Now it’s Iamgold in CAD 275m bought deal
Iamgold, the Tier II gold miner with operations in Africa, Suriname and Quebec, has announced a CAD 275m bought deal, rising to a possible CAD 316m if over-allotments are exercised. The deal, yet to be priced, would take to USD 38.7bn investments that global miners have raised, or are raising, over the past few months from outside any banking system, selling instead equity or assets directly to investors, or to each other.In a statement, Iamgold said that the net proceeds from its offering are expected to be used to fund the construction and development of Essakane - replacing all or substantially all of the previously proposed Essakane project debt facility and related gold hedging requirements - with the balance earmarked to fund capital expenditures at Iamgold’s other properties and for general corporate purposes "including future acquisition opportunities".Essakane was recently acquired by Iamgold when it completed its friendly takeover of Orezone. Essakane, in Burkina Faso, is fully permitted with around USD 350m in outstanding capital expenditure. Production is anticipated from the fourth quarter of 2010, at a rate of around 300,000 ounces a year, off a resource base of 4m ounces. Over the next five years, Iamgold plans to double its group production to some 1.8m ounces of gold a year, a progression that would firmly promote the stock to Tier I global gold producer status.Iamgold ranks as a top performer, even within its gold peer group, with an increase of more than 200% in its stock price from lows seen four months ago. Iamgold’s bought deal follows at least three dozen similar bought deals, by listed gold stocks, over the past few months; some of the most recent have involved names such as Paramount Gold, Simmer & Jack, Great Basin Gold, Lihir, Jaguar and Novagold.Of the USD 38.7bn investments that global miners have raised, or are raising, over the past while, more than half this amount, at USD 19.5bn, is earmarked to be invested by Chinalco in debt-ridden Rio Tinto; USD 12.3bn is earmarked for direct investment in equity stakes in various underlying prized Rio Tinto assets, while USD 7.2bn is proposed to go into Rio Tinto convertibles that could later have the effect of increasing Chinalco’s stake in Rio Tinto at the parent level.Listed gold stocks have raised USD 5.3bn in the past few months. The vast majority of these transactions have been in the form of bought deals, where a few brokers buy wholesale blocks of fresh equity from a gold stock, and sell it on to many retail and institutional investors. The majority of these raisings have been only mildly dilutive for the gold stock involved. Newmont, a Tier I gold digger, sold 30m new shares to raise USD 1.1bn, and also sold convertibles to raise a further USD 450m. The total USD 1.6bn raised comprises less than 10% of Newmont’s market value, similar to the number that arises for Iamgold.Xstrata, a debt-riddled diversified miner, is, by contrast, raising USD 5.7bn on the back of a market value of USD 7.3bn, translating into a hugely dilutive issue. For investors with an esoteric bent, listed gold stocks have in fact been outperformed by a precious metal sibling in the form of listed silver stocks. The investable universe of primary silver stocks, however, is just USD 10.8bn, compared to USD 191bn for gold stocks, and is dominated by a hugely sizeable Fresnillo, which also dominates performance, with an increase of just over 300% in its London stock price, from lows seen just four months ago. While gold diggers have dominated recent bought deals, silver miners that have successfully come to the market include Hecla Mining, ECU Silver, and Silver Standard.