TORONTO – Two financings in Canada’s metals and mining sector were called off on Thursday, a reminder that market conditions remain fragile and volatility can scuttle management’s best-laid plans very quickly.
Timmins Gold Corp. withdrew a private placement worth up to $10 million that was announced on Feb. 17. The offering, which was backed by the Lundin family and Sentry Investments Inc., was priced at $1.25 per share. Timmins is now trading below a dollar.
At the same time, Orbite Aluminae Inc. called off a complex offering of debentures and warrants that was expected to raise $8.5 million to $15.5 million. Orbite’s stock plunged 21% on Monday after the deal was announced, convincing the company to come up with new plans.
At the start of 2015, it seemed the financing outlook was improving for the mining sector. Six gold companies raised almost $800 million in the span of two days in mid-January, and there were some other large transactions around the same period.
But that window closed quickly, and raising capital has been a major challenge over the past couple of months. The one large offering that was announced in March — Silver Wheaton Corp.’s US$800-million bought deal — was priced too high and led to big losses for the underwriters.
“I just don’t see any mining financing market right now at all,” said Jay Kellerman, co-head of mining at Stikeman Elliott LLP. He added that the Silver Wheaton deal put “a bit of a chill on things.”
In the case of the Timmins offering, there was a unique circumstance. The company announced the private placement in conjunction with a $140-million friendly takeover bid for Newstrike Capital Inc.
Newstrike’s key project is in Mexico’s Guerrero state, a region that has made headlines in recent months because of a series of violent murders and kidnappings. Timmins shares dropped sharply after the deal was announced and one of the investor concerns was security in the region. The shares are currently 25% below the offer price.
Mining magnate Lukas Lundin, one of the people backing the Timmins financing, said through his assistant that the re-financing will occur after the merger closes. He did not specify a price.
Orbite, meanwhile, was unprepared for the crash in its stock price on Monday. Nearly 16 million shares changed hands that day — or 14.5% of the total float — after the offering was announced. While companies always expect some trading volatility after a financing is unveiled, this was extreme.
“When something like that happens, you have to take a step back and re-evaluate. So that’s what the company is doing,” said Marc Lakmaaker, an external spokesman for Orbite.
He noted that Orbite is working on a number of other financing alternatives. The company, which wants to produce alumina from aluminous clay deposits in Quebec using a unique technology, has been able to raise significant capital over the last few years despite the tough market conditions.
Original Article: http://business.financialpost.com/2015/03/26/timmins-gold-corp-and-orbite-aluminae-inc-call-off-financings-amid-market-volatility/?
