Struggling gold producer Eastern Goldfields has announced a $75 million recapitalisation deal and board overhaul led by private mining services company Adaman Resources.
Struggling gold producer Eastern Goldfields has announced a $75 million recapitalisation deal and board overhaul led by private mining services company Adaman Resources.
Under the deal, Adaman will provide up to $17.5 million of in-kind services to support short-term capital requirements at the Davyhurst operation.
Adaman is owned by mining companies Mitchell Group, SMS Mining Services and Rivet Group.
The gold miner, which will be renamed Eris Gold, has also raised $36.8 million via a share placement and will receive $8.8 million of interim funding via the issue of secured loan notes.
Under the placement, the company will issue 736 million shares at 5 cents each, with a one-for-five free attaching option.
Shares in the company have been suspended since July 23 and last changed hands at 11.5 cents each.
A $9.6 million syndicated loan facility with US investor Hawke’s Point Holdings will be converted to equity on the same terms as the loan notes, while a $2.5 million debt with existing mining contractor Pit N Portal will be converted into shares under the placement.
The recapitalisation comes after the company suspended operations at Davyhurst earlier this month while it finalised a deal.
The miner’s executive chairman and largest shareholder, Michael Fotios, resigned last month.
As part of the recapitalisation, Adaman chief executive Craig Bradshaw will become managing director of the renamed company, while David Quinlivan, Keith Jones and Tony Patrizi will be appointed as non-executive directors.
Mr Bradshaw has led Adaman since July last year and previously served as chief operating officer at gold miner Saracen Mineral Holdings for five years.
He will receive a base salary of $300,000, with a number of performance incentives.
Peter Mansell will remain on the board as non-executive chairman.
Campbell Baird, Craig Readhead and Victor Rajasooriar will all resign as directors following completion of the placement.
Under the deal, Adaman will provide mining services to the company up to a value of $15 million, which will be paid in shares on the same terms as the placement.
The private company has also agreed to participate in the placement to the value of $2.5 million, or provide additional in-kind services to that amount.
Adaman will also partner with Pit N Portal to complete some services.
Mr Mansell said the deal would provide future growth for the company.
“The agreement of the recapitalisation package, together with the alignment of key stakeholders represents a significant milestone and presents a solid platform from which to rebuild the company and deliver profitability and long-term shareholder value,” he said.
“Completion of the recapitalisation will ensure that Eastern Goldfields is well funded with a strong balance sheet to enable it to focus on the development of the company’s significant portfolio of projects in close proximity to the Davyhurst mill.”
The company said the funds raised would be used to pay trade creditors, settle legal disputes, repay the syndicated loan and for capital expenditure at Davyhurst.
The deal is subject to a number of conditions including shareholder approval.
A shareholder meeting is expected to be held in November.
Longreach Capital and Ashanti Capital acted as lead managers to the deal, while Squire Patton Boggs acted as legal adviser.
Turnaround seminar
The Eastern Goldfields deal is the latest of several complex restructurings undertaken by financially stressed Perth companies over the past year.
These deals will be discussed at a seminar next month hosted by the Turnaround Management Association WA.
Its Navigating the Brink seminar will feature former Atlas Iron chair Cheryl Edwardes and Paladin Energy chair Rick Crabb, sharing their insights on steering businesses through ‘near death’ experiences..
Remagen Capital’s Simon Raftery and Oaktree Capital’s Byron Beath will complete the panel.
