Firstgold in default under $12 million in senior secured promissory notes

By Devika Patel

Knoxville, Tenn., Dec. 23 - Firstgold Corp. is in default in regards to its $12 million in senior secured promissory notes, according to an 8-K filed Tuesday with the Securities and Exchange Commission.

Under the note agreement, the company is required to make monthly principal reduction payments equal to the greater of 40% of its free cash flow in the preceding calendar month and $400,000. The payments were to begin on Dec. 15 and continue each month thereafter.

Firstgold said in the filing that it has not paid the first principal reduction payment of $400,000.

Therefore, as of Dec. 16, the company was technically in default.

As a result of the default, the $12 million principal balance of the notes can be called immediately due and payable and the lenders can charge a default interest rate that is the lesser of 18% or the maximum applicable legal rate per annum.

Additionally, the loans are secured by a first priority interest in all of the company's assets.

As of Dec, 22, the company has not received a formal notice of default.

Firstgold is a mining company based in Cameron Park, Calif.

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