Great Basin Gold (TSE:GBG)(AMEX:GBG) said Wednesday it has been notified that Tranter Burnstone Ltd., its Black Economic Empowerment partner for its Burnstone mine in South Africa, is currently in default of their loan agreement with Investec Bank.
Under the loan agreement, ZAR 200 million ($27 million) was borrowed
to partly fund the purchase of 19.94 million treasury common shares in Great Basin Gold in 2007.
The default is due to an approximate ZAR 45 million ($6 million)
unfunded cash margin call as a consequence of the decline in the value
of the Great Basin Gold shares serving as collateral for the loan.
Of the company's existing guarantee of R140 million ($19 million),
ZAR 14 million ($1.82 million) remains available to meet the unfunded
cash margin, it said.
Great Basin also said in a statement that it is seeking, through
ongoing discussions with Investec and Tranter, to assist Tranter in
fixing the default position and meeting their future loan obligations.
The company said Tranter is owned by historically disadvantaged South
"While the outcome of the discussions is uncertain, the company does
not expect the outcome of these discussions to affect its current
compliance with the Mining Charter or near term cash flow."
Earlier this month, Great Basin Gold said it agreed to a C$50 million bought deal financing.
The company said it entered into the agreement with a syndicate of
underwriters led by RBC Capital Markets, who will purchase, on a bought
deal basis, 61 million Great Basin common shares at a price of 82 cents
each. The new funds will be used toward working capital for the
development and ramp up of the company's Burnstone Mine in South Africa.
The company also gave last week an operational update on its
Burnstone Mine. It said "significant progress" had been made on the
ramp-up in drilling since the end of December last year, with the water
issues resolved and reef development rates achieving planned levels of
40 metres per month.
Burnstone is the first greenfield operation to come online in South Africa's Witwatersrand Basin in 30 years.
Great Basin Gold
said that square metres available for stoping at the South African mine
were up 71 percent to 12,356 square metres, with an additional 6,000
square metres partially developed.
Underground productivity has been improving through de-bottlenecking
and infrastructure development, and Burnstone is expected to be cash
flow positive - after capital investment - by early in the third-quarter
Burnstone's production targets for the coming year are 90,000 to
100,000 ounces gold at a cash cost of $900 to $1,000 per ounce, Great Basin Gold said.