Eric Sprott is substantially increasing his ownership in New Found Gold Corp (TSXV: NFG). It was revealed this morning that Sprott would be acquiring the entire 15.0 million share stake held by Novo Resources (TSX: NVO) in the company.
The transaction will see Sprott pay a 9.3% premium to the current market price of New Found Gold to acquire the stake, the total value of which is pegged at $125.9 million. The transaction is said to be conducted under two separate tranches.
The first tranche of the share sale will see Sprott acquire 8.25 million shares at a price of $8.35 per each, which will be completed on April 27. The second tranche meanwhile is set to be completed on August 5, with the 6.75 million shares under this tranche subject to escrow provisions and the approval of the TSX Venture.
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For Novo, the transaction will enable the company to use the proceeds to pay off a US$40.0 million senior secured credit facility that it currently has outstanding with Sprott Private Resource Lending II. On a pro-forma basis, the company is expected to have a cash position of $97.1 million as a result of the share sale, which is to be used for exploration and feasibility studies across multiple of its properties.
For Sprott, his already substantial stake in New Found Gold is expected to expand rather dramatically. His ownership in the company, once both tranches are completed, is expected to grow by 9.1%, to that of 31.4%. Post-closing, his holdings will consist of 51.6 million common shares of the issuer.
New Found Gold last traded at $7.68 on the TSX Venture.
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