Chap Mercantile raises $70 million (August 06, 2004)

Chap Mercantile (CPC-V) has privately placed 175 million subscription receipts at a price of 40 each for gross proceeds of $70 million.

The financing is part of Wheaton River Minerals‘ (WRM-T) plan to sell Chap all the silver produced from its Luismin operations in Mexico. That deal calls for Chap to pay $262 million in cash and shares up front plus US$3.90 or the prevailing market price (whichever is less) for each ounce of silver delivered (T.N.M., Jul. 26-Aug. 1/04).

The funds raised by Chap, which will be renamed Silver Wheaton, will, less $1 million, go toward the Luismin acquisition. The shares issued to Wheaton will be subject to a 4-month hold period.

Originally, the Chap financing was planned to max out at $50 million, but was boosted to $70 million thanks to excess demand.

Each subscription receipt allows the holder to buy one Chap share plus half a five-year warrant at no additional consideration; each warrant is good for an additional share at 80 apiece. The securities carry a 4-month hold period.

Proceeds from the placement will be held in escrow pending completion of the Luismin transaction, which is subject to the signing of definitive agreements, and the approval of regulators and Chap shareholders. The deal is expected to wrap up in early September.

Of the total proceeds, $46 million will be applied to the upfront cash payment due Wheaton River; the remaining $19 million will be used by Chap to pursue acquisitions and for general corporate purposes. The group of investment dealers that arranged the financing will receive commissions and fees totalling 6% of the gross proceeds.

In the end, Silver Wheaton will have around 724 million shares outstanding, with Wheaton River holding a 75% stake. The originally planned $50 million financing would have left Wheaton with an 80% interest.

Shares in Chap have moved to tier 2 of the TSX Venture Exchange.