After securing $3.4 million in loans from the Northern Ontario Heritage Fund and the FedNor Core Industrial Program, Deak Resources (TSE) has been able to complete agreements for a $3-million private placement of 15 million shares at 20 cents per share. The funds will be used to retire a $1.85-million convertible debenture and to bolster the company’s working capital. As part of the transaction, a $3.3-million convertible debenture held by Deak’s major shareholder, Jarden Morgan of New Zealand, will have its term extended by 12 months and its convertibility cancelled in exchange for one million warrants at 33 cents per share.
Deak’s fully diluted share capitalization will increase to 30.9 million shares from 21.2 million shares as a result of the above transactions.
The proceeds of the government-assisted financing will be used to expand the first circuit at Deak’s Kerr gold mill at Virginiatown, Ont., to 2,200 tons per day, from 1,200 tons.
Deak said delays in securing the mill expansion financing has resulted in a costly buildup of broken ore inventory from the Kerr mine. Despite the delays, the mill expansion is expected to be completed by mid-July.
Meanwhile, stepout drilling is continuing on the company’s Magusi base metal property at Rouyn-Noranda, Que., where significant sulphide intersections were obtained below the main deposit. Assays are pending from hole 6, which was recently completed west of the discovery hole while three other stepout holes are under way.
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