Carpathian Gold raises $45 million in bought deal

Confidence is mounting in Carpathian Gold‘s (CPN-T) gold projects in Brazil and Romania. A syndicate led by Cormark Securities and including Canaccord Genuity, Haywood Securities and Jennings Capital has agreed to purchase an additional 17.8 million shares of the junior in a bought deal financing for a total of 81.8 million shares.

The syndicate initially agreed to purchase 64 million common shares of Carpathian at a price of 55¢ per share for proceeds of about $35.2 million. With the additional shares (at the same purchase price), the financing jumps to $45 million.

Carpathian also granted the underwriters an option to purchase up to an additional 12.27 million shares (about 15% of the offering) at the same price within 30 days after the Nov. 3 closing date, for additional proceeds of up to $6.75 million.

The money will be used for construction and development of Carpathian’s Riacho dos Machados (RDM) gold project in southeastern Brazil, exploration and development of its Rovina Valley gold-copper project (RVP) in Romania, and for general corporate purposes.

The mid-October financing followed news on Sept. 21 that the Toronto-headquartered company had signed a mandate letter with Macquarie Bank to arrange a project financing facility of up to US$75 million to be used to partially fund the development of RDM. At the same time Carpathian mandated Caterpillar Financial Services to arrange an equipment leasing facility for up to US$22 million for the project.

Carpathian expects to complete a feasibility study on its RDM project, about 540 km north of Belo Horizonte in Minas Gerais state, in the fourth quarter. Measured and indicated resources stand at 17.25 million tonnes grading 1.46 grams gold per tonne for contained gold of 812,300 ounces. Inferred resources add 11.10 million tonnes grading 1.94 grams gold per tonne for contained gold of 692,900 ounces.

Vale (Vale-N) previously operated an open-pit oxide heap leach gold operation (Mina de Ouro Fino) at RDM from 1989 until 1997. “Vale was producing 20,000 ounces per year of oxides (open pit) only at RDM during that period and the price of gold versus production costs became uneconomic so Vale changed direction and focused on base metals only,” explains Mike O’Brien, Carpathian’s manager of investor relations. “There is still a 14 km shear zone open on strike with plunging ore shoots and we plan to drill between these targets and report on mineralization here also.”

Earlier this year in March, Carpathian released results from a preliminary economic assessment of its RVP project in west-central Romania, which indicated average annual production of 196,000 oz. gold and 49 million lbs. copper over a 19-year mine life. Pretax net present value (NPV) was calculated at US$544 million based on a 10% discount rate and a gold price of US$1,000 per oz. and a copper price of US$3 per lb. The internal rate of return came in at 24%.

Rovina has measured and indicated resources of 193.1 million tonnes grading 0.49 gram gold and 0.18% copper for 3.07 million oz. gold and 759.1 million lbs. copper. Inferred resources add 177.7 million tonnes grading 0.68 gram gold and 0.17% copper for 3.89 million oz. gold and 663.1 million lbs. copper.

At presstime in Toronto the junior was trading at 56¢ per share and over the last 52 weeks has traded in a range of 24¢-68¢ per share. Carpathian has about 287 million shares outstanding.