By Euan Rocha
TORONTO Jan 22 Timmins Gold Corp,
which owns the San Francisco gold mine in Mexico, said on
Wednesday it will sell C$25 million ($22.7 million) in equity to
a syndicate of banks, making it the latest in a slew of recent
share offerings from Canadian miners.
The Timmins deal, aimed at strengthening its balance sheet,
builds on a wave of offerings that potentially signal a thaw in
the financing environment for mining companies, which have long
been out of favor with investors.
The bank syndicate, led by RBC Capital Markets, will buy the
shares at C$1.50 each, a significant discount to Timmins Gold's
C$1.73 closing price on the Toronto Stock Exchange on Tuesday.
The offering is being done on a bought deal basis. A bought
deal occurs when an underwriter, or a syndicate, buy shares from
an issuer at a set price before selling them to the public.
While these deals typically occur at a slight discount to a
company's last trading price, the large discount that Timmins
agreed to underscores the challenges still facing gold miners.
"New issue discounts are a factor of market sentiment," said
Peter Miller, the head of equity capital markets for BMO Capital
"If you look at the same deal done today, as it would have
been done two years ago, the discounts are larger today and that
is not unusual given that it's early days in terms of these
mining and development companies being able to access the equity
The price of spot gold has fallen by nearly 30
percent in the past 12 months and is now trading at around
$1,240 an ounce. The drop shook investor confidence in gold
miners, whose equity values have tumbled.
Bought deals and equity offerings from gold miners were all
the rage between 2009 and 2011, when the price of gold was on a
tear, but the pace and size of these deals has plummeted in the
past two years, as the gold price has fallen after peaking at
more than $1,900 an ounce in 2011.
The market for mining deals, however, is beginning to show
signs of a thaw. The world's largest gold producer, Barrick Gold
Corp, announced a massive $3 billion equity offering
late in 2013 aimed at trimming its debt load and strengthening
its balance sheet.
EQUITY OFFERINGS BEFORE SPRING DRILLING
Exploration and development company Torex Gold Resources Inc
outlined a C$125 million bought deal late on Tuesday.
And Canadian base metals miner HudBay Minerals Inc
announced a roughly C$150 million bought deal early in January.
Other miners that have recently announced plans to tap the
market include Athabasca Minerals Inc, Platinum Group
Metals Ltd and Castle Mountain Mining Co.
The equity offerings come ahead of the spring drilling
season for many North American miners and the annual Prospectors
and Developers Association of Canada conference in March, which
is the biggest gathering in the industry.
Despite the pickup in financing activity, bankers remain
cautious, noting that investor sentiment for mining companies is
still tepid and warning that some exploration-stage companies
will still struggle to raise funds in the near term.
"The floodgates aren't opened, but they are beginning to get
unfrozen. So it is still going to be a selective market in terms
of who can access the equity markets," said Miller, whose bank
led the Torex deal and co-led the HudBay offering along with GMP
Timmins said proceeds from its offering would be used for
general corporate purposes, including repayment of debt and
working capital needs.
Shares in Timmins fell 13 percent, closing at C$1.52 on the
Toronto Stock Exchange on Wednesday. Shares in Torex also fell
sharply on Wednesday, closing down 17 percent at C$1.14.