Bridge Loans vs Convertible Financing for Mining Companies

Mining companies between capital events face a recurring problem: the business needs cash now, the major capital raise or milestone is months away, and existing funds won't bridge the gap. Two instruments dominate the solution set: bridge loans and convertible notes. Understanding exactly how each works — and when each is appropriate — is essential before signing either.

Bridge Loans for Mining Companies

A mining bridge loan is short-term debt — typically 6 to 18 months — designed to fund operations through to a defined capital event: a royalty close, an equity raise, the receipt of flow-through share proceeds, or the commencement of production cash flows.

How it works: The mining company borrows a defined amount at a fixed or floating interest rate, with a defined maturity date. Security is typically over mining tenements, equipment, and offtake agreements where they exist. Interest accrues over the term and is repaid — along with principal — from the proceeds of the capital event.

When it works best: The capital event is highly probable and has a defined timeline. The royalty negotiation is at term sheet stage. The equity raise has a lead investor. The feasibility study is near complete. A bridge loan provides clean, non-dilutive capital for a defined period — and the company retains 100% of its equity.

The risk: If the capital event is delayed or doesn't close, the bridge loan matures and cash repayment is required. Mining projects slip — timelines extend. A bridge taken with 3 months of contingency can become a default if the royalty close takes 6 months longer than planned.

Convertible Notes for Mining Companies

A mining convertible note is short-to-medium-term debt that converts to equity at a future date — either at a fixed price, at a discount to a future equity raise, or at the election of either party on defined terms.

How it works: The company issues a note bearing interest at typically 8–12% per annum. At maturity (typically 12–36 months), the note converts to equity at the conversion price — either a fixed price set at issuance, or a discount (typically 15–25%) to the price of the next equity raise. The investor receives equity at below-market pricing; the company avoids immediate dilution and defers the valuation conversation.

When it works best: The company expects to raise equity within 12–24 months but cannot currently support the valuation that equity would require. The convertible note buys time — operationally and for de-risking — without forcing a discounted equity raise today.

The risk: Dilution is deferred, not avoided. If the company's valuation at conversion is lower than hoped — or if multiple notes have been issued — the equity dilution at conversion can be substantial. For exploration companies, a large convertible note overhang can suppress the share price precisely when it matters most (before and during a capital raise).

"A bridge loan costs you interest. A convertible note costs you equity. Know which is cheaper before you sign."

Side-by-Side Comparison

Factor	Bridge Loan	Convertible Note
Repayment	Cash at maturity	Converts to equity (no cash required)
Dilution	None	Deferred — occurs at conversion
Interest rate	12–20% p.a. (mining)	8–12% p.a.
Security required	Yes — tenements, equipment	Usually unsecured or lightly secured
Best when	Capital event is near and certain	Equity raise is planned but timing uncertain
Risk if delayed	Default / restructure	Conversion at unfavourable terms
Balance sheet	Adds debt	Adds debt (until conversion)
Investor type	Specialist mining lenders	Mining-focused equity investors

Hybrid Structures: The Best of Both?

Many mining financings combine elements of both. A common structure: a bridge loan with an equity kicker — the lender receives warrants in addition to interest, providing upside participation if the project succeeds. This reduces the cash interest rate (because the lender accepts some return in warrants) while keeping the primary instrument as debt rather than equity. For lenders with equity mandates, this structure aligns incentives effectively.

Another common hybrid: a convertible note with a floor price — the conversion cannot occur below a defined share price, protecting existing shareholders from conversion at a severe discount. Floor prices limit dilution in downside scenarios and are standard in well-negotiated convertible structures.

What Determines Which Is Right?

The core question is: how certain is the capital event, and what is the timeline? If the royalty close or equity raise is genuinely near and highly probable, a bridge loan is cleaner — no equity overhang, no conversion mechanics, no cap table complexity. If the timeline is uncertain and equity is clearly the destination, a convertible note buys the operational runway without forcing a discounted equity raise today.

OAKRG arranges both mining bridge loans and mining convertible notes, working with mining companies to select the appropriate instrument given their project stage, timeline, and capital structure objectives.

Frequently Asked Questions

A mining bridge loan is short-term debt — typically 6–18 months — used to fund a mining company's operations or development through to a defined capital event: a royalty or streaming close, an equity raise, flow-through share proceeds, or the start of production cash flows. It is repaid in cash from the event proceeds.

A mining convertible note is short-to-medium-term debt (typically 12–36 months) that converts to equity at maturity — either at a fixed price or at a discount to the next equity raise. The company avoids immediate dilution and defers the valuation conversation, at the cost of future equity issued at below-market pricing.

A bridge loan typically charges 12–20% annualised interest and is repaid in cash — no equity is issued. A convertible note typically charges 8–12% interest but converts to equity, often at a 15–25% discount. If the company's equity value grows significantly before conversion, the convertible note is significantly more expensive in equity terms.

Mining bridge lenders typically take security over mining tenements, mineral claims or mining leases, equipment, cash accounts, and offtake agreements where they exist. For early-stage projects without production, security is predominantly over the tenements and IP of the project.

Yes — but lenders and investors will scrutinise the total debt load and dilution overhang carefully. Multiple convertible notes with overlapping conversion terms can create a significant equity overhang that suppresses share prices and complicates future equity raises. Capital structure should be managed holistically.

An equity kicker is a warrant package attached to a bridge loan — the lender receives the right to purchase shares at a fixed price in addition to interest. This reduces the cash interest rate (the lender accepts some return in equity upside) while keeping the primary instrument as debt.

A floor price (or conversion price floor) sets a minimum share price at which a convertible note can convert. Conversion cannot occur below this price — protecting existing shareholders from conversion at a severe discount if the share price has fallen. Floor prices are standard in well-negotiated convertible note structures.

Convertible notes create an overhang — the market knows additional shares will be issued at conversion, typically at a discount. This can suppress the share price in the period before conversion, particularly if the note is large relative to market cap. For this reason, convertible notes should be sized carefully and conversion terms should be structured to limit share price pressure.

Ready to Finance Your Mining Project?

OAKRG arranges capital for mining companies at every stage — from early exploration through to production finance. Bridge loans, convertible notes, royalty financing, project debt, and IPO advisory across gold, silver, copper, lithium, and critical minerals.

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