Lundin to raise C$50 million in bought deal financing
Lundin Gold's Fruta del Norte gold project in the Cordillera del Condor near Loja, Ecuador. Credit: Lundin Gold.
BMO Capital Markets will buy 4.15 million common shares of Lundin Gold (TSX: LUG) at C$12.05 per share in a bought deal financing that will raise C$50 million for the Vancouver-based gold miner. The deal includes an overallotment option for up to 15% of the offering.
Newcrest Mining (ASX: NCM), which owns 32% of the company, and Orion Mine Finance, which has an 11% stake, have exercised their rights to participate in the offering. The company says it also expects the Lundin Family trust to participate in the financing to maintain its collective holdings, which currently stand at 27%.
The proceeds will be used to study increased throughput and resource expansion at the company's flagship Fruta del Norte gold mine in south-eastern Ecuador, potential costs related to Covid-19 and for general working capital purposes.
"We have been able to open-up some logistical corridors on May 15 to transport some concentrate we had at the site out to the port," Ron Hochstein, Lundin Gold's president and CEO said in an interview. "We're now preparing ourselves for starting up operations again."
Hochstein noted that the company only had about one month's worth of commercial production before it had to suspend operations on March 21 due to the coronavirus pandemic. "We were already at around 3,500 tonnes per day but we saw there were some great opportunities to increase throughput to at least 4,000 tonnes per day or even more as well as the potential to increase resources at the project," he said.
Fruta del Norte, one of the largest gold deposits in Ecuador, is located in the Zamora-Chinchipe Province, approximately 139 km east-northeast of Loja, the country's fourth-largest city.
The project currently contains indicated resources of 23.8 million tonnes grading 9.61 grams gold per tonne
The project currently contains indicated resources of 23.8 million tonnes grading 9.61 grams gold per tonne and 12.9 grams silver per tonne for 7.35 million oz. contained gold and 9.89 million oz. of silver. Inferred resources add 11.6 million tonnes grading 5.69 grams gold and 10.8 grams silver for 2.13 million oz. of gold and 4.05 million oz. of silver.
Bryce Adams, an analyst at CIBC, says the financing deal "adds [a] buffer to the balance sheet during the coronavirus shutdown," and is "a prudent top-up given a formal re-start plan has not yet been tabled."
The analyst maintains an outperformer rating on the company and forecasts a 12- to 18-month price target of C$14.00 per share.
At press time in Toronto, Lundin Gold was trading at C$11.99 per share within a 52-week trading range of C$5.22 and C$13.49.
The company has around 224 million common shares outstanding for a C$2.69-billion market capitalization.
(Carl A. Williams - This article first appeared in The Northern Miner on March 27)