http://www.ntnews.com.au/article/2008/09/26/6168_nt-business.html...

http://www.ntnews.com.au/article/2008/09/26/6168_nt-business.html



Tanami Gold in $7.7m bailout

ALISON BEVEGE

September 26th, 2008

TANAMI Gold has taken an emergency loan to keep its Coyote gold mine running.

There are fears the company, which employs 70 full-time staff, could fall victim to the credit crunch.

The company needs the money to pay for the ongoing expansion of the underground section of the mine, 13km from the NT border in WA.

It is digging down to high-grade ore of up to 1117g/tonne, but executive chairman Denis Waddell said the costs of materials and labour had increased while delivery times had lengthened.

"As the cost base has risen significantly, we've been impacted by that,'' he said.

Over the last few months the gold miner has moved from using a contractor to employing workers directly to mine the gold.

But site issues including a delay in the development of the decline reaching down to the high grade ore have hurt cash flow.

The company announced last week an agreement to take short-term unsecured loans worth $HK49.5 millon, ($A7.7 million) from Chinese financier AP Finance Limited, so it could reach the high-grade ore and become "cash-flow positive''.

But due to the credit crunch it is difficult to borrow, especially unsecured funds, and the terms are steep.

After paying the Hong Kong-based firm establishment fees of almost $A400,000, Tanami must then pay an interest rate of 15 per cent per annum, payable every three months.

The loans must be repaid by September 30 next year -- or at any time within 60 days of the lender demanding repayment.

But Mr Waddell said it was worth it.

"If we don't get the loan, we'd have to shut the mine.''

He said the terms of the loan reflected the cost of capital in the seized-up credit markets.

"A lot of companies can't get loans at all.''

To raise a further $11.79 million in funds, Tanami has turned to shareholders with an entitlements issue.

All shareholders would be able to purchase two shares for every one they own, with about 2.3 billion new shares issued at 0.5c per share.

Funds raised would repay loans at Coyote.

Mr Waddell said thanks to the cash injection the company should reach its ore and become cash-flow positive within a few months.

The company has appointed Graeme Sloan as its new managing director and chief executive