Timmins Gold extends $18-mln credit facility with Sprott Resource

Timmins Gold Corp. (TSE:TMM)(AMEX:TGD) said Thursday it has extended its existing $18 million credit facility with Sprott Resource Lending Partnership.

The new credit agreement will have a term of 18 months from July 29, and interest will be payable at a rate of 8 per cent per year.

The extension is subject to final documentation, the company said.

Payment of the principal amount outstanding will be made at the end of the term, Timmins added.

In consideration for the extension, a bonus payment of 2 per cent of the principal amount of the loan will be paid in common shares of Timmins Gold at a 10 per cent discount to the 10-day weighted average closing price of the company's stock.

If the loan has not been repaid by July 28, 2013, a further fee of 1 per cent of the outstanding amount on that date will be paid to the lender in shares priced at the same discount.

"The extension and repricing of our credit agreement provides Timmins Gold with a strong financial base," said CEO of Timmins, Bruce Bragagnolo.

"With cash from operations being added to the balance sheet on a monthly basis even after paying for expansion and exploration, the extension provides the company with operational flexibility."

In April, Timmins reported record gold production for its first quarter, despite downtime associated with a three-stage, capacity improvement program at its Mexican mine.

The gold producer, which generates revenue from its San Francisco gold mine in Sonora, Mexico, said that for its fiscal first quarter that ended March 31, it produced 21,532 gold ounces.

The company said the gold recovery ratio was 69 per cent for the period. The recovery ratio is defined as the ratio of gold ounces produced, divided by the number of contained gold ounces stacked over a specific period.

Timmins said it also produced 11,740 ounces of silver during the quarter.

Increased production was achieved even after roughly four days of downtime, related to the completion of the first part of a three-stage capacity improvement program.

The completion of the capacity improvements are meant to take the mine to throughput of 32,000 tons per day (tpd) of processed ore, and annual production of 130,000 ounces of gold beginning in 2013.