As security for the punctual performance of the Emergency Response Plan under the Operating Conditions, prior to removing shipping containers with lead carbonate concentrate from the Mine, the Company was required to issue in favour of the Minister for Environment and the CEO of the OEPA an A$5 million unconditional and irrevocable guarantee from a bank (the "Bond") acceptable to the OEPA. In November 2012, the Company had the A$5 million bond refunded that was previously in place to cover shipments from the Mine to use as working capital. In March, 2013, the Company received a C$5 million final advance under the Sprott Facility to refund the A$5 million Bond and the Bond has been reinstated. The Company's aggregate current performance bonds as at March 31, 2013 are A$7.6 million.
Throughout the first quarter of 2013, a total of approximately 140 employee positions were filled in Perth and at the Mine as part of the restart of operations.
At the time that the transport operations were stopped in April 2011 there were approximately 10,100 tonnes of lead concentrate stockpiled on site at an estimated average concentrate grade of 64% lead, containing approximately 6,450 tonnes of contained lead in concentrate. This concentrate is stored in sealed bags and protected from the weather. There was no production or ore processed in 2012. Transportation of the stockpiles of lead carbonate concentrate commenced in April 2013.
With the resumption of operations in the second quarter of 2013, the Company expects to produce between 40,000 and 45,000 tonnes of lead contained in concentrate in 2013. The Company expects to sell between 45,000 and 50,000 tonnes of lead contained in concentrate in 2013.
On January 29, 2013, the Company announced that it had entered into the Sprott Facility with Sprott which is expected to provide the Company with the funding needed to restart operations at the Mine. On the closing of the Sprott Facility, the Company drew down a C$15 million initial advance under the Sprott Facility. A subsequent advance of C$5 million was drawn down on March 20, 2013 to fund the Bond required for punctual performance of the Emergency Response Plan under the Company's Operating Conditions. The Sprott Facility is secured by the Mine and all of its assets.
The Sprott Facility matures on February 28, 2015 after twelve equal principal repayments starting March 31, 2014, however early repayment of the Sprott Facility, at Ivernia's option, is allowed without penalty provided that Ivernia has paid at least six months of interest under the Sprott Facility. The Sprott Facility bears interest at a rate of 12% per annum, compounded monthly, which is payable at the end of each month. In addition to the payment of interest, under the Sprott Facility, Ivernia also issued 10,169,491 Ivernia common shares to Sprott and its nominees having a value of C$1.2 million and paid a cash structuring fee of C$0.2 million.
As a condition to the execution of the Sprott Facility, Enirgi Group agreed to postpone the maturity date of the Enirgi Facility to March 31, 2015.
Capital Resources and Working Capital Requirements
As of March 31, 2013, the Company had approximately $7.6 million in cash. At current lead prices and foreign exchange rates, the Company expects that it has sufficient working capital to fund the Mine until operations turn cashflow positive. Operations are expected to turn cashflow positive in the third quarter of 2013. While the Company anticipates that cashflow from operating activities will be sufficient to fund non- operating activities going forward, the Company's financial condition will remain subject to certain risks and uncertainties as it ramps-up operations over the course of 2013. For instance, ongoing cash flow from operating activities is exposed and continues to be exposed to fluctuations in metal prices, production and shipping rates and the A$/US$ exchange rate. See "Risk Factors - Funding Requirements" in the 2012 AIF and "Forward-Looking Statements" below.
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