Blackham Guarantees its Immediate Survival

Shares in troubled gold miner Blackham Resources tumbled this morning after returning to trade following a month-long suspension prompted by its near collapse.

Blackham shares hit a low of 4.6¢ in early trade before regaining some lost ground to be off 2.5¢, or 23.81 per cent, at 8¢ at 10.50am.

The company announced late yesterday its company-saving $36 million, five-for-two rights issue was fully underwritten after institutional and sophisticated investors rallied to support the raising under sub-underwriting arrangements.

The backing means the miner’s creditors including contractor MACA, former contractor Pybar and financier Orion can wind back their collective underwriting arrangements from $13 million to $4 million.


MACA has also agreed to provide a $14.3 million loan to Blackham to repay a $14.8 million debt repayment owed to Orion, which fell due on December 31.

Domestic and international institutions and professional investors were eager to buy shares in Blackham priced at just 4¢ under the rights issue, which is being managed by Perth broker Hartleys.

Their support provides an insurance policy to guaranteeing the quantum of the $36 million raising even is existing shareholders fail to take up their full entitlements.

Blackham said it would use the cash to repay the balance of its Orion loan ($23 million) by the end of year, achieve strong cashflow from its operations, continue drilling targeting a five-plus year free-milling mine life and end the calendar year in a net cash position.

Executive chairman Milan Jerkovic said Blackham would be well funded with a strong balance sheet after the raising which would enable it to focus initially on a simple free milling mine plan at its Matilda-Wiluna gold operation and enjoy a period of stable production from high-grade ore zones.

He said 2018 would be a transformational year for Blackham with strong operational performance likely to generate significant cashflow and value for the company and its shareholders.

Blackham’s 6.5Moz Matilda-Wiluna operations bled cash last year because of high strip ratios and a lack of access to high-grade ore resulting in average operating costs of $1962/oz.

However the company advised earlier this month it had recently accessed high-grade ore zones, delivered record fortnightly gold production of 3294oz and had achieved a step-change in project economics.

Blackham said operating costs had fallen to $1359/oz in December and it was targeting costs of $1100 to $1200/oz this half.

The company said its cash balance was expected to remain above $15 million throughout 2018.

While milling high-grade ore, it would aslo continue drilling to convert more of its 6.5Moz resource base into reserves and extend minelife.

Shares in the company were suspended before Christmas after private equity outfit Pacific Road Capital pulled out of a $60 million funding package initially flagged in November.

The withdrawal meant Blackham could not meet the $14.8 million due to Orion on December 31.

Orion subsequently agreed to a stay on the repayment to allow Blackham to square away a recapitalisation plan.