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Why Guyana Goldfields ignored dealers and flew solo

Why Guyana Goldfields ignored dealers and flew solo

Posted by Shanelle Weir on July 03, 2014

Something strange happened on the way to Guyana Goldfields completing its latest equity issue, a financing mandated by lenders as a condition of advancing US$185-million for its Aurora Gold Project that’s scheduled for commercial production in mid-2015.

Guyana Goldfields raised equity capital by way of a non-brokered private placement. That method stands in contrast to the conventional way where an issuer will strike a bought deal with a consortium of underwriters and pass the risk of selling the shares to the dealers.

But its decision didn’t harm Guyana Goldfields: it ended up with $44.4-million, or one third more than it originally intended, from the sale of shares priced at $1.85.

Guyana Goldfields was in the market for additional equity because of the late decision from the lenders to its project in the South American country.

“The Company is obligated to fund an additional US$33M as a condition of first disbursement,” said a Guyana Gold release dated June 9 where the lenders were identified as the International Finance Corporation, Export Development Canada, ING Capital LLC, Caterpillar Financial Services Corporation, and The Bank of Nova Scotia.

At that time, the company announced it would raise the US$33-million ($37-million) by way of a non-brokered private placement. Of that amount the insiders’ as a group were “expected to purchase up to $10-million of the placement.”

So what happened given that in February 2013, Guyana raised $100-million – from the sale of 29.4 million shares at $3.40 – through a syndicate led by BMO Capital Markets? That 2013 transaction also included a private placement with the International Finance Corporation, which kicked in $5.5-million also at $3.40 a share.

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