Talk to anyone involved in the Canadian diamond business and ask them if they could have convinced banks to raise them $75 million in a bought-deal for their project over the last two decades. My suspicion is they would respond with a resounding “NO!”
Today, shares of Mountain Province (MPV:TSX) resumed trading after the company announced late yesterday that they were raising $75 million at $5 per share in a bought-deal and another $25 million (at $5) under a non-brokered private placement.
Shares are down $0.23 to $5.37 (4% at the time of writing), but still well above the issue price. The $25 million component will be sold to Bottin (International) Investments Ltd, one of the company’s largest shareholders and other qualified investors. According to the company’s latest presentation, they have $38 million in cash on-hand.
The syndicate is led by BMO Capital Markets, RBC Capital Markets and Scotia Capital.
Typical for these types of announcements the use of proceeds is vague: “continued development of the company’s Gahcho Kue project and for general corporate purposes.”
Gahcho Kue is a joint venture between Mountain Province and diamond giant De Beers. It is being touted as ‘the world’s largest and richest new diamond mine.’
The Canadian diamond sector has been predominately shutoff from investor’s watch lists over the past 20 years. Recently and fortunately for those involved in the business, interest is growing and investors are willing to place their investment dollars on the line again.
The diamond business is widely accepted as one of the toughest in the entire natural resources space. Investors should tread very carefully when looking at diamond explorers as speculations.
Like with all exploration stocks, the best bet is to follow proven teams and the smart money. One that comes to mind as fitting that bill is North Arrow (NAR:TSXV) with the backing of Gren Thomas (Chairman), Eira Thomas (advisor), Ken Armstrong (CEO) and the Lundin Family Trust (as the largest shareholder).
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Disclosure: We own shares of North Arrow. As a result we are biased. This is not investment advice. Always do your own due diligence.