How Will Theta Gold’s $120M Loan Propel Its South African Gold Mine?
Theta Gold Mines has entered a non-binding agreement for an $80 million USD senior secured loan to fully fund its TGME Gold Mine Project, aiming for first gold pour in early 2027. The deal includes flexible funding tranches and equity-linked warrants.
- Non-binding $80M USD senior secured loan agreement with Nebari Partners
- Two tranches – $45M available early 2026, $35M optional after 3 months
- Five-year term with interest at SOFR plus 10%, 12-month interest capitalisation
- Warrants issued representing 27% of funded amount at 40% premium
- Funding to complete construction and commissioning of TGME Gold Mine Project
Funding Milestone for TGME Gold Mine
The journey toward establishing South Africa’s next major gold mine has taken a significant step forward. Theta Gold Mines Limited (ASX, TGM) announced it has signed a non-binding term sheet with US-based Nebari Partners for a senior secured loan facility of US$80 million (approximately A$120 million). This funding is earmarked to complete the construction and commissioning of the TGME Gold Mine Project in the Eastern Transvaal Goldfields, a region renowned for its rich gold deposits.
Structure and Terms of the Loan Facility
The proposed facility is structured in two tranches, an initial tranche of US$45 million expected to be available early in 2026, and a second tranche of up to US$35 million accessible at Theta Gold’s discretion after three months, contingent on operational milestones and conditions precedent. The loan carries a five-year term and an interest rate tied to the 3-month Secured Overnight Financing Rate (SOFR) with a floor of 3.75%, plus a substantial 10% per annum margin. Notably, the agreement includes a 12-month capitalisation of interest and an 18-month moratorium on principal repayments, providing breathing room during the critical construction and ramp-up phase.
Equity-Linked Warrants and Security
In addition to the debt facility, Nebari will receive warrants to subscribe for ordinary shares in Theta Gold equivalent to 27% of the funded amount. These warrants are exercisable at a 40% premium to the 20-day volume-weighted average price at signing or announcement and will expire 48 months after each tranche’s funding. The loan will be secured by a first-ranking security interest over substantially all of Theta Gold’s and its subsidiaries’ assets, with subsidiaries acting as guarantors, underscoring the lender’s confidence in the project’s asset base.
Strategic Implications and Market Context
The funding arrangement positions Theta Gold to transition smoothly from construction to production, targeting its first gold pour in the first quarter of 2027. This milestone comes at a time when gold prices have surged above US$4,000 per ounce, potentially enhancing the project’s economics. Chairman Bill Guy highlighted the significance of being "fully-funded," emphasizing the confidence this deal reflects in the TGME project and the management team’s capabilities. The flexible funding structure, including co-lending options, offers strategic financial agility as the project advances.
Next Steps and Risks
While the term sheet marks a major achievement, the agreement remains non-binding pending completion of due diligence, regulatory approvals, and execution of definitive documentation. The company will proceed with extensive legal and technical reviews before finalising the loan agreement. Investors should note the potential dilution from warrants and the conditional nature of the second tranche, which depends on operational milestones. Nonetheless, this funding framework significantly de-risks the project’s path to production.
Bottom Line?
Theta Gold’s near-term funding breakthrough sets the stage for a pivotal production milestone, but final terms and execution remain to be seen.
Questions in the middle?
- Will Theta Gold meet the operational milestones required to access the second tranche of funding?
- How might the issuance of warrants at a 40% premium impact shareholder dilution and market sentiment?
- What are the key risks identified in Nebari’s due diligence that could affect the final loan agreement?
