Winnipeg Free Press Article Today
GOLDEN Golden opportunity
Equity offering could net local mining company $150M
By: Martin Cash
14/07/2010 1:00 AM | Comments: 0
Print E–mail Share ThisReport Error San Gold has done well discovering new gold resources, but it may have hit the jackpot Tuesday with an equity offering that could net the company close to $150 million to use to ramp up production.
The Winnipeg-based company that operates two gold mines near Bissett announced a bought deal with a number of underwriters that, if the over-allotment option is exercised in full, could produce gross proceeds of $149,500,000.
Such a flush treasury could allow San Gold to more than double its gold production over the next couple of years.
"It's a lot of money, but we have a lot to do," said company CEO Dale Ginn.
He said the company wants to build out a couple of new zones and eventually consolidate gold production in the region from four potentially different mines into one efficient operation.
If exploration results are successful in the two new zones, Ginn said the company will spend about $75 million to expand production and build out the mill over the next two or three years.
Last year, San Gold produced about 40,000 ounces of gold. This year, Ginn said the plan is to double that. Within a couple of years he said that total could get up to 200,000 ounces of annual production.
"The idea is that we are getting to a point where the new discoveries warrant a bigger operation, otherwise we will be overrun with resources," Ginn said. "We will have 50 years of resources, but we're not mining it fast enough."
The gold mining business has been bolstered in the last few years by the shaky nature of the financial services industry, which has driven up the price of the commodity to unprecedented heights.
Gold closed up $14.80 to $1,213.30 an ounce Tuesday, about 30 per cent higher than it was a year ago.
The equity offering, at $4 a share, is to close on Aug. 4.
Earlier this year, the company raised about $26 million at $4.05 a share, but that was a flow-through offering where the money can only be used for exploration.
For the first quarter that ended March 31, San Gold generated $14 million in revenue compared to $3.7 million the year before.
The company operates in the so-called Rice Lake Greenstone Belt, about 250 kilometres northeast of Winnipeg. Its main Rice Lake Mine has been a producing mine on and off since 1934.
Company shares closed down four cents to $4.05 on Tuesday.firstname.lastname@example.org