Southern Gold Ltd (ASX:SAU) has completed the drawdown of a $1 million convertible debt facility from high net worth investors to advance the Cannon and Glandore projects in Western Australia.
The $1 million facility is available as a single drawdown with an 8% interest rate, 2% arrangement fee and repayable by 30 June 2017.
The debt is unsecured but is nominally backed by the issuance of call options with an average strike price of $0.36 per share, expiring on 30 June 2017.
If exercised prior to full debt repayment, proceeds from the options are to be applied to repayment of the loan.
After the drawdown, Southern Gold’s cash position is around $1.56 million.
Southern Gold will use the funds to start diamond drilling at the Cannon Gold Mine, with the intention of extending JORC resources below the open pit, in preparation for potential underground mining.
The company is actively mining at the Cannon Gold Mine where a total 9,978 ounces of gold have been recovered as of the end of January 2016.
Southern Gold will also undertake reverse circulation drilling to advance the portfolio of JORC resource targets at the new Glandore Project, 12 kilometres to the east of Cannon Mine.
The shares of Southern Gold has increased by about 35% since the beginning of 2016.
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