President and CEO of Torex, said: "We are pleased to be able to announce that once the loan facility has closed, the project will be fully financed, based on the current expectation that the ESIA will not require any material, non-budgeted capital expenditures."

The company's current construction at Morelos is under budget and ahead of schedule.  They started the 21 month build in November and are still aiming for production to start in Q3/2015, starting with 168,000 ounces in 2016 and ramping up to ~360,000 ounces of gold production per year at roughly $600/oz cash costs.

Read: Torex Executes Commitment Letter for US$375 Million Project Finance Facility