Manuka’s Debt Deal Cuts Costs but Hinges on Shareholder Approval
Manuka Resources has restructured A$18.2 million of trade finance debt with Tennant Metals, converting part to equity and easing its capital costs ahead of a major silver production ramp-up in 2026.
- A$6.4M of debt converted to equity at A$0.075 per share
- US$7M restructured into subordinated debt facilities with 14% interest
- Balance of trade finance debt cancelled, reducing cost of capital
- Tennant Metals to receive warrants and a capitalised fee
- 10-year production plan targets 19Moz silver and 47koz gold starting Q1 2026
Debt Restructuring Details
Manuka Resources Limited (ASX – MKR) has reached a pivotal agreement with Tennant Metals South Africa to restructure its A$18.2 million trade finance debt. The deal converts A$6.4 million of this debt into equity at a share price of A$0.075, matching the recent capital raising price, subject to shareholder approval. Additionally, US$3 million (approximately A$4.6 million) will be restructured into a two-year subordinated debt facility bearing 14% annual interest, while a further US$4 million (around A$6.1 million) will become a subordinated working capital facility with similar terms.
The remaining balance of the trade finance debt will be cancelled, effectively reducing Manuka's overall debt burden and lowering its cost of capital. Tennant Metals will also receive a one-off capitalised fee of 2% on the US$3 million term facility and approximately 22.5 million warrants exercisable at 12 cents per share, expiring in December 2026, pending shareholder approval.
Strategic Implications for Manuka
Executive Chairman Dennis Karp highlighted the significance of this restructuring, noting the conversion of debt to equity at a 50% premium to the current share price as a strong vote of confidence from Tennant Metals. This move not only strengthens Manuka’s balance sheet but also frees up cash flow to accelerate project development and exploration activities.
Manuka’s focus remains on its precious metals assets in the prolific Cobar Basin, particularly the Wonawinta Silver Mine. The company recently unveiled a comprehensive 10-year production plan aiming to produce 19 million ounces of silver and 47,000 ounces of gold. This plan leverages existing infrastructure, including a 1 million tonnes per annum processing plant, with first production targeted for late Q1 2026.
Financial Outlook and Market Position
The production plan is forecast to generate approximately A$589 million in EBITDA and an NPV of A$349 million, underscoring the project’s robust economic potential. The restructuring deal with Tennant Metals aligns well with these forecasts by reducing financing costs and improving liquidity, which are critical as Manuka prepares to transition from development to production.
Tennant Metals, a diversified metals trading and mining investment company with a strong presence in Africa and strategic interests in Australia, continues to play a key role as both lender and shareholder. Their support through this restructuring signals confidence in Manuka’s near-term operational prospects and long-term value creation.
Looking Ahead
With shareholder approval pending for the equity conversion and warrants issuance, Manuka’s next steps will focus on executing the subordinated debt facilities and advancing its production milestones. The company’s ability to deliver on its production targets will be closely watched by investors eager to see tangible returns from the Cobar Basin assets.
Bottom Line?
Manuka’s debt restructuring clears the path for a major silver production push, but execution risks remain as shareholder approvals and project milestones loom.
Questions in the middle?
- Will shareholders approve the equity conversion and warrants issuance as planned?
- How will fluctuations in silver and gold prices impact the financial forecasts?
- Can Manuka meet its targeted production start in late Q1 2026 without delays?
