The debenture will bear interest annually at a rate of four percentage points above the London Interbank Offer Rate (LIBOR), and will have a maturity date of six months.
The debentures will be convertible into Tethyan shares on the same terms as the company's next equity financing, provided that Southern Arc's stake does not rise to 30% or above, as this would trigger a mandatory offer for the company.
The loan and convertible debenture are subject to the approval of the TSX Venture Exchange.
Having made alternative financing arrangements, the company will not be proceeding with its previously announced private placement.
Shares in the minerals exploration company were up 3.8% in Canada following the announcement.