Post by
jclarke042 on Feb 27, 2023 10:46am
Junior attempts a build - Argonaut Gold edition
Argonaut Gold releases its 2022 financials today, which is besides my point. For the uninitiated, this junior producer runs two small gold mines, and is trying to build the Magino deposit, which it claims will be a top 10 largest in Canada. Some lead-in:
Dec 31, 2019: 179.5m shares outstanding, market cap C$350m. Closing price C$1.95/share. Company has environmental approval from Gov't, awaiting construction permit.
June 2020: Gets construction permit for Magino, which "significantly de-risks" this "strategic asset" per the company's CEO. I've heard those phrases somewhere before. Day closes at $1.95/share, unchanged from YE. No rerating there. Time to build, but their two operating mines don't bring in enough $$. Now the fun starts:
July 23 2020: issues 49.6 million shares (including full over-allotment option), at $2.55
Sep 11 2020: sells development project for $30m
Oct 14 2020: issues 3m flow through shares (including full-over allotment option) at $3.83
Oct 30 2020: closes $58m convertible debt at 4.625% due 11/30/25
Feb 17 2021: issues approx 9.4 million shares at $2.82, upsized from 8.1m at announcement
Mar 31 2021: issues 4.3m shares at $2.35
Mar 3 2022: issues 22.36 million shares (including full over-allotment option) at $2.32
July 5 2022: issues 434 million shares at $.45, plus $250m credit facilities
Oct 27 2022: closes debt facility, draws down tranche of $70m
Nov 17 2022: issues 36m shares (including full over-allotment option) at $.48
The asset sale and all raises, debt & equity, were specifically to fund the ever increasing capex number for this Magino project. Full capital cost will be well over $1billion. My guess is within 1 year this company will be taken over a la Alexco Resources, for a fraction of "fair value."
Casino is around 4 times the capital cost. When it comes time for construction, we'll be entirely at the mercy of the one or two companies willing to take this on, otherwise we risk the above.
Back to Argonaut: When the company announced earnings today, outstanding shares are now 837.5 million, up 4.6 times from 3 years ago, current share price is $.50. If you're a buy & holder, you're down nearly 80% or more, depending on your entry. You're only in the positive if you bought into every dilution. Could you afford that with Casino?
Alexco, Sabina, Argonaut: companies that had no business trying to build a mine, but tried to anyways. Victoria probably has no business operating Eagle, so we can throw that in there.
No one wants to hear we'll try permitting this solo. That's 4 years from now, an eternity in today's landscape. I might be wishcasting, but there has to be a deal here around C$4-5 per share. Get it done, Paul.
Comment by
GardenManman on Feb 27, 2023 11:19am
Jc. Totally agree. Solo permitting will be a disaster for retail share holders, finally you need to raise huge for construction. If it is final idea of BoDs, I will leave WRN ASAP.
Comment by
jclarke042 on Feb 27, 2023 5:06pm
Not unprecedented. The closest analogy off top of mind is Great Bear Royalties, which was a spinout after GBR made its initial discovery, subject to a 2% NSR on the project. Traded on the TSX and everything. Shortly after Kinross acquired GBR, Royal Gold bought the NSR for C$200m cash.