Under a Heads of Agreement (HoA) between the JV partners, Pacific will seek 100% of the financing required for the project and offer the same financing terms to Bulletin, which will contribute its equity share to finance repayments, hedging requirements and any equity expenditure prior to drawing loan funds.

In exchange, Pacific will take ownership of a further 15% of the Nicolsons project from Bulletin, giving it an 80% stake immediately following the execution of the agreement.

Pacific will continue to sole fund the project until January 1, after which Bulletin will contribute costs correlating to its 20% ownership. Pacific will no longer have to sole fund the first $A4 million in the project prior to earning 80% interest and Bulletin’s cost contribution date will be brought forward.

Bulletin chairman Paul Poli said his party would benefit from the conditions.

“This agreement allows Bulletin the best opportunity to finance its JV requirements and benefit from superior loan terms compared to those it could likely secure in its own right as a minority party,” he said.

“It makes sense to work constructively with Pacific in order to generate the best possible return for our shareholders and minimise any dilution of our share capital.”

The agreement followed a financing proposal secured between Pacific and the Commonwealth Bank of Australia (CBA) on Friday which would provide funds for the refurbishment and development of the project.

Under the proposal CBA would complete a secured gold prepay of up to $A11.5 million and a mandatory hedge facility.

Pacific intends to fund the equity for this facility through a one-for-four rights issue at 5c per share, which would raise about $3.93 million if fully subscribed.

The amount of ounces repayable to CBA is dependent on the gold price once the sale is financed, with the facility to be repaid over 23 months commencing nine months from financial close.

The hedging facility will provide payment for quarterly deliveries over the same period as the secured prepay, expected to be about 20% of forecast production at current gold prices.

Execution of this agreement is subject to due diligence, approvals and the payment of equity by Pacific, while execution of the HoA is subject to approval by CBA.

Shares in Pacific Niugini fell 5% this morning to A5.7c, while Bulletin shares were unchanged at 1.5c.