Speculation is rising that Blackham Resources is on the cusp of heading into voluntary administration as it extends a trading halt to try to nail down a debt deal.
The company (ASX:BLK) said on Monday that its shares were suspended until December 27 “pending an update to its funding arrangements”.
An analyst spoken to by Stockhead as well as investors on the Hot Copper forum agree the company’s debt problems might be about to unravel.
The gold miner is still negotiating a $50 million loan from Pacific Road Capital and has $14.8 million in debt due by the end of December.
The debt deal terms are harsh, with Pacific Road potentially ending up owner of just under half the company after negotiating a sizeable pool of options for providing the loan.
Blackham is producing gold from the Wiluna mine in West Australia, a prospect that sent the previous owner, APEX Minerals, to the wall and is proving difficult to produce cheaply from.
The miner has been selling its gold at an average price of $1617 an ounce in the last three quarters.
But according to Stockhead calculations, average costs for the first three quarters were about $2200/oz, so the gold miner has lost between $400/oz and $700/oz in each quarter this year.
By the end of September it was burning cash at a rate of $12 million a quarter, and had $1.8 million left in the bank.
A funding arrangement with New York financier Lind Partners in August was supposed to deliver up to $3 million a month in return for equity.
While it appears that an initial $1.5 million was paid out, it’s not clear whether this facility was ever used. It wasn’t used to pay down the $14.8 million debt.
A $12 million entitlement offer was extended from December 15 to December 22.
Stockhead is seeking comment from the company.
Before heading into a trading halt on December 14, Blackham last traded at 10.4c. The company’s shares have traded as high as 83c in February this year.