Roxgold Inc. (TSX: V.ROG, Stock Forum), a company headed by Vancouver financier Robert Sibthorpe, is popping up on investment industry radar screens after releasing drill results from an early stage gold project in Burkina Faso.
On Tuesday, the junior explorer moved to take advantage of a soaring stock price by unveiling plans to raise $7.5 million from a bought deal financing to fund gold exploration in the West African country.
News of the financing comes after Sibthorpe told Stockhouse that his business partner (Roxgold director) Al Fabbro was spending the week in Toronto talking to brokers about the company and its exploration plans.
“We have become a very popular company to talk to in the past couple of days,’’ said Sibthorpe, during a telephone interview from Beijing, China.
Roxgold is getting attention after its stock rocketed to a high of 95 cents on Friday [from Thursday’s 36 cent close] on the strength of drilling results from the Yaramoko concession in Burkina Faso.
News that step-out drilling had intersected 20 metres of 28.61 grams per tonne gold, resulted in over 13.5 million shares changing hands in a hectic day of trading, Friday.
On Tuesday, investors took some profits off the table, sending the stock down 10% to 71 cents.
Sibthorpe said 33 reverse circulation holes have been completed so far on the Yaramoko property, which the junior is exploring under an option agreement with Riverstone Resources Inc. (TSX: V.RVS, Stock Forum), the project operator.
The deal gives Roxgold the right to earn a 60% interest in Yaramoko, where drill crews have tested three separate areas, known as Bagassi North, Bagassi South and Bagassi Central.
Friday’s stock market action was a response to two key holes in the Bagassi Central area, including the one that returned 20 metres of 28.61 grams gold.
“The market liked the grade and the widths,’’ said Jim Mustard, vice-president, Investment Banking, Mining with PI Financial Corp. in Vancouver. But he warned that with only two key holes driving the stock, Yaramoko is still very much a “work in progress.’’
Roxgold and Riverstone are now waiting for the assay lab to analyze additional drilling results from two more Burkina Faso properties (Solna, and Bissa West), which Roxgold has optioned from Riverstone under identical terms.
Still, if future results live up to expectations, Sibthorpe and his Roxgold colleagues clearly have the experience and connections to capitalize on the opportunity.
Sibthorpe is a 62-year-old geologist and former mining analyst. He previously worked for Midland Doherty (defunct) in Toronto and in corporate finance for Yorkton Securities Ltd. (also defunct) and Canaccord Capital Corp. in Vancouver.
Now a self described “director at large,” he is currently on the board of Oromin Exploration Ltd. (TSX: T.OLE, Stock Forum), and Midnight Sun Mining Corp. (TSX: V. MMA, Stock Forum).
Other familiar names on the Roxgold board include Chet Idziszek, the Oromin President, and chief executive officer, who played a key role in the discovery of the Eskay Creek gold deposit in northwestern British Columbia.
Before leading the reorganization of Roxgold last August, Sibthorpe was a director for several years with Klondex Mines Ltd. (TSX: T.KDX, Stock Forum), which is developing a gold mine in Nevada.
Roxgold’s involvement in Burkina Faso is attributable to Sibthorpe’s friendship with Riverstone President Mike McInnis. Riverstone has a large portfolio of properties in the African country, where it is focused on establishing gold resources at its Karma project.
“He [McInnis] decided to joint venture out some of the properties that he couldn’t get at right away,’’ Sibthorpe said.
Mustard said Roxgold can benefit from the fact that Riverstone is well established in Burkina Faso, a country with a relatively long history of exploration and some significant deposits to show for that work.
Some key players in Burkina Faso include Cluff Gold Plc (TSX: T.CFG, Stock Forum), which operates the 70,000 ounce-per-year Kalsaka gold mine, and Orezone Gold Corp. (TSX: T.ORE, Stock Forum). Orezone’s flagship asset is the Bombore project, which hosts an indicated resource of 1.6 million ounces gold.
The Yaramoko property is located next door to the Mana gold mine, where operator SEMAFO Inc. (TSX: T.SMF, Stock Forum) is expanding production from 180,000 ounces last year to a targeted 500,000 ounces per year in 2015.
Sibthorpe said the geology in the area is similar to that of the Canadian Shield. Important deposits in West Africa are shear-hosted vein and disseminated deposits which occur in greenstone belts, composed of volcanic or volcano-sedimentary rocks
Since last December, 75 holes have been drilled across the Yaramoko, Solna and Bissa West properties. But Riverstone and Roxgold are waiting for the drill core to be analyzed in the assay lab before more results are released.
“We will be getting those results over the course of this month and next month,’’ Sibthorpe said. Drilling has also resumed on Yaramoko, he said.
Meanwhile, Sibthorpe said the company hopes to accelerate the move to fulfill its obligations to Riverstone by spending a total of $4.5 million on exploration to earn a 60% interest in Yaramoko and the other properties.
In keeping with that plan, Roxgold said Tuesday it had struck a deal with an underwriting syndicate to raise $7.5 million from the sale of 10 million units in a bought deal priced at 75 cents per unit.
Each unit consists of a common share and one half of a non-transferable common share purchase warrant. Each full warrant is exchangeable for one common share at a cost of $1 for a period of two years after the financing closes.
Proceeds of the financing could rise to $8.6 million if the underwriters exercise an option to buy another 1.5 million units prior to closing on May 10, 2011.
During the interview with Stockhouse, Sibthorpe attributed Friday’s stock market rally to the fact that Roxgold only has 34.5 million shares outstanding. About 20% of the shares are held by members of the board.
Assuming the bought deal financing is succeeds, Roxgold will have roughly 69 million shares outstanding (on a fully diluted basis), plus $15 million in the bank.