WPG Resources Ltd's (ASX: WPG) wholly-owned subsidiary, Challenger Gold Operations Pty Ltd (CGO), has entered a $20 million secured debt facility with the Byrnecut Group.
Byrnecut Australia Pty Ltd is the mining contractor at the Challenger gold mine in South Australia.
The new facility will allow WPG to develop the Challenger Deeps mining area.
This good news follows WPG recently revealing high-grade gold from the initial near pit exploration drilling at its Tarcoola open-pit gold mine.
Results included a bonanza grade 67.68 g/t gold.
Details of the facility
The $20 million facility has been made available for general working capital purposes and CGO will work with the lender and its affiliated mining consulting arm Mining Plus to deliver an optimised mine plan that puts increased emphasis on near term development into the Challenger Deeps area.
The facility was subject to customary financial, legal and operational due diligence.
All conditions precedent has been met and drawdown of the $20 million is expected to commence before the end of December 2017.
The two year facility carries an interest rate of approximately 20% per annum and will be amortised monthly over the length of the loan.
It will provide the funds necessary for continuation of operations at Challenger.
The improvement in working capital will allow WPG to strengthen its balance sheet leading to a focus on longer term mine planning and development.
Wayne Rossiter, chief executive officer for WPG, commented:
"WPG has flagged to the market the need to inject working capital into our business and in particular at Challenger, to allow the development of the virgin Challenger Deeps area.
"Byrnecut was the contractor at Challenger prior to WPG’s acquisition of the mine and is very familiar with operations at site.
"We are pleased to be working closely with Byrnecut and Mining Plus over the coming months and years, both as contractor and financier, to enhance and optimise mining at Challenger."
Bob Duffin, chairman, added:
"When we bought Challenger, one of our key objectives was to develop into the new mining area known as Challenger Deeps as quickly as possible.
"Up until now we haven’t been able to do this.
"Our plan is to de-emphasise short term high cost remnant mining in the older parts of the mine, and put more focus on developing into the Deeps which have the potential to be mined for many years to come."