Yesterday we called one of our favourite gold stories, Roxgold (ROG:TSXV) to get an update from management not only on their two recent announcements (1. receiving their mining permit and 2. closing a $30 million bought deal financing), but also on how the political unrest in Burkina Faso is playing out.
Roxgold President and CEO John Dorward was on the road but we spoke with our friend, Ben Pullinger, who is VP Exploration. (Read: This Gold Developer Punches Above its Weight).
Regarding the mining permit, yesterday the company announced that the Burkina Faso Council of Ministers approved the issuance of the Yaramoko exploitation permit, but that it was subject to the receipt of an official state decree. The decree is to be signed by the Head of State, but given the quasi coup d’etat of last week, it’s odd timing for the announcement.
“The decree is more of a formality at this point,” Mr. Pullinger told CEO.ca by phone.
Mr. Pullinger says the Head of State is still in place and that it is too early to know what effect the developments last week will have on the signing of the decree.
“We need the final decree to be signed, but we can start working on some preliminary work in the meantime,” he says.
In the same release, Roxgold announced the closing of their $30 million bought deal financing. They issued 46.2 million units at a price of $0.65 per unit which came with a 1/2 warrant at $0.90 (expires on February 4, 2016).
Mr. Pullinger told CEO.ca that their employees on site (which includes COO, Paul Criddle who was just there assessing the situation) say that the situation in the country has already improved dramatically. The borders and airports were closed briefly, but have already reopened and the streets are being cleaned up. There is still a lot of uncertainty given the turmoil is so fresh, but Burkina’s military (who have claimed authority in the interim) are calling for Presidential elections within 90 days.
London-based private equity fund, Appian Capital remains committed to the story. They bought 5,926,100 shares in the market at prices of between $0.64 and $0.70 and also participated in the most recent bought deal financing, acquiring another 12 million units. They now hold 18.4% of the company or just over 53 million shares.
Shares lost 1/4 of their value last week on news of the protests in Burkina’s capital city of Ouagadougou. They closed today at $0.51 per share.
Roxgold has no debt, ~$50 million in cash, and a market cap of $143 million.
We see a twofold risk: timing of the final signature needed for the mining permit is uncertain, and Roxgold’s lenders might get cold feet and delay closing of an already approved $75 million debt facility currently in the final ‘paperwork’ stages.
All in all, the situation is too immature to know how it will affect any of these mining companies. Most of the unrest, it seems, has been focused around the capital city. Fortunately Yaramoko is located 180 kilometres southwest of the capital and so has largely been unaffected by the protests.
Recently, Orezone (ORE:TSX) announced they were shutting their doors in Burkina temporarily in order to wait out the unrest. The company claimed their was minor vandalism at their camp and so they got their employees out to ensure their safety. Orezone’s Bombore is located less than 100 kilometres southwest of Ouagadougou.
Related: What the hell happened to Burkina?
Disclosure: Author is long and is very biased. Always do your own due diligence. This is not investment advice.