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Blackham Resources raising $36 million to support gold growth strategy

Published: 09:24 23 Jan 2018 AEDT

Gold bars
High grade ore is being accessed at the Matilda-Wiluna project

Blackham Resources Ltd (ASX:BLK) expects the $36 million to be raised in a fully underwritten rights issue will underpin growth of its gold operations in Western Australia.

The launch of the 5:2 renounceable rights issue is the final step in Blackham’s recapitalisation strategy.

The company will maintain a sound cash position once the issue is complete and all relevant payments have been made, with cash expected to remain above $15 million during 2018.

READ: Blackham Resources implements initial stages of recapitalisation strategy

It has received strong demand from its domestic and international institutional and professional investor network to participate in sub-underwriting the issue.

Milan Jerkovic, executive chairman, said: “It is very pleasing to see the level of interest in the entitlements issue received during the sub-underwriting process as well as the high quality of investors that have entered into sub-underwriting agreements.

“With the issue fully underwritten, we can now move forward with the final stage of our recapitalisation strategy.

“Blackham will be well funded with a strong balance sheet to enable us to focus initially on a simple free milling mine plan at the Matilda-Wiluna Gold Operation and enjoy a period of stable gold production having recently accessed high grade ore zones.

Company at “exciting stage”

“The company is at an exciting stage, with 2018 expected to be a transformational year of strong operational performance that is likely to generate significant cash flow and value for Blackham and its shareholders.”

During 2018 the company intends to achieve strong cash flow generation from operations and end the year in a net cash position.

Debt repayment plan

By the end of the year it also aims to repay the $23 million project financing facility with Orion Fund JV Limited, which will stand at $20.5 million after the Entitlements Issue.

This year will also see Blackham continue exploration drilling targeting an ongoing five-plus year free-milling mine life.

The entitlements issue is for up to 897 million new shares on the basis of five new shares for every two existing shares held by eligible shareholders at an issue price of $0.04 per new share.

It also includes one free attaching listed $0.08 option expiring on 31 January 2019 for every two new shares issued.

Reduction in sub-underwriting commitments

MACA Limited, Orion Fund JV Limited and PYBAR Mining Services Pty Limited originally agreed to provide sub-underwriting pre-commitments of up to $8 million, $2.5 million and $2.5 million respectively.

However, the high level of demand for sub-underwriting resulted in an agreed reduction in the commitments to $4 million.

Each had the opportunity to further reduce their commitments, but elected to maintain their participation in the issue.

Additionally, the company’s chairman has committed to sub-underwrite up to $500,000.

The suspension of trading in Blackham securities will be lifted today and trading of the new shares is expected to begin on Tuesday, 20 February 2018.

READ: Blackham Resources accesses high grade ore at gold operation

Blackham is entering a lower risk period of production at Matilda-Wiluna in Western Australia.

It will initially focus on free milling gold production with an expected stripping ratio of 7:1, which is less than half of recent levels.

This is expected to provide a step change in project economics.

In conjunction with continued access to high grade ore zones supported by extensive grade control drilling, this will provide ongoing mill supply and continued growth in high grade stockpiles.

Due to available carried forward tax losses, Blackham does not expect to pay income tax during the current free milling plan.

Exploration drilling to increase

This cash flow will ensure there is an increased level of exploration drilling going forward, focused on identifying additional free milling mineralisation.

Blackham also aims to increase the 1.2 million ounce gold reserve by converting more of the large resource base of 65 million tonnes at 3.1 g/t gold for 6.5 million ounces.

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