Blackham Resources has signed up Hartleys as lead manager for a $36 million capital raising that will be priced at just 4 cents per share, while mining contractor MACA has agreed to lend $14 million and take equity in the struggling gold producer.
Existing Blackham shareholders will have their stake in the company heavily diluted as the company will issue approximately 900 million shares through its entitlement offer, more than double the current stock of 359 million shares.
Maca, Pybar Mining Services and current lender Orion have agreed to sub-underwrite the $36 million capital raising to the tune of $13 million.
This is effectively a debt-for-equity swap by all three parties.
Under the planned two-for-five entitlement offer, priced at 4 cents per share, one free attaching listed option, exercisable at 8 cents, will be issued for every two shares issued.
The pricing compares to the 68 cents per share at which Blackham raised $25 million in February last year.
Blackham’s shares have been suspended since December and last traded at 10.5 cents.
Hartleys has been appointed as lead manager and is expected to sign an underwriting agreement this week.
Maca has provided sub-underwriting commitments for up to $8 million in exchange for a reduction in trade debts payable to the mining contractor, while Orion and Pybar will sub-underwrite $2.5 million each in a similar exchange.
Blackham also announced that Maca had agreed to lend $14.3 million to Blackham, so the miner can pay off a $14 million loan to Orion.
Under the Maca loan, Blackham will not make any principal repayments until March 2019 with an initial interest rate of 10 per cent per annum.
Blackham is carrying a further $23 million debt to Orion, which will be reduced to $20.5 million following the entitlement offer.
Blackham’s recently appointed executive chairman Milan Jerkovic said the recapitalisation was a step forward.
“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,” he said
“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 also announced the appointment of Greg Fitzgerald to the board.
Mr Fitzgerald had worked as chief financial officer and secretary at Resolute Mining for the past 15 years before resigning last year.
Linton Kirk and Jonathan Lea will join a newly created technical advisory committee.
Mr Kirk has been a non-executive director at Maca since 2012 and has worked as a mining consultant for the past 20 years.
Mr Jerkovic will receive a fixed remuneration of $25,000 per month and 10 million zero exercise price options.
Maca's share price was unchaged at $1.80 today.