Carpathian Gold (CPN:TSX) 12 month chart

Carpathian Gold (CPN:TSX) 12 month chart

Carpathian Gold (CPN:TSX) has closed its second tranche of a planned $16 million equity raise led by Cormark and Macquarie.  Surprisingly, the bought deal was fully subscribed to including the underwriter’s purchase of $3.4 million worth of stock which enabled the company to raise a total of over $19.4 million.  This is a good sign for equity markets which have, essentially, been frozen for the past 12 months.

I spoke to an institutional investor from London yesterday who said, the European resource investors tend to watch Canadian resource companies over the summer months and then begin to pick up cheap stock at the end of August and early September.  These investors have been burned and so they have allowed these companies to get to historically cheap levels.  Now, it appears, some appetite is coming back and this raise is a good sign.

Carpathian's RDM deposit in Brazil

Carpathian’s RDM deposit in Brazil

Carpathian raised the money for working capital needs at its RDM project in Brazil.  RDM is on track to be in production by the end of Q3/2013.   The project is set to produce approximately 100,000 ounces per year at approximately $558 per ounce for over 8 years through a 7,000tpd open pit operation.  The project cost approximately $160 million to construct. Given the company is set to begin commercial production at 100,000 ounces per year starting in the next couple of months, the $90 million market capitalization seems in need of a re-rating.  It is important to note that mining operations are notorious for having issues during ramp-up which can lead to delays and cost increases.

Map of Carpathian's Romanian RVP project

Map of Carpathian’s Romanian RVP project

The company also has a large gold-copper project in Romania called RVP, which the market is assigning little to no value to.  The project hosts 7.19 million ounces of gold and 1.42 billion lbs of copper and is set to produce some 200,000 ounces per year of gold and 50 million lbs of copper per year.  At current gold prices, their Romanian asset is worth approximately $1.1 billion.  This project has been engulfed in the permitting process since early 2011 and investors are concerned with the ability to permit a project in Romania.  Given that no value is assigned in the markets to RVP, it offers a free option on anything that occurs there.  And in the interim a shareholder gets cash flow from a 100,000 ounces per year gold producer in Brazil,

NOTE: Luna Gold, another Brazilian gold producer, has a market capitalization double that of Carpathian and is guiding production of 80-90,000 ounces this year.

News Release here: Carpathian Gold Closes Second Tranche of Financing

Disclaimer: I own shares of Carpathian. These are just my opinions and not investment advice. Do your own due diligence.