Eastern Goldfields beats administration with $75m lifeline
Eastern Goldfields has again managed to escape administration – this time locking in a $75 million recapitalisation deal.
The struggling gold producer (ASX:EGS) revealed today that it had been promised cash from a number of stakeholders, including institutional investors, secured debt financier Adaman Resources, and trade creditors.
Eastern Goldfields had just $10,000 cash in the bank and $35 million worth of loan facilities — of which around $18.1 million was still outstanding — at the end of June.
The gold miner has been in trouble for some time, last year facing difficulties in paying its contractors.
One contractor even tried to have the junior producer wound up and a liquidator appointed.
But the Supreme Court of Western Australia came to its rescue and it lived to fight another day.
Under the new recapitalisation deal, Eastern Goldfields will receive $8.75 million in interim financing through the issue of secured loan notes.
It has received binding commitments to raise a further $36.8 million via a placement.
Adaman Resources has agreed to provide $17.5 million worth of in-kind services and partner with the existing underground mining contractor at the Davyhurst project to convert $2.5 million worth of outstanding debts.
Lastly, Eastern Goldfields will undertake a 1-for-7 entitlement offer at 5c per share to raise another $5 million.
“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,” chairman Peter Mansell said.
Eastern Goldfields will also restructure its board.
Victor Rajasooriar will resign his post as CEO and Craig Bradshaw will take up the role of managing director.
Campbell Baird and Craig Redhead will step down as directors, to be replaced by David Quinlivan, Keith Jones and Tony Patrizi.
Mr Mansell will remain on as chairman.
Eastern Goldfields is also looking for a sixth director.
To complete its rebirth, the company will change its name to Eris Gold.
Shareholders will vote on the recapitalisation at a meeting in November.