Investors have taken a shine to precious metal stocks, and Canadian gold producers are seizing the opportunity to issue new equity.
Since the beginning of the year, the Toronto Stock Exchange’s gold and silver index has jumped 15% compared with a 1.5% advance by the TSE 300 composite index.
During the same period, at least six medium-sized gold companies have announced private placements or rights offerings.
Gold issues are so hot, in fact, that brokerage houses have been falling over themselves to do business with royalty-holder Franco-Nevada Mining (TSE). “After Barrick’s presentation in February . . . our NPI (net profits interest) on the Goldstrike property started to look far more attractive to the street,” says President Pierre Lassonde. “Within five days, we had calls from three brokerage houses who all wanted to make a deal.”
Franco recently closed the offering of one million special warrants, priced at $38 each, and will use the cash to buy bigger royalties.
Other financings completed this year will fund a variety of exploration and development properties stretching from the Canadian barrens to the tropics. Royal Oak Mines (TSE), for instance, expects to use some of the $25 million raised through a private placement of warrants to revive the mothballed Colomac mine in the Northwest Territories.
Viceroy Resource (TSE) will either pay down a portion of its gold or build a grinding circuit at its Castle Mountain mine in California.
Golden Star Resources (TSE) plans to pour $12 million into exploration and development on its gold and diamond properties in Guyana and Suriname. “Whenever gold index peaks, you’ll see new financings,” says Michael Jalonen of Midland Walwyn.
But the soaring index, which topped 6,000 recently, does not reflect gold’s performance. On the contrary, the yellow metal has been languishing in the US$327-to-$335 range for months and recently bottomed at just over US$326 — its lowest level since 1985.
Opinions are mixed, but some analysts believe reflation will soon put an end to the 13-year bear market for gold.
Company Financing Use of Proceeds
Franco-Nevada $38 million Royalty acquisition
Royal Oak $25 million Colomac
Viceroy $22 million Castle Mountain
Golden Star $12 million South American prospects
Crown Butte $11 million New World
Glamis Gold $11 million Baltic project
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