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PureGold Enhances Credit Facility, Closes US$6 Million Additional Credit Facility and Launches Strategic Review Process

Press Release

July 12, 2022

  • Closing of previously announced US$6 million Additional Credit Facility from Sprott
  • New rescheduling of C$12 million of principal repayments to enhance liquidity
  • Operational Turnaround Plan underway, Updated Life of Mine Plan remains on track
  • Objective of strategic review process is to evaluate alternatives and maximize value

VANCOUVER, B.C. – Pure Gold Mining Inc. (TSX-V:PGM, LSE:PUR) (“PureGold” or the “Company”), today announced the finalization of several agreements (“Agreements”) with its lending partner, a fund managed by Sprott Resource Lending Corp. (“Sprott”), including a new debt repayment schedule to enhance the Company’s liquidity and provide financial flexibility.

PureGold also announced that its Operational Turnaround Plan is progressing, its Updated Life of Mine plan remains on track, and that the Company is launching a strategic review process with the objective of maximizing shareholder value and the value of its PureGold mine in Ontario. Meanwhile, in order to better forecast the mine’s near-term production, the Company is postponing until August a 2022 guidance update that had previously been scheduled for June 2022.

Mark O’Dea, President & CEO of PureGold, stated, “We have initiated a strategic review process to explore potential alternatives for maximizing shareholder value and generating the financial strength to allow the PureGold Mine to achieve its potential. We remain focused on achieving positive site-level cash flow by Q3 2022, and delivering an updated NI 43-101 Technical Report and Life of Mine plan by Q4 2022. If we can maximize the value of the mine, we can also maximize value for our stakeholders, including but not limited to our shareholders, employees, and the local communities surrounding Red Lake.”

Amendments to the Credit Agreement and Additional Credit Facility

The Company together with Sprott have agreed to a second amendment of the restated credit agreement dated April 2021 (“Second ARCA”). Pursuant to the Second ARCA, and as previously announced, Sprott has provided the Company with an additional secured, first-priority, non-revolving credit facility (“Additional Credit Facility”) up to a maximum principal amount of US$6 million. Drawdowns on the Additional Credit Facility are permitted for payments owing to Sprott including interest, gold stream and production payment agreement (“PPA”) payments. The first such drawdown is expected to be made in respect of amounts owing to Sprott as of June 30, 2022. The Additional Credit Facility matures on December 31, 2022 and accrues interest at a rate of 14% per annum.

In addition, the Company has agreed with Sprott to defer the first four scheduled principal repayments, each 2.5% of the total principal amount, originally scheduled for the last day of September 2022, December 2022, March 2023, and June 2023, respectively, to the bullet payment in August 2026. The bullet payment will increase from 35% of the total principal amount to 45% as a result. This creates approximately C$12 million of additional liquidity for PureGold within the next 15 months that would have otherwise been allocated to debt repayments.

The Company has further agreed with Sprott on temporary reductions to the minimum cash and minimum working capital ratio covenants to US$5 million (approximately C$6.5 million at the current exchange rate) and 0.75x, respectively, for the months ending June 30 and July 31, 2022. As of June 30, 2022, the Company had C$13 million in cash, C$21 million in available liquidity including the full Additional Credit Facility, and a net working capital ratio of approximately 0.85x. The Company cautions that it might not be able to comply with its covenants in the future without further amendments from Sprott.

Other amended terms pursuant to the Second ARCA and related agreements include removal of requirement to pass the completion test, removal of the post-completion test interest step-down, and an increase in the PPA amount from US$12 per ounce to US$14 per ounce. The consideration for these amendments is a payment of US$0.5 million which will be added to the outstanding principal amount with no upfront cash outlay.

Strategic Review Process

The strategic review process, which was initiated with the assistance of advisors, might include a potential sale or merger of the Company, sale of some or all of the PureGold Mine, or various other potential long-term financing alternatives.

The Company has not made any decisions related to strategic alternatives at this time, and there can be no assurance that the evaluation of strategic alternatives will result in any transaction or change in strategy. Any breach of the Agreements with Sprott including an unsuccessful strategic review process could result in an event of default under the Credit Agreement. The Company does not intend to comment further unless and until the Board of Directors of the Company has approved a specific course of action or the Company has determined further disclosure is appropriate or necessary.

Grant of RSUs

The Board of Directors of the Company has approved the grant of an aggregate of 400,000 Restricted Share Units (“RSUs”) to an executive pursuant to its RSU Plans. The RSUs are payable in common shares of the Company on exercise, vest immediately and must be redeemed within 30 days of July 12, 2025, or they expire.

Qualified Persons and 43-101 Disclosure

Terrence Smith, P.Eng., Chief Operating Officer for the Company, is the designated Qualified Person for this news release within the meaning of National Instrument 43-101 (“NI 43-101”) and has reviewed and verified that the technical information contained herein is accurate and approves of the written disclosure of same.

About Pure Gold Mining Inc.

PureGold is a Canadian gold mining company, located in the heart of Red Lake, Ontario, Canada. The Company owns and operates the PureGold Mine, which entered commercial production in 2021 after the successful construction of an 800 tpd underground mine and processing facilities. Gold reserves and resources are centered on a forty-seven square kilometre property with significant discovery potential.1

Additional information about the Company and its activities may be found on the Company’s website at www.puregoldmining.ca and under the Company’s profile at www.sedar.com

  1. For further information, see the technical report titled “Madsen Gold Project Technical Report Feasibility Study for the Madsen Deposit,  Red Lake, Ontario, Canada” with an effective date of February 5, 2019, and dated July 5, 2019 (the “Feasibility Study”), for further information please see puregoldmining.ca or under the Company’s Sedar profile at www.sedar.com

ON BEHALF OF THE BOARD

“Mark O’Dea”

Mark O’Dea, President & CEO

Investor inquiries:

Adrian O’Brien,

Director, IR & Communications
Tel: 604-809-6890

[email protected]

IBF4

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