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Great Basin Gold (TSE:GBG)(AMEX:GBG) said Wednesday it has been notified that Tranter Burnstone Ltd., its Black Economic Empowerment partner for its Burnstone mine in South Africa, is currently in default of their loan agreement with Investec Bank.

Under the loan agreement, ZAR 200 million ($27 million) was borrowed to partly fund the purchase of 19.94 million treasury common shares in Great Basin Gold in 2007.

The default is due to an approximate ZAR 45 million ($6 million) unfunded cash margin call as a consequence of the decline in the value of the Great Basin Gold shares serving as collateral for the loan.

Of the company's existing guarantee of R140 million ($19 million), ZAR 14 million ($1.82 million) remains available to meet the unfunded cash margin, it said.

Great Basin also said in a statement that it is seeking, through ongoing discussions with Investec and Tranter, to assist Tranter in fixing the default position and meeting their future loan obligations. The company said Tranter is owned by historically disadvantaged South Africans.

"While the outcome of the discussions is uncertain, the company does not expect the outcome of these discussions to affect its current compliance with the Mining Charter or near term cash flow."

Earlier this month, Great Basin Gold said it agreed to a C$50 million bought deal financing.

The company said it entered into the agreement with a syndicate of underwriters led by RBC Capital Markets, who will purchase, on a bought deal basis, 61 million Great Basin common shares at a price of 82 cents each. The new funds will be used toward working capital for the development and ramp up of the company's Burnstone Mine in South Africa.

The company also gave last week an operational update on its Burnstone Mine. It said "significant progress" had been made on the ramp-up in drilling since the end of December last year, with the water issues resolved and reef development rates achieving planned levels of 40 metres per month.

Burnstone is the first greenfield operation to come online in South Africa's Witwatersrand Basin in 30 years.

Great Basin Gold said that square metres available for stoping at the South African mine were up 71 percent to 12,356 square metres, with an additional 6,000 square metres partially developed.

Underground productivity has been improving through de-bottlenecking and infrastructure development, and Burnstone is expected to be cash flow positive - after capital investment - by early in the third-quarter of 2012.

Burnstone's production targets for the coming year are 90,000 to 100,000 ounces gold at a cash cost of $900 to $1,000 per ounce, Great Basin Gold said.