Glencar Mining has completed the financing for its Wassa gold mine in Ghana. Following the completion of financial due diligence, $42.5 million (£30 million) has been arranged with Standard Bank London (SBL) and the Commonwealth Development Corporation (CDC).

Part of this will be repaid in gold. It has also arranged a further $5 million standby facility with SBL to cover any possible cost overruns on the construction of the mine.

Glencar has confirmed that as the package represents 100 per cent of its financial needs, there will be no need to raise funds from shareholders for the construction of the Wassa mine. It is to commence an initial drawdown of the funding immediately and construction of the mine will start in a week to 10 days time, said Glencar's managing director, Mr Hugh McCullough. He said that considering the recent volatility in the price of gold, the financing reflects confidence in the company. When Glencar first looked at the feasibility of the mine, the price of gold was high as $385 per ounce and when negotiation started with the banks it was $350. While the price is now around $300 now, it was as low as $270, he said.

The senior part of the debt, amounting to $27.5 million, due to SBL, has, in effect, been financed. This has been arranged with SBL borrowing 90,000 ounces of gold and selling it for $27.5 million, or $306 per ounce. Glencar now has a commitment to pay back SBL 90,000 ounces of gold when it starts production in 1999.

The remaining $15 million is subordinated debt from CDC. The coupon on the loan has not been disclosed but Mr McCullough said it is at a "very keen price above LIBOR (London Interbank Offer Rate)". Glencar has also arranged a hedging contract with SBL which involved the selling of 236,000 ounces of gold, over a four year period, at a price of $324 per ounce. The company has estimated mineable reserves of around 932,000 ounces of gold, at a price of $300 per ounce. Gold production is estimated at 110,000 in the first year and 118,000 in the second year.

With around 75,000 ounces spoken for, Glencar would have around 35,000 ounces per annum, for four years, which could be sold at the then market rate for about four years. After that all the production could be sold at the market rate. The mine has an estimated life of only six and a half years. However, Mr McCullough is confident that the reserves can be doubled.