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Blackham locks in upsized $61m financing with major commodity trader
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Special Report: Blackham Resources is making good on its promise to strengthen its balance sheet and start growing gold production with an updated multi-million-dollar financing deal.
Blackham (ASX:BLK) is putting in place the first part of its five-pronged strategy to turn the company around, with Mercuria Energy Group agreeing to now provide the company access to up to $61m.
Mercuria is one of the four largest privately held commodity traders globally, operating in over 50 countries. Founded in Geneva, Switzerland, Mercuria has hubs in London, Dubai, Singapore, Shanghai and Houston.
The deal includes an initial $21m via a prepaid swap on gold with a supporting hedge facility, and a commitment for a further $40m.
The updated terms of the facility better aligns the drawdown of funds to Blackham’s current proposed capital expenditure commitment timeline.
It gives Blackham the flexibility of drawing a further $40m, if required and subject to Mercuria credit approval, to further advance the stage one expansion of its Wiluna gold mine in Western Australia.
“This is really just another instalment in being able to take us further up the path to put the capital in to fully develop the geological potential of this asset,” executive chairman Milan Jerkovic told Stockhead.
“It also marks another significant group that is prepared to support this asset, which clearly has had a troubled history in the last couple of years. This gives the other shareholders confidence that there’s other people that see the value in this as we do.”
Part of Blackham’s strategy is implementing a solid mine plan and building an inventory of longer dated resources.
And the beauty of the Wiluna mine is that it already has a multi-million-ounce resource, but that has only been drilled down to 500m – there remains significant potential at depth as demonstrated by recent high-grade drilling results.
To give an indication of the size potential, the mine has already produced more than 4 million ounces of gold and has a resource of 6.4 million ounces, with real potential for multi million ounces still to be found under the head frame.
In addition to the Wiluna mine, there’s also three other known systems within the landholding – with a potentially large Wiluna lookalike among them.
Perfect timing
And Blackham couldn’t have picked a better time to grow gold production, with the price of the precious metal touching a near seven-year high this week.
As part of the prepaid swap facility, Blackham has negotiated a favourable, ongoing hedging deal with Mercuria that will see about 34,000oz of gold hedged at prevailing spot gold prices over a 12-month period as a condition of the drawdown.
“I think the gold price means that we are trying to grow the company at a time when the external market is also favourable to us and we just got to get on with it and deliver,” Jerkovic said.
“The COVID situation has meant that our physical construction work is delayed by about six months anyway because you don’t want to start work while there’s travel restrictions in place.
“So it gives us time to strengthen the mine plan and put more reserves on the table.”
Boosting production
Part of Blackham’s growth plan involves processing the sulphides into a gold concentrate, a move that will raise annual production to 110,000-120,000oz.
Jerkovic says the goal is to start producing gold in concentrate by September next year, giving the company two streams of product and revenue.
Blackham’s plans have been substantially progressed with seven rigs drilling on site — five of those rigs are drilling at the Wiluna Mining Centre to assist with the mine planning and resource/reserve conversion.
Work is expected to be completed by the end of this year.
Jerkovic said securing the new deal with Mecuria was an excellent result for Blackham because, along with the $52m equity injection early this year, it provides important funding for the stage-one expansion.
“The ability to upsize the prepay amount by up to an additional $40m, and to align this to our revised capital requirement timetable on the stage-one sulphide extension, gives us real flexibility to finish the stage-one expansion and fast track studies for stage two,” he told investors today.
The initial funding from Mercuria, together with the $52m equity funding completed last month, allows Blackham to advance its 24-month, five-point strategy which involves:
- Strengthen the balance sheet;
- Maintain and increase immediate operational cash flow;
- Transition to include gold concentrate production;
- Expand production; and
- Undertake exploration and feasibility studies to fully develop a more than 250,000oz per annum, long life, gold operation.
