A few days ago Endeavour Mining announced that is was going to increase its share count by 6.25 million ordinary shares at a price of C$20 a piece for net proceeds of C$118.75
million, at least (there is an option to increase the issue by another 0.9 million shares). Endeavour intends to use the proceeds as follows:
- C$40 million – funding the two-year drilling program conducted on the premises located in the Ivory Coast, Burkina Faso and Mali
- C$70 million – funding development projects, especially the Ity carbon-in-leach processing facility
- C$8.75 million – general corporate purposes
It looks like Endeavour needs
around C$118.8 million (US$92.6 million) to finance its drilling program and
the Ity upgrade.
Let me calculate how much
cash the company actually has.
At the end of 1Q 2016 it had cash
of US$117 million.
Then the company announced the so-called La Mancha anti-dilution offering of 7.5 million shares, priced at around US$8.5. This offering will bring around
US$64.4 million to the company.
The last offering should add another
US$92.6 million in cash.
Summarizing, after these two
offerings Endeavour should have around U$S274 million in cash.
Because the
Hounde project (discussed in my last article on Endeavour) was fully funded before these offerings, the company is going to
have US$181.4 million in excessive cash (US$274 less total cash needs of US$92.6
million).
The question is: “Did the last offering of 6.25 million shares make
any sense?”.
In my opinion it did not. What is more, Endeavour is able to
deliver significant cash flow from operations. For example, in 2015 it
delivered US$54.7 million in free cash flow (defined as cash flow from operations
less expenditures on mining interest). Lastly, at the end of 1Q 2016 a ratio of net debt / EBITDA was standing at 0.78, which means that the company carries vey low debt level (no cash is needed to pay debt off).
Summarizing – I perceive the last
offering as something harmful for the current shareholders. Further, this offering makes me wondering about the quality of the company's management.
Simple, what about raising war chest for a competing bid for Gryphon Minerals vs Teranga Gold or other African based gold assets? Would that be a rational explanation?
ReplyDeleteGood question. I guess it is worth an article
ReplyDelete