Eldorado drops $275M share offering

Vancouver – Unable to agree on terms with underwriters to get the most bang for its buck Eldorado Gold (ELD-T, EGO-N) nixed a $275 million financing announced Feb. 23.

That day Eldorado said the number and price of shares was still to be set and terms were to include an overallotment of 15% the number of shares issued.

But in a statement Feb. 24 Eldorado president and CEO Paul Wright says that the level of dilution the terms required was unacceptable to shareholders.

Although as of presstime the company could not be reached the financing fall-through may have been a matter of unlucky timing.

The day after Eldorado announced its offering, the price of gold dropped about US$30 per oz. in New York to US$960, its worst day so far in February.

The share price of Barrick Gold (ABX-T, ABN-N), for instance, plummeted more than 10% that day to close at $39.25.

The debilitated price of gold could have made it difficult for Eldorado to get typical financing terms which often see underwriters issued shares at around a 5% discount.

For example Kinross Gold (K-T, KGC-N) recently issued about 24 million shares, including overallotment, and raised US$414.6 million dollars at a share price of US$17.55, a 4.4% discount over the share price the day prior to the announced financing, Jan. 21.

Likewise Red Back Mining‘s (RBI-T, RBIFF-O) Jan. 23 announcement that it would raise $150 million by issuing 20 million shares at $7.50 was about a 4% discount over its Jan. 22 closing share price of $7.81.

Eldorado says it has “no current intention of issuing further equity.”

The company, which produced over 300,000 oz. gold in 2008 from its Kisladag mine in Turkey and Tanjianshan mine in China, is under little financial duress to do so.

It has almost no debt and as of Dec. 31, 2008, it reported having $62 million in cash or $182 million in working capital on hand.

On news of the withdrawal of the financing Eldorado’s share price slipped $1.34 to $10.24. It has about 368 million shares outstanding.