The convertible note had an issuer undertaking of "The Company...

The convertible note had an issuer undertaking of "The Company will not incur new bank or structural debt until the Future Raising is announced by the
Company to ASX, other than a $2 million overdraft
facility and any debt (excluding any structural debt)
incurred in the ordinary course of business".
So, further debt is not an option for AXO without crystallising the 'option' held by the current notes. Options which appear to be open to AXO re getting required monies to start Balla Balla (>$500M) are:
1. Issue only shares.
2. Sell some of the company to a group that is prepared to tip in ALL the money to get it going and live with the resulting dilution (as suggested by GG).
3. Shares/debt, requiring crystallising of the current AXOG 'option'
4. Wait until after note redemption (June 30, 2010) to raise money.

Greater leverage might indeed be found in AXO under the right conditions, but greater security is offered by AXOG, in addition to the potential 'bonus' I've discussed.

I hold AXOG only.