Gold Hawk Restructures Debt

Gold Hawk Resources (CGK-V, CGHRF-O) has restructured its debt in the nick of time.

One of its lenders has agreed to give the company US$2 million in new funds, repay Gold Hawk’s existing US$9.7-million bank debt coming due on Jan. 29, and restructure all of the loans under a new US$13-million loan facility.

Gold Hawk is responsible for paying back the new loan, which carries an interest rate of 12% per year, in February 2010.

The new money will be used for activities at the Coricancha mine, in the central Andes of Peru about 90 km east of Lima, as well as for general corporate purposes.

Under the terms of the refinancing, Gold Hawk will issue the lender 20 million warrants and grant a 2.5% net smelter return royalty on production from the Coricancha mine. But Gold Hawk has the option to reduce the royalty rate to 1.5% for a payment of US$1 million.

The company also announced it is trying to raise $1 million through a non-brokered private placement of up to 50 million units at 2¢ apiece. Each unit will consist of one share plus a warrant exercisable for an additional share at 5¢ within a year. The financing is expected to close in February.

The Vancouver-based junior acquired its wholly owned Coricancha mine in March 2006. After refurbishing the mine and concentrator, Coricancha reached commercial production in October 2007.

The plant at Coricancha can process about 600 tonnes of ore per day.

The mineralization of the Coricancha operation consists of lowsulphidation, narrow veins containing gold, silver, lead, zinc and copper.

Coricancha has measured and indicated resources of 651,200 tonnes grading 6.5 grams gold per tonne; 200.4 grams silver; 3.17% lead; 3.84% zinc and 0.44% copper.

In addition, the project has an inferred resource of 3.91 million tonnes grading 6.5 grams gold, 261.23 grams silver, 2.56% lead, 3.12% zinc and 0.35% copper.

In early May 2008, management suspended operations at the plant and tailings placement while it investigated nearby ground movements.

Geotechnical consultants later determined the movement was triggered by excessive irrigation by third parties on the hillside above the tailings and processing plant. The irrigation system was then terminated and the ground movement came to a halt at the end of July.

Early last month, Gold Hawk received the final permit necessary to build a permanent tailings facility; the company has all the permits it needs to restart the mine.

Management expects the mine to move back into production in the third quarter of 2009.

In addition to Coricancha, Gold Hawk has exploration properties in northern Peru and Quebec.

News of the refinancing sent Gold Hawk shares up 75% or 1.5¢ to close at 3.5¢ apiece with 14.85 million shares changing hands. At presstime, following news of the private placement, the stock had settled at 2.5¢.

The junior has a 52-week trading range of 1-52¢ per share and has 226.1 million shares outstanding.