Pure Gold Mining (TSXV: PGM) appears to have found a path to raising the short term funds it needs to keep its operations afloat. The problem, is that it is at the major expense of shareholders.
Recall Pure Gold’s press release from March 28, indicating that they needed to obtain short term financing to fund operations as well as service its debt. The company at the time had just $9.0 million in the coffers at the time, which dwindled down to $6.0 million just days later on March 31.
The firm broadcasted at the time that it needed total external financing of an estimated $50.0 million over six months just to keep the lights on and potentially reach sustainable positive free cash flow.
Fast forward a little over a month later, and the company managed to secure US$6.0 million in the form of a non-revolving credit facility with Sprott Private Resource Lending II. While a positive, the company still needed more cash to keep its operation going.
Now, however, it appears that the company has managed to find a method to further plug the funding hole – much at the expense of shareholders.
Late on Friday night, the company announced that it would be raising $30.0 million via a non-brokered private placement. Priced at $0.15 per unit, the offering is expected to result in 200.0 million units being issued by the company. With 498.6 million shares outstanding, the financing is expected to cause significant dilution to current shareholders if it is fully subscribed.
The company also indicated that it may upsize the offering to $40.0 million and 266.6 million units if the demand exists.
Under the terms of the offering, each unit is to contain one common share and one common share purchase warrant. Each warrant is valid for a period of six months from closing, and contains an exercise price of $0.18 per share.
The company is currently anticipating that AngloGold Ashanti, the firms largest shareholder, will exercise its top-up rights in association with its current 19.99% ownership stake in the company. Further, certain insiders have indicated they will acquire a total of 10.0 million to 13.3 million units under the offering.
Proceeds from the financing are to be used to ramp the PureGold Mine to 800 tonnes per day by the third quarter, while also reducing operating and sustaining capital costs in the second quarter by up to 30%. The company is currently anticipating achieving positive cash flow at the mine level by the third quarter, while aiming to release an updated resource estimate and life of mine plan by the fourth quarter.
Elsewhere, the company also indicated that it has added Tony Makuch, former CEO of Kirkland Lake Gold, whom was recently acquired by Agnico Eagle Mines (TSX: AEM) in a $30 billion merger, as a technical advisor to the company.
“I see an opportunity to be involved in the creation of value through careful planning, executing, and maintaining a commitment to operational excellence. I look forward to sharing my own experience to help the PureGold Mine reach its potential,” said Makuch.
Notably, despite the significant dilution to shareholders from this financing, the company still falls short of the estimated $50.0 million it needs over the next several months.
Pure Gold Mining last traded at $0.185 on the TSX Venture.
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.
