Gold sector starting to turn upwards now
Aside from a nearly Cdn$1,600 gold price (NWM being a Cdn $ reporter) and 50% lower oil/diesel price (significant input cost for miners), I am now seeing PM companies (especially gold) getting bought financing deals. This is a major change. Over the past 3.5 years, institutions refused to go near gold companies (even the large, solid, ones). Now they are giving these same companies (not just financing deals, but) bought deals. A bought deal is when the institutions buy shares from the company based on a negotiated price. The institutions then sell the shares to its clients. The institutions take on all the risk of the transaction as any unsubscribed shares cannot be returned to the company. In 2009, coming out of the global financial crisis, I saw the same early signals (bought deals given to gold companies). This situation occurs because the miners need to cash up and the institutions need to rotate money into a beaten up sector (for cheap prices). With regards to now, there have been 6 such deals in the last 2 days: 1) Romarco Minerals ($300 million bought financing deal), 2) Osisko Gold Royalties ($200 million), 3) Detour Gold ($141 million), 4) Asanko ($40 million), 5) Primero ($75 million), 6) Richmont Mines ($34 million). Also, Lydian International announced a $16.5 million bought deal on Jan 15/15, while Integra Gold closed an $8.2 million bought deal on Dec 30/14, Lake Shore Gold closed a $15.1 million bought deal on Dec 3/14 and Shore Gold (a diamond company) announced a Cdn$3.65 million bought deal on Dec 11/14. There are likely plenty more to come, especially with the large cap gold miners and the bigger mid-tier miners. These companies will also be raising money for acquisitions and M&A. Of these companies are all higher quality companies relative to NWM`s situation, but nevertheless, hopefully this new environment could open up opportunities for NWM Mining to finally find a lender to provide financing. I gather from the July 2014 Corp Presentation that they have been tossing around 3 financing scenarios. The first is to finance $12 million (no payment towards current debt). Second scenario is to finance $20 million (with $4 million going towards current debt payment). I think both of these scenarios would see the current debt lender holding onto the NWM debt, but maybe (hopefully) at a lower interest rate than the current 15%. Also both scenarios has potential to increase NWM`s yearly production to 60,000 ounce per year level (from 18,000 oz) and increase reserves to 1 million P&P ounces (from 600K oz). I don`t think they mentioned this in the presentation but a 3rd scenario might be for a larger debt financing package (say $40 million) which would provide both $20 million for full ramp up and exploration and also full refinancing of the current debt. This would allow the current debt holder to step away completely (though they will still have a stakeholder interest in NWM, with the NSR royalty they now control, as well as over 60 million of NWM Mining common shares). Let`s hope management can put something together and finally get this thing going.