When a mining company needs short-term capital — to bridge a funding gap, accelerate exploration, or hit a production milestone before a larger raise — the two most common structures are the bridge loan and the convertible note. They look similar on the surface. Both are short-duration instruments. Both defer the hard questions about valuation. But they behave very differently, and choosing the wrong one can cost you equity, flexibility, or both.
What Is a Bridge Loan?
A bridge loan is short-term debt — typically 6 to 24 months — secured against an asset or expected capital event. In mining, the most common triggers are: a known royalty stream, a permitted project approaching production, or an imminent equity raise. The lender gets a fixed interest rate (often 12–18% annualised in resource lending) and expects full repayment at maturity. There is no equity conversion. The loan is repaid in cash.
Bridge loans work best when you have a clear exit — a definitive agreement with a strategic buyer, a royalty deal in final negotiation, or a confirmed institutional equity round closing within the loan term.
What Is a Convertible Note?
A convertible note is debt that converts into equity at a future event — usually the next financing round — typically at a discount to that round's price (10–25%) or at a capped valuation. It starts as a loan, paying modest or zero cash interest, and the investor's upside comes from owning cheap equity when conversion triggers.
For mining companies, convertible notes are often used in the pre-resource or pre-feasibility stage, where it's genuinely difficult to set a defensible equity valuation. The instrument defers that conversation while still getting capital in.
Side-by-Side Comparison
| Bridge Loan | Convertible Note | |
|---|---|---|
| Instrument type | Secured debt | Debt with equity conversion right |
| Repayment | Cash at maturity | Converts to equity (or repaid in cash) |
| Interest rate | 12–18% p.a. (cash pay) | 0–8% p.a. (often accrued) |
| Dilution | None | Yes — at conversion |
| Security required | Asset, royalty, or project charge | Typically unsecured |
| Typical term | 6–18 months | 12–24 months |
| Valuation needed? | No | No (deferred to next round) |
| Best for | Near-production, clear exit | Pre-resource, early-stage, unclear valuation |
| Investor type | Credit funds, family offices, resource lenders | Angel investors, early-stage VCs, strategic backers |
Which Is Right for Your Mining Company?
Common Mistakes
The most frequent error is using a convertible note because it feels easier — no valuation fight, no security negotiation — when the company actually has sufficient assets and a clear exit to support a bridge loan. The result: unnecessary dilution that compounds over multiple rounds.
Equally, mining companies sometimes pursue bridge loans when their timeline is genuinely uncertain. If your production date slips six months and your bridge loan matures, you're in a forced refinancing — often on worse terms.
OAKRG typically recommends a bridge loan for producing or near-producing assets, and a convertible note (or royalty financing) for earlier-stage projects where cash flow visibility is limited.
Not Sure Which Structure Fits?
OAKRG works with businesses across mining, data centers, manufacturing, and trade — matching deal structure to the right capital source. Tell us what you're trying to achieve.
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