Quadra Raising $75M Ahead Of Merger

In a bought-deal agreement with a syndicate of underwriters, Quadra Mining (QUA-T, QADMF-O) will raise $75.3 million that it will use to refinance existing project debt, compensate project contractors, and complete the development of the Franke project, which will be added to its portfolio following Quadra’s proposed acquisition of Centenario Copper (CCT-T, COPRF-O).

The syndicate will buy 16.2 million shares at a price of $4.65 per share for gross proceeds of $75.3 million.

The offering is conditional on the completion of Quadra’s acquisition of Centenario Copper, which it first announced in early February. The offering is expected to close by April 16.

The underwriters, led by Macquarie Capital Markets Canada and including Raymond James, BMO Capital Markets, GMP Securities and Paradigm Capital, have an overallotment option to purchase up to an additional 2.4 million shares at the offering price, for another $11.29 million.

News of the offering sent Quadra’s shares down 37¢ or 6.9% to close at $4.99 per share, with 2.1 million shares changing hands. (The stock has traded in a 52-week range of $1.97-27.)

The Vancouver-based company has arranged a committed senior secured credit facility for US$37.5 million.

Quadra’s principal assets are its Robinson copper-gold mine near Ely, Nev., the Carlota copper mine in Arizona, the Sierra Gorda advanced exploration copper-molybdenum project in Chile and the Malmbjerg molybdenum development project in Greenland.

Earlier this month, painful pricing adjustments and a hefty writedown resulted in Quadra posting a US$126-million loss for the fourth quarter ending Dec. 31, 2008.

Though it managed to eke out US$38.6 million in earnings for the year, that compares with earnings of US$135 million in 2007.

A US$96-million writedown due to the suspension of its Malmberg molybdenum project in Greenland accounted for the bulk of the fourth-quarter loss.

There were some bright spots, however. Its Robinson copper-gold mine turned in revenues of US$458 million for the year on production of 147 million lbs. copper and 127,000 oz. gold.

Promising too were lower cash costs at Robinson. These were US34¢ per lb. copper lower than 2007 at US$1.15 per lb.

Quadra was also able to scratch US$150 million in senior debt from its books in 2008 with a well-timed equity financing in June that raised net proceeds of US$183.3 million, including a US$19-million overallotment.

Although Quadra ended the fourth quarter with US$107.8 million in cash and equivalents, those were down precipitously from the third quarter by US$158.6 million.

Most of the disappearing cash resulted from US$112 million in pricing adjustments to customers. Quadra president and CEO Paul Blythe noted in a statement that such pricing adjustments are normal “but the amount was exceptional due to the unprecedented fall in the copper price in the second half of 2008.”

With no debt and a strong cash balance, Blythe said Quadra’s “immediate focus is on riding out the downturn in the economy.”