Argonaut Gold Snubs Shareholders With Financing That Will Dilute Shares Over 50%

Argonaut Gold (TSX: AR) yesterday decided it no longer cares for its shareholders so long as it can get the Magino Project to the finish line and into production. The company last night announced a financing for $195 million – which will have a significant impact on a firm currently valued at $189.6 million.

The financing will see a total of 434.0 million common shares of the issuer sold at a price of $0.45 per each, with no warrant included in the offering. The financing is being led by BMO Capital Markets, Scotiabank, and Cormark Securities under a syndicate arrangement.

The financing also includes a 15% over-allotment option.

And if the financing did not hit current shareholders hard enough already, the offering price reflects a 43.6% discount to the five day volume weighted average price of Argonaut Gold, and a 21.1% discount to the closing price of the equity on June 23.

When combined with the binding commitment letter for US$200 million from a syndicate of lenders announced yesterday, as well as a US$50 million three year revolver, the company believes it currently has the funds required to see the project through to the end of construction. This is despite the estimated cost to completion rising by $120 million since December 14.

The project as a whole is now estimated to cost a total of C$920 million, of which $659 million has been committed thus far, and $473 million has been incurred. The project is currently 50% complete, with the first gold pour scheduled to occur in March 2023.

The offering will see GMT Capital Corp expand its ownership in Argonaut from 20.3% to 27.66%, while ownership by directors and officers will halve from 0.8% to 0.4%.

Argonaut has also applied for a financial hardship exemption from the TSX, so as to avoid requiring shareholder approval on the financing, stating that without the funds from the offering, the company is “in serious financial difficulty.”

The offering is currently expected to close July 5.

Argonaut Gold last traded at $0.57 on the TSX.

Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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