The Gold Advisor (copy and pasted) March 14, 2023: Snowline Gold (SNWGF; C.SGE) gets a big investment from B2Gold.
This is big news for Snowline Gold: a senior gold producer invests in the company, and at a stock price far above where it’s trading.
The private placement totals 3,941,048 flow-through shares at a price of C$4.862 per share, for total gross proceeds of up to C$19,161,375. This will give Snowline a war chest of C$40.5 million in cash.
The dilution amounts to just 2.9%. Not bad, but stocks usually fall on dilution, especially on days the gold price is also declining. So why is Snowline jumping?
Let’s break this down…
First, B2Gold is an international gold producer with four operating assets that produced over a million ounces of gold last year. And they are clearly looking to grow: just last month they bought Sabina Gold & Silver for $1.1 billion (which, BTW, was at a 45% premium).
The deal will amount to B2Gold owning 5% of Snowline.
It is a major endorsement that a senior gold producer decided to become a core investor of Snowline.
They’re not the only ones that like the company.
I’ve casually mentioned a few times that I wondered if Snowline would be around this time next year, meaning they could potentially be bought out that soon. That thought may not be premature. I’m not saying B2 will buy Snowline, but they’re clearly interested.
Second, the stock is jumping because of the price of the deal. If you read the press release you probably paused when you saw the price of B2Gold’s shares… their private placement shares are priced at C$4.862—but yesterday’s close was C$2.44, amounting to a whopping 99.2% premium!
To be clear these are flow-through shares, which are commonly priced as high as 50% above the stock price since it comes with tax benefits. But a near 100% premium? I don’t think I’ve ever seen that before, and neither have a couple colleagues I asked.
The cash will be used for exploration on all their properties. And they can be aggressive: how many juniors do you know that have $40 million in cash?
The stock is up 10% as I write, on a down day for gold. Don’t chase it, but if you like what’s happening here and want more shares or wish to initiate a position, watch for the next dip (PAYDIRT readers, follow Commandment #3 starting page 137 for how to do this). For my sake, I continue to hold an overweight position.