Yukon-Nevada Gold (YNG-T) shares saw a healthy boost following first quarter results and a recent $59-million financing, which will be used to upgrade its Jerritt Canyon gold mine in Nevada.
A day before Yukon-Nevada announced its first quarter results, the junior said it would rake in $44.9 million from its share purchase warrants, and another $14.4 million from a private placement with Deutsche Bank for a total of $59.3 million.
The financing would allow the company to finish its capital expenditure and upgrade program at the Jerritt Canyon mine, which consists of a milling facility and two underground mines: Smith and SSX.
The company estimates that SSX would produce 1,200 tons a day, once it is up and running.
Currently, the Smith gold mine churns out 1,000 tons per day, since restarting in late 2009 after some delay.
Yukon-Nevada says both mines combined would generate 2,200 tons daily grading 0.22 oz. gold per ton.
However, the miner plans to increase production by adding ore purchased from Newmont Mining (NMC-T, NEM-N) and from its stockpile to move throughput to 4,000 tons per day, which would help the company reach its first production milestone of generating 150,000 oz. gold per year by the end of 2011.
The Jerritt Canyon mine produced 14,447 oz. gold in the first quarter, which was about 30% less than the previous quarter’s production of 18,770 oz. The company says the reduction resulted from severe winter conditions and a lack of materials and supplies, which led to shutdowns during the period.
The company sold 13,650 oz. of gold from Jerritt Canyon for about US$19 million for the first quarter. This is a boost from gold sales of US$10 million on 9,108 oz. sold in the first quarter of 2010, but lower than the fourth quarter’s sales of US$29.8 million.
However, the miner saw a profit of US$28.9 million in the first quarter, compared to a loss of US$41.9 million in the year-ago period. Yukon-Nevada says the profit came thanks to a US$51-million gain in the “fair value of warrants recorded as derivative liabilities.”
In March, the company reduced the exercise prices of its unlisted share purchase warrants for a 30-day period, ending on April 13, 2011. In that period, about 59 million warrants were exercised for $12.5 million.
Following the April 13 deadline, the company said on May 24 that Orifer, a major shareholder of Yukon-Nevada, agreed to transfer its current warrant holdings for a nominal amount to several institutional investors including Deutsche Bank, on the condition that the warrants would be exercised immediately.
The bank will exercise 80 million warrants for $25 million, and other investors will exercise 60.4 million warrants for proceeds of $19.3 million.
Deutsche Bank also agreed to buy 33.5 million units at 43¢ apiece for $14.4 million in a private placement. Each unit contains one Yukon-Nevada share and one warrant, which would have a two-year term and is exercisable for one share at 55¢. The private placement still requires regulatory approvals.
On the first quarter news, the company’s shares jumped 31% to 56¢ on 1.5 million shares traded. A day before, its shares gained 2% on the financing news.
The junior has a 52-week trading range of 19¢-95¢.
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