LONG-TERM DEBT

12 Months Ended

Dec. 31, 2019

LONG-TERM DEBT.

LONG-TERM DEBT

NOTE 11 LONG-TERM DEBT

On August 10, 2018, the Company finalized a $50.0 million senior secured three year term loan facility with Royal Capital Management Corp. (“RoyCap”), as administrative agent, and the lenders party thereto (“Lenders”). An affiliate of Robert McEwen, Chairman and Chief Executive Officer and the beneficial owner of 23% of the Company’s common stock, contributed $25.0 million of the $50.0 million total term loan. The term loan was raised to finance construction of the Gold Bar mine in Nevada and for general corporate purposes.

The loan bears interest at 9.75% per annum with interest due monthly and is secured by a lien on certain of the Company’s and its subsidiaries’ assets. Scheduled payments on the loan are as follows: $2.0 million monthly payments starting in August 2020 for twelve months and a final $26.0 million payment on August 10, 2021. The term loan can be retired in full or in part any time during the first two years upon payment of the outstanding principal and accrued interest plus a fee linked to the remaining life of the loan, and during the third year upon payment of the remaining principal and accrued interest plus a fee equal to 3% of the remaining principal.

The Company incurred $0.9 million in debt issuance costs in connection with the loan, which have been included in the carrying amount of the loan. The loan was recorded at $49.1 million at initial recognition (fair value, net of debt issuance costs) and is subsequently measured at amortized cost using the effective interest method, with the movements for the year ended December 31, 2019 and 2018 as below:

	December 31, 2019		December 31, 2018
Balance, initial recognition	$	—	$	49,092
Balance, beginning of year		49,206		—
Interest expense		5,185		2,037
Interest payments		(4,875)		(1,923)
Balance, end of year	$	49,516	$	49,206
Current portion		(10,000)		—
Long-term portion	$	39,516	$	49,206

The long-term and current portion at December 31, 2019 and 2018 are equally split between debt to related party and third parties.  During the year ended December 31, 2019 and 2018, interest expense of $0.6 million and $0.8 million, respectively, was capitalized in plant and equipment for Gold Bar mine (Note 8). The scheduled remaining minimum interest payments are $4.7 million in 2020 and $2.0 million in 2021.

The Credit Agreement underlying the term loan contains affirmative and negative covenants customary for financings of this type, including, but not limited to, limitations on additional borrowings, additional investments and asset sales. The agreement contains restrictions on the payment of certain distributions to shareholders (see Note 13 Shareholders’ Equity-Shareholder Distributions). The covenants also require the Company to maintain minimum consolidated working capital of $10.0 million and consolidated shareholders’ equity of $120.0 million at the end of each fiscal quarter. On October 28, 2019, the Company amended the terms of the loan facility. The amendment reduces the minimum working capital covenant to $nil at December 31, 2019 and September 30, 2020. The remainder of the agreement remains in full force and effect.