The company has paid back a $1.75 million loan to former merger partner Metgasco, and will use the balance of the funds ($1.85 million) to meet funding requirements to support negotiations in relation to Elk's Grieve CO2-EOR project obligations, as well as a proposed sale of Elk's Grieve oil pipeline expected to net in excess of $5 million.
The loan terms have an interest rate of 12.5%pa with most interest expected to be accrued for payment in April 2016 either as cash or through conversion to Elk shares.
The conversion price is 3.8 cents, about 60% above Elk's last traded share price of $0.024.
A further 3.95 million Elk shares valued at $94,800 will be issued as a fee for arranging the loan with clients of Singapore-based Republic Investment Management, a company well known to Australian investors, through its investments in Drillsearch Energy and Acer Energy.
Republic is also one of Elk's major shareholders and a supporter of Elk retaining its current EOR project interests in Wyoming and Nebraska.
Several other major shareholders are participating lenders and another major shareholder has expressed interest to get involved in the future. A number of newly introduced investors are also participating as lenders.
The injection of new funds is also accompanied by the company implementing a number of efficiency measures to reduce the company's administrative overheads to below $150,000 per month during times of depressed oil prices and until material cash flows commence from ELK's interest in the Grieve CO2-EOR project.
Discussions continue with Grieve operator Denbury Resources in regard to alternative longer-term funding arrangements and Denbury's obligations for the Grieve CO2-EOR project.
The discussions are expected to facilitate completion of oil transportation agreements for use of Elk's Grieve oil pipeline and the potential sale of the pipeline.
Elk chairman Dr Neale Taylor said the injection of new funds was a clear sign of faith in the company's future, especially considering the premium was paid.
