McEwen shares drop after $40m stock offer

Black Fox gold mine, Timmins Ontario. Image: Primero Mining

Canadian precious metals producer McEwen Mining (TSX, NYSE:MUX) announced after the close on Monday, bought deal financing for its acquisition of the Black Fox mining complex in northern Ontario.

According to a statement McEwen agreed to sell 18m shares of its common stock and warrants to purchase up to 9m shares of its common stock at a price of $2.25 per share and associated one-half common stock warrant for gross proceeds of $40.5 million. The warrants will have a term of 53 weeks and an exercise price of $2.70 per whole share. The underwriters also have a 30-day option to buy an additional 2.7m shares and 1.35m warrants.

The stock came in for more punishment after hours – shedding an additional 7.4% to trade at $2.25 per share in line with the offer price

MUX shares lost 5.8% in New York during regular trading on a generally weak day for gold mining stocks. The counter came in for more punishment after hours – shedding an additional 7.4% to trade at $2.25 per share, in line with the offer price. McEwen is worth $760m on the NYSE after losing 16% of its market value this year.

The $35m Black Fox acquisition from Primero Mining announced last month was McEwen Mining’s second acquisition in the famous Timmins gold camp this year and CEO Rob McEwen described the transaction as “just the beginning of a new chapter of growth” for the Toronto-based company:

“Black Fox comes with a talented operating team, an underground mine producing 50-60,000 ounces of gold in 2017, a processing facility with excess capacity, two future development opportunities, and excellent exploration potential. Combined with our existing portfolio of Timmins deposits, I believe this is a logical and potent combination.”

Last year McEwen Mining produced 101koz of gold from its El Gallo mine in Mexico and 49%-owned San Jose mine in Argentina and the company is projecting the same for this year. Gold equivalent production for 2017 is pegged at 144koz.

McEwen, who built Goldcorp into a top gold producer before stepping down as CEO of the Vancouver company in 2005, owns 25% of McEwen Mining.