Blackham Resources’ new creditor could end up owning almost half the business, in exchange for a $50 million loan.

The gold miner (ASX:BLK) has refinanced debt due in December and is raising another $19.65 million from investors.

But the debt comes with severe terms for existing shareholders, and the raising at 12c a share comes at a considerable discount on past rounds.

Existing shareholders have funded the company to the tune of $80.25 million so far at prices of up to $1 a share.

Blackham has struggled to produce gold cheaply from the Wiluna gold mine in West Australia.

It is yet to produce gold from the Wiluna project for less than it’s selling it for, according to numbers crunched by Stockhead.

Tough terms

The deal is still at term sheet stage and hasn’t been finalised, but Blackham has agreed to pay private equity fund manager Pacific Road Capital a total of 99.4 million options at 14.4c each, in exchange for a $40 million credit line.

That facility will refinance a $37.2 million debt owed to Orion Min Finance.

If exercised, these would hand Pacific Rose up to one third of the company.

There is a further sting in the details: the second, much larger tranche of this option package must be approved by shareholders by the end of March 2018.

If they don’t, the interest rate doubles from 9 per cent annually to 18 per cent.

If Blackham draws down on a second, $10 million standby loan, Pacific Road can receive up to 69.4 million options. These options will be valued at a 20 per cent premium to the 20 day VWAP (volume weighted average price) at the time the lender exercises them.

If exercised, this would give Pacific Road ownership of up to 41.3 per cent of Blackham Resources.

Another $10 million loan to solely pay for Wiluna development costs may also be in the offing.

Disappointing cap raise

The funding deal is a comedown for the gold miner, which last raised money in February at 68c.

Pacific Road will also be buying into a 12c a share private placement with $7.4 million, to be spent on expanding reserves, and partly backstop a $12.3 million rights issue for existing shareholders to be spent on “studies”, transactions costs and working capital.

Blackham has burned over $12 million in each of the last two quarters.

Its shares plummeted 11 per cent to 12.5 on Monday morning after it came out of a three week trading halt, before rising back up to 13.4c.

This followed a 40 per cent share price drop after the quarterly report came out at the end of October.

At the AGM last week investors refused to endorse the remuneration report, with 56 per cent of votes going against it.

Blackham has been contacted for comment.

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