PERSPECTIVE: Are investors ready to tighten their belts?

I have been looking over the list of mining financings closed during the month of July and found roughly $250 ...

I have been looking over the list of mining financings closed during the month of July and found roughly $250 million was raised by various enterprises. Many were small, but one was huge - the $167.6-million project loan obtained by Largo Resources for the development of its Maracas vanadium project in Brazil.

Then I glanced through the June list. There were only nine deals closed that month, all small except the $35-million-worth of special units issued by Crystallex International.

No mine financings closed in May, April or in the last half of March.

There have been a few notable proposed offerings in July. One is by Toronto's St Andrew Goldfields to raise $20 million to advance development of the Smoke Deep zone at the Holloway mine at Matheson, ON. The company is also repurchasing senior secured gold notes.

Other deals have been proposed by Yukon-Nevada Gold Corp. (US$25 million), Sabina Gold & Silver ($22.4 million), Crowflight Minerals ($12 million), and Mala Noche Resources ($300 million).

Finally, the deal proposed by San Gold Corp. of Bissett, MB, caught my eye. This is a gold miner, tiny by international standards, but with three producers and a fourth one to come on stream later this year. Tonnages are small, but grades are high, in the neighbourhood of 7.5 to 9.9 g/t Au. The potential in the area is excellent as shown in the new Hinge mine (13.5 g/t) and the developing 007 zone (58 to 88 g/t Au).

On July 13 San Gold sent out a news release saying it wanted to raise $130 million through a bought deal. Then the next day, July 14, the company sent word that it is shrinking the deal to $80 million, plus an overallotment that could bring it up to $92 million. The company is offering 20 million common shares at a price of $4 each, rather than the original 32.5 million shares at the same price. The shares will be bought by syndicate lead by Dundee Securities and BMO Capital Markets.

That is a significant drop in expectations. As San Gold CEO Dale Ginn told CMJ, "The markets were just a little shaky. There were some other big deals ahead of us, and maybe we were a little late to the table."

Whatever the reason, we will wait and see if San Gold's experience means that investors are tightening their belts or if it was a case of poor timing.


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