Today, Agnico Eagle announced additional investment in Belo Sun Mining Corp. (TSX:BSX, Financial). The miner will add 14,922,760 common shares of Belo Sun to its current stake of 74,180,000 common shares resulting in a total of 89,102,760 common shares, representing approximately 23.3% of the issued and outstanding common shares of Belo Sun on a non-diluted basis.
Belo Sun Mining Corp. is a Canadian mineral exploration and development company that is focused on advancing the Volta Grande Gold Project located in Pará State, Brazil. It is estimated to be an economically robust project with average annual gold production of 205,000 ounces of gold for 17 years with a cash operating cost of $618 per ounce, according to the company’s 43-101 compliant Feasibility Study.
Based on the assumptions used in this study, the project is economically viable, presenting a significant positive NPV ($665 million post tax) and an IRR higher than the discount rate adopted.
Source: Belo Sun Mining Corp's website
Keep in mind, a project with an IRR of 30% to 35% and a capital investment payback of two-to-three years is usually considered a financially robust operation.
Considering a NPV of $665 million and taking into account the fact that Belo Sun has 382.82 million shares outstanding, I assess the value of one share of the exploration company being $1.74 ($665m / $382.82m S/O) using the Net Present Value calculation.
Agnico Eagle will pay CA$0.85 per Subject Share and the closing of the offering is expected to occur around July 27.
On July 22, Belo Sun Mining Corp. closed at CA$ 0.89 per share (or approximately US$0.67) and the stock rallied 240% YTD.
