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Tuesday, 20 August 2013
Minera IRL: Don Nicolas financing will not be signicantly dilutive, says finnCap
Development of Minera IRL's (LON:MIRL, TSE:IRL) Don Nicolas gold mine in Argentina will not be significantly dilutive to shareholders, says broker FinnCap reacting to yesterday's financing news.
The mining group has raised the US$80mln required from a group of investors based in the country, it emerged on Monday.
Compania Inversora en Minas, or CIMINAS, will pay US$45mln for a 45% share in the local subsidiary MIRL Patagonia and 9.1mln shares in Minera.
Minera's interest is thus diluted to 51% from 100% and the issue of new shares is equivalent to around 5% of the company.
"As we expected, the development of the Don Nicolas mine in Argentina will not be significantly dilutive as it has been financed at the project level using local money," said finnCap analyst Martin Potts.
The broker has updated its valuation on the firm to reflect the dilution, the reduced interest in the project and near-term debt on the Minera balance sheet.
The target price moves to 64.5p a share, from 88.2p previously - still a significant increase on the current share price of 15.50p.
Potts says the two main reasons for the stock trading at a significant discount to the target price are market sentiment over the gold price, and the fact Minera still needs to arrange financing on its larger Ollachea gold project.
He reckons development of that project will require some new equity unless some unconventional financing or a joint venture partner could be found.