Blackham turns cash flow positive, locks down new debt
After achieving its first month of positive cash flow in December, Blackham Resources has received a financial fillip from its primary mining contractor, MACA Ltd, who has agreed to support the company’s recapitalisation strategy with a $14.3 million loan that Blackham will use to pay down debt to current lender Orion Mine Finance.
The West Perth-based gold miner said in a market update this morning that the $14.3m loan had been secured on commercial terms and would be used to repay Orion’s $14.8m debt that was due to mature on 31 December last year but had been extended to the 15th of January 2018.
The deal comes at a critical time for Blackham who struggled with production at the Wiluna Gold project last year but appear to have turned a corner in December.
The funding announcement comes barely a week after Blackham announced a significant turnaround in production in December after the company was rocked by delays as a result of pit wall slippages and debilitatingly high stripping ratios of up to 26 to 1 in the September quarter.
Blackham mined as much gold in the month of December as they did during the entire September quarter and announced 10 days ago that the company was building high-grade stockpiles for the first time in almost a year.
Blackham achieved record fortnightly gold production in the last two weeks of 3294 ounces and have set themselves a target of producing 250,000 ounces of gold from free milling reserves over the next
A total of 8,038 ounces of gold was mined in December for production of 5,500 ounces with the rest going to stockpiles to kick off the current quarter.
The company was able to stockpile 51,000 tonnes of ore grading 1.6 grams per tonne in December and reduce its stripping ratio to an impressive 10.5 to 1 in the December quarter and as low as 4.8 to 1 in December itself. The company says it expects stripping ratios to stabilise at around 7 to 1 over the next 3.5 years producing an all in sustaining cost per ounce of between AUD$1100 and AUD$1200 an ounce.
Importantly, Blackham appear to have achieved positive cashflows for the first time in December with an all in sustaining cost per ounce of $1359.
The company’s aim of producing 250,000 ounces of gold from free milling ore during the next 3.5 years was given further financial impetus today with the news that Orion, MACA and a former contractor, Pybar, will jointly underwrite $13m of a $36m rights issue to be underwritten by Hartleys.
The gold miner said the rights issue would be issued at 4c a share, with one 8c option to be issued for every two new shares taken up by shareholders.
Blackham said Orion had agreed to underwrite up to $2.5m of the entitlements issue and MACA and Pybar up to $10.5m. Blackham chairman Milan Jerkovic has also agreed to sub-underwrite up to $500,000 of the entitlements issue.
In its most recent market update Blackham management said; ‘Significantly, the Company will maintain a sound cash position once the Entitlements Issue is complete and all relevant payments have been made, with cash set to remain at all times above $15 million during 2018.”
The company also announced that Greg Fitzgerald will join the board as a non-executive director and Linton Kirk and Jonathan Lea will join a newly formed technical advisory committee mandated to further de-risk and optimise current operations.
Blackham’s Chairman, Milan Jerkovic, commented: “The refinancing of the Orion Term Loan, together with the alignment of key stakeholders, marks a significant milestone which now allows the Company to move forward with the final stage of our recapitalisation strategy. This will ensure that Blackham is well funded with a strong balance sheet to enable it to focus initially on a simple free milling mine plan at its Matilda-Wiluna Gold Operation as it transitions to a period of stable gold production, having recently accessed high grade ore zones, delivered record gold production and achieved a step-change in project economics.”
“The Company plans to repay the remainder of its Orion facilities and normalise working capital using internally generated cash flows by the end of 2018, targeting a net-cash position by the end of the calendar year, whilst continuing exploration aimed at lengthening and improving the free-milling mine plan.”
“We appreciate the strong support that each of Orion, MACA and PYBAR have given us in order to affect our recapitalisation strategy.”
MACA Managing Director Chris Tuckwell said: “We are pleased to be able to provide this support to Blackham. Following successful completion of the Entitlements Issue, Blackham will be well positioned to execute its forward plans. We look forward to continuing to work with Blackham for many years to come.”
Blackham Resources (BLK)
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