Three mining companies reaping the rewards of large financings
It takes money to make money; mining companies need capital to make acquisitions and conduct exploration. Brien Lundin of Gold Newsletter profiles three companies making the most of recent financings.
Klondex Mines Ltd. (KDX:TSX; KLDX:NYSE.MKT) took a giant step toward completing the acquisition of the Hollister and Esmeralda mines in Nevada. It did so by completing a CA$129.5 million subscription receipt offering.
Expanded from an initial CA$100 million offering, the bought-deal private placement issued 25.9 million subscription receipts priced at CA$5.00 per subscription receipt. Gross proceeds from the offering have been placed in escrow and will be released once all conditions of the Hollister and Esmeralda acquisitions have been satisfied. Should that not happen by November 16, 2016, the funds raised will be returned to the receipt holders.
Once the deal conditions for the mines have been satisfied, receipt holders will need to exercise their receipts (each good for one common share of Klondex). The shares issued from this transaction are subject to a four-month-plus-one-day hold. In addition to paying for the acquisition, Klondex will use the funds raised for exploration at Hollister and Esmeralda and for development at Hollister.
The acquisition will allow the company to grow through both production and exploration and to build on the impressive results from its active Fire Creek and Midas mines, which are also in Nevada.
Those mines delivered a strong Q2/16 to Klondex. The company achieved revenue of $48 million from sales of gold and silver that averaged, respectively, $1,266 per ounce and $16.78 per ounce. Production at the two mines hit a record 41,436 gold equivalent ounces (GEOs), based on 0.44 ounce/ton gold head grades and 5.72 ounce/ton silver head grades.
Management continues to expect production to increase in the back half of 2016 and is maintaining its guidance for Fire Creek and Midas of 145,000–150,000 GEOs for the full year.
All-in sustaining costs (AISCs) per gold ounce sold are projected to be between $1,025 and $1,075. Those AISC projections exclude the money Klondex spent to make a production decision on its True North mine in Manitoba.
The acquisition of Hollister and Esmeralda has the potential to supercharge the company's growth plans and to provide shareholders with even more reasons to smile down the road.
Rye Patch Gold Corp. (RPM:TSX.V; RPMGF:OTCQX) has officially taken ownership of the Florida Canyon gold mine in Pershing County, Nevada.
The company closed on the deal after funds were released from the CA$49.1 million private placement of subscription receipts it conducted in June. Prior to closing, the company also entered into a US$27 million credit facility with Macquarie Bank.
The 223,247,242 subscription receipts were converted to shares on a one-to-one basis and are subject to a four-month hold. Approximately US$23 million of that money was used to purchase the Florida Canyon mine from ADM-Gold Co. Ltd. and other owners. The credit facility will help Rye Patch pay for the redevelopment of the mine.
Rye Patch has pole-vaulted itself into the ranks of potential gold producers with this acquisition. In spite of the dilutive nature of the transaction, I have high hopes for this project and this company. It's still a great bargain and a strong Buy.
In February, Gold Standard Ventures Corp. (GSV:TSX.V; GSV:NYSE) announced that Goldcorp Inc. made a CA$16.1 million strategic investment and OceanaGold Corp. made a CA$13.8 million strategic investment. Not long after, Gold Standard announced a US$13.4 million 2016 exploration program for its Railroad-Pinion project in Nevada.
The release in August of an eye-popping intersection from drilling on its North Dark Star deposit led the stock to rocket higher. A key component of the company's flagship Railroad-Pinion project along Nevada's Carlin Trend, North Dark Star hosts a higher-grade zone discovered last year by Hole 15-13.
Hole 16-08 from this year's program was drilled 100 meters to the south of Hole 15-13, and it managed to top that hole's impressive results, cutting an uber-long 126.2-meter interval of 3.95 grams/tonne (3.95 g/t) gold. That intersection included higher-grade intervals of 4.70 g/t gold over 44 meters, 5.6 g/t gold over 17.9 meters and 10.7 g/t gold over 7.9 meters.
The mineralization surrounding Hole 16-08 is open in multiple directions and began just 90 meters from surface. Other highlights came from Hole 16-05 (24.1 meters of 1.28 g/t gold) and Hole 16-02 (23.2 meters of 0.72 g/t gold). These holes were drilled, respectively, 50 meters north and 70 meters east of last year's discovery hole.
Subsequent results managed to extend the North Dark Star deposit by another 120 meters to 270 meters in total strike. Hole 16-03B provided the extension with a 101.2-meter intersection of 1.50 g/t gold drilled 120 meters south of Hole 16-08.
Clearly, these are exciting results, and Gold Standard plans to follow up on them by devoting a greater portion of its 2016 drilling program at Railroad-Pinion to Dark Star. Finding high-grade gold at these widths (this near surface and in this part of the world) makes this company a legitimate takeout target.
There's still more drilling to be done to determine Dark Star's overall size and potential, but the company's geologists are clearly on the right track here. With the latest spike in Gold Standard's share price, the company has given us a more-than-four-fold gain since the beginning of the year.
With these latest results, it's very likely that Gold Standard gets bought out by one of the majors already operating in Nevada, or by one that wants to finally get a toe-hold.
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With a career spanning four decades in the investment markets, Brien Lundin serves as president and CEO of Jefferson Financial, a highly regarded publisher of market analyses and producer of investment-oriented events. Under the Jefferson Financial umbrella, Lundin publishes and edits Gold Newsletter, a cornerstone of precious metals advisories since 1971. He also hosts the New Orleans Investment Conference.
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1) The following companies mentioned in the article are sponsors of Streetwise Reports: Klondex Mines Ltd., Rye Patch Gold Corp. and Gold Standard Ventures Corp. The companies mentioned in this article were not involved in any aspect of article preparation. Streetwise Reports does not accept stock in exchange for its services. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
2) Brien Lundin: I, or members of my immediate household or family, own shares of the following companies mentioned in this article: Rye Patch Gold Corp. I personally am, or members of my immediate household or family are, paid by the following companies mentioned in this article: None. My company has a financial relationship with the following companies mentioned in this article: None. I determined which companies would be included in this article based on my research and understanding of the sector.
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Source: Brien Lundin for The Gold Report (9/22/16)