IAMGOLD Corp. (IAG, Financial) will issue 38,850,000 common shares at a price of $5.15 per share, according to the agreement the miner reached with a syndicate of underwriters led by TD Securities Inc., National Bank Financial Inc. and Morgan Stanley Canada Ltd.
The underwriters will also have the option to purchase up to an additional 5,827,500 common shares at the offering price to cover overallotments within 30 days following the closing of the offering.
The aggregate gross proceeds of the offering to the company will be approximately $200 million. In the event that the option is exercised in its entirety, the aggregate gross proceeds will be approximately $230 million.
The miner is going to use the net proceeds of the offering to strengthen its balance sheet by reducing indebtedness and funding future growth.
Up to $150 million of the net proceeds will be used to fund its concurrently announced tender offer for its outstanding 6.75% senior notes due 2020:
Source: IAMGOLD Corp.
The total consideration for each $1,000 principal amount of the notes is $970, which includes an early tender payment of $30 per $1,000 principal amount of the notes and a tender payment of $940 per $1,000 principal amount of the notes.
The remainder of the net proceeds will be used to fund internal growth projects, including the expansion of the Sadiola mine, subject to the timely approval of its joint venture partner to proceed.
Joint ventures contributed to IAMGOLD’s second-quarter total gold production with 19,000 ounces (flat year over year) at total cash cost of $926 per ounce (up 34.6% year over year) and at AISC of $970 per ounce (up 31.8%).
Whether IAMGOLD will go ahead with the expansion of Sadiola mine is conditional upon the timely decision by its joint venture partner, AngloGold Ashanti, to proceed and the government of Mali’s renewal of construction and operating permits.
On Aug. 8, before the cash tender offer and bought deal financing announcements, IAMGOLD closed at $5.68 per share, up 14 cents (or 2.53%) from the previous close.
Let’s see how the market will react to management's decision to strengthen the balance sheet and fund internal projects with the equity offering. As of the second quarter the miner has $587.20 million in cash and short term investments.
Disclosure: I have no positions in IAMGOLD Corp.
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