TORONTO (miningweekly.com) – Great Basin Gold will sell C$110-million of senior unsecured convertible debentures for the development of its Burnstone project, in South Africa, the firm announced this week.

Great Basin, which also has a gold project in Nevada, has been trying all year to finalise an R850-million senior debt facility for Burnstone, and said on Thursday that it has now opted instead for a  bought-deal offering of debentures, replacing the proposed debt facility.

“We have been reviewing funding alternatives given the long timeline and restrictions that project debt facilities require,” CEO Ferdi Dippenaar said.

“Due to the extended time it has taken to finalise the facility, as well as the costs and constraints, including high upfront equity contribution and complex associated hedging structures, the company has been evaluating alternative funding options.”

Dippenaar said in August that the crisis in global financial markets had had a significant impact on the process to obtain approval for the project funding facility.

The sale of convertible debentures offers fewer encumbrances on the company's balance sheet, no requirements to hedge gold production and, on a relative basis, comes at a lower cost of capital in a rising gold price environment, he said.

Under the terms negotiated with the syndicate of South Africa banks, Great Basin would have had to put in place a participation collar hedge for about 285 000 oz from Burnstone, or 20% of production over the repayment term.

The debentures will mature on November 30, 2014, and will accrue interest at the rate of 8% a year payable on a semi-annual basis.

The firm has also given its underwriting syndicate, which is led by RBC Capital Markets, an overallotment option to buy up to another 15% of the offering.

The company will use the proceeds of the debentures sale to repay the amounts drawn down on an an advance R200-million loan facility last year provided last year by Investec Bank, and for for project development.

Great Basin plans to start commercial production at Burnstone in June 2010.

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