A lot of CashHow long will it be before deals are done here?
From globeandmail.com, Monday, May 27, 2002
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> Equity demand for mining firms remains hot
> Almost $1.3-billion raised in past 5 months
> ALLAN ROBINSON
> MINING REPORTER
>
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> At 6 a.m. one day in April, three investment bankers arrived for a meeting
at the home of Robert McEwen, the chairman and chief executive officer of
Goldcorp Inc. of Toronto.
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> Forty minutes later around his dining room table, a deal for an issue of
shares and warrants was signed. Goldcorp, which really didn't need the
money, had been guaranteed at least $90-million (U.S.) in cash.
>
> For the three bankers from Griffiths McBurney & Partners it was a big deal
in a continuing stream of mine financings this year.
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> The demand for mining company equity in Canada is hot at a time when
technology, biotechnology and telecommunications are not.
>
> In the first five months of 2002, almost $1.3-billion (Canadian) has been
raised. That is more than twice the $620.5-million raised during all of
2001, according to one investment dealer who was using industry data
compiled by a research group.
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> "A lot of people knock on our door offering money," Mr. McEwen said. "One
is never sure how long the window will stay open in the market place. I
wanted to be in a position to move quickly if accretive opportunities
present themselves."
>
> Goldcorp announced the deal April 11 and five days later Griffiths
McBurney and a syndicate of six other investment dealers had sold the
original five million units, which consisted of shares and warrants, at $18
(U.S.) each. They also picked up options on another three million units to
raise a total of $144-million.
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> That left Goldcorp sitting on more than $225-million in cash and
$17-million of gold bullion.
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> Gold mining was the hottest sector. But the equity deals also included the
sale of a zinc smelter to the public, money for a nickel mine in Botswana
and cash to pay off bank debts of a fertilizer business.
>
> It appears that one of the underwriters' rules this year is to go big or
not go at all.
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> There has been a slew of giant offerings -- fertilizer producer Agrium
Inc. $110.3-million to pay off debt; Wheaton River Minerals Ltd.
$94.3-million (Canadian) to buy a gold and silver mine in Mexico; Ivanhoe
Mines Ltd. $89.2-million for its Mongolian copper and gold exploration play;
LionOre Mining International Ltd. $100.4-million to increase its ownership
in a Botswana nickel mine; and Noranda Income Fund $225-million to buy a
51-per-cent interest in a Quebec zinc smelter from Noranda Inc.
>
> "A lot of institutions were underweighted in gold and wanted exposure to
it," said Eugene McBurney, the chairman of Griffiths McBurney and one of the
three executives on Mr. McEwen's doorstep that morning. In addition to
Goldcorp, his firm lead Wheaton River and Ivanhoe deals as well as a
$25-million Northgate Exploration Ltd. deal. The firm also participated in a
number of other deals.
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> "There's a whole new generation of fund buying by managers who did not
have experience in gold," Mr. McBurney said. Among the new players, in
addition to the gold funds, are managers of micro-capitalization funds who
target as investments companies with market caps of less than $700-million
(U.S.), he said.
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> A lot of money has also been raised to help repair the damage done to
balance sheets after a sustained period of low gold and base-metal prices.
>
> "So many companies are in terrible shape that they are taking the first
opportunity to raise money," said Murray Pollitt, the president of Pollitt &
Co. Inc., a Toronto investment dealer. "Three years of sub-$300 gold has
devastated the industry and left a lot of companies in fragile shape."
>
> Several companies have raised money to refinance and for other projects --
Zinc producer Breakwater Resources Ltd. $18.9-million (Canadian); Cambior
Inc. $60-million; Echo Bay Mines Ltd. $37.3-million; Eldorado Gold Corp.
$25-million; Kinross Gold Corp. $27-million; and TVX Gold Inc. $75-million.
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> And the pace of deals hasn't slowed at all.
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> "There's an old saying -- 'When the ducks are quacking, you feed them,' "
said one investment dealer of institutional investors seemingly insatiable
demand for mine deals.
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> Bema Gold Corp. has sold $15-million in units and the underwriters --
Canaccord Capital, Haywood, Sprott and Griffiths McBurney -- have options to
acquire another $10-million worth of units consisting of shares and
warrants. Bema said the money would be used for its Julietta gold mine in
Russia, for potential acquisitions in that country and for working capital.
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> Other deals included IamGold Corp. ($28-million), Pan American Silver
Corp. ($16.6-million) and NovaGold Resources Inc. ($18.5-million).
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> Last week, Cumberland Resources Ltd. said it has raised $10.4-million in a
deal underwritten by Canaccord Capital Corp. of Vancouver.
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> The money from the sale of units was for its Meadowbank gold project near
Baker Lake in Nunavut Territory.
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> European Goldfields Ltd. said strong demand has caused it to increase the
amount of money it planned to raise for its Romanian projects to $18-million
from $13.5-million.
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> Leading roles in almost all of the deals have been played by mid-sized
investment dealers such as Griffiths McBurney, Canaccord, Haywood Securities
Inc., Sprott Securities Ltd. and Dundee Capital Corp.
>
> Meanwhile, another dozen small and startup mining ventures hoping to
strike it rich have either raised or are in the process of raising between
$400,000 and $2-million each.
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> And Salman Partners Inc. and Bermuda-based LOM Capital Inc. are trying to
raise $6-million privately on a best-efforts basis for Gammon Lake Resources
Inc. Gammon is developing the Ocampo gold and silver project in Chihuahua,
Mexico.