Wednesday, September 15, 2010

$5M Private Placement

Century Mining Corporation ("Century" or "the Company") (CMM: TSX-V) is pleased to announce that it intends to complete a private placement financing of 12,820,513 units (the "Units") of the Company, at a price of $0.39 per Unit, for gross proceeds of $5,000,000. Each Unit will consist of one common share and one-half of one common share purchase warrant (each whole warrant, a "Warrant"). Each Warrant will be exercisable for one common share at $0.60 for 18 months from closing.

The Company will pay a finder's fee of 5% of the gross proceeds of the private placement. The completion of the private placement is subject to regulatory approval by the TSX Venture Exchange and completion of documentation. All securities issued under this private placement will be subject to a four-month hold period.

The proceeds from this offering will be used for the continuing commissioning of its Lamaque Gold Mine operation in Val d'Or, Québec, Canada, and as working capital. Century has been advised that Kirkland Intertrade Corp and Gravity Ltd. have consented to the Offering and will not exercise their pre-emptive rights in respect thereto as provided in the current Shareholders Agreement.

About Century Mining Corporation

Century Mining Corporation is a Canadian junior gold producer and holds strategic land positions in Canada, United States and Peru. The Company's strategy is to grow to an intermediate gold producer through existing mine expansions and acquisitions of other strategic and synergistic gold opportunities.

On behalf of Century Mining Corporation,

"Keith Hulley"

Interim CEO

16 comments:

Anonymous said...

Didn't expect more dilution. $0.39 cents is dirt cheap. I'm disappointed. But I guess we will have more cash for development. Shareholder suffering continues...

real_economics said...

Interesting. My first reaction was not great, since in a sense we have to revise our targets about 2% lower to account for the extra shares. (Which is not all that terrible really.)

On the other hand, this eases any anxiety about the ramp up period. We're obviously liquid enough between this PP and the remaining 28 mil or so of Finskiy warrants to go through the critical period where we get BD and North Wall up and running to commercial production. This probably bridges the gap caused by the delay in being able to access the credit facility that will be available once we hold the 70k pace for 4 months.

It's also obvious that i'm not the only investor that sees .39 as a ridiculous price that should be the absolute floor for this play or very close to it at this stage.

I'm hoping perhaps if this takes us to commercial production and operating income, they can use the credit facility cash to make the upgrades necessary to take the Peruvian operations from 20k to 30k a year.

I'm looking forward to hearing what others think - P05?

Anonymous said...

Repost of my comments on Stockhouse:

Right now CMM should have been receiving the last dispersment from Deutchbank for roughly 9 million. This dispersment was based on achieving an annualized production rate of 70,000 oz. CMM is not there yet.
.
The financing was completed at 39 cents, the warrents are set at 60 cents. I look forward to the financier being able to excercize those warrents.

Hopefully this 5 million will replace the monies from Deutchbank and get Lamaque into to a production level where Deutchbank releases the 9 M .. Then CMM should have plenty of cash .. perhaps enough to spend the 1.5 million required to upgrade San Juan.

Mike

Anonymous said...

In response to a question on Stockhouse "why not force the russians to exercize warrents

Better to keep the Russian warrent cash in reserve and go to the Market now for financing while the Gold price is high. Want as much cash as possible during the ramp up phase .. things seldom go as planned in the mining sector. .. Contingencies happen ..

Dilution from the financing is only 1.5% at the current share price. I would rather have a 1.5% smaller piece of something big .. than a 1.5% larger piece of nothing because they were struggling to come up with cash.

This is good market timing to get financing IMO

Mike

Anonymous said...

As a shareholder, I regret saying that this company is kind of a joke. Why can' t they run a business?!

And how does (12.8+6.4)/412.2=1.5%????! It's 4.66% dilution!!

The price of gold is the only thing this "company" has going for it. Unbelievable!

Keith said...

Question for the experts, Prod05, Carib, Chilby, etc.

I always thought CMM was fully financed, or at least the Russians will exercise their warrants to keep up the money supply.

So why do we need a PP at this point?

How much cash we need to develop Bedard and Northwall?

I'm sure once we get into production, operating costs will be under $600.

So do we have enough cash or can we see more PPs?

Thank you for sharing your thoughts

production05 said...

Hi real economics,

I hate share dilution just as much as any other shareholder. However, one hard lesson learned during the global financial crisis: It`s better to be safe than sorry.

Actually, for small companies like Century, the global crisis started in August 2007, with the blow up of the Asset Backed Securities crisis. It resulted in Century struggling mightily in raising sufficient capital. IMO, management`s reputation (previous management) and the company`s struggles with the open pit, along with (issues associated with the timing of) getting involved with the legal case to secure the Shahuindo property, didn`t help either.

This shortfall in capital left the company completely vulnerable when the Lehman situation triggered the all out global crisis in mid 2008.

We also have to remember that, aside from cash injection for development of Bedard Dyke and the North Wall, they also have decent size (carried forward) payables amounts they are scheduled to pay down in Q3 and Q4.

There are never any certainties as to when short-term economic crisis can hit. It`s better to get the capital when you can, and ensure you have sufficient cash buffer, even if it means a bit of cheap share dilution. The big picture is the only one that matters for an emerging mid-tier producer like Century.

If we are held back in this gold price environment it definitely will not be due to today`s announced dilution. For example, outstanding shares:

*Andean Resources = 541,382,867 ($3.4 billion mkt cap)

*Centamin Egypt = 1,028,144,053 ($2.8 billion mkt cap)

*Romarco Minerals = 469,358,375 ($1.1 billion mkt cap)

Although it is a complete guessing game at this point, I would not completely rule out the possibility of this financing being done with an institutional investor or with a company associated with providing analyst coverage, with the intention of the PP shareholder playing a fruitful role (in some capacity) as Century reaches a more advanced stage.

production05 said...

Of note, Century had no hedges as of June 30, 2010. The gold price has been well above US$1,100 since end of Q2, thus there should also be no gold hedges in Q3. Even if the gold price falls temporarily below US$1,100, it is not a certainty that Deutsche Bank will make us hedge 60% of our Lamaque production. I posted a couple of weeks ago that Deutsche Bank`s top analyst in the field (who is also one of the most accurate analysts in 2010) is forecasting US$1,550 gold for 2011. The gold price fell below US$1,100 for a few days in Q1 this year and Deutsche Bank didn`t force our hand.

From note 4 of the financial statments:

``If on any business day, on or after January 2010 and on or prior to December 31, 2012, the price of gold is less than US $1,100 per ounce, Deutsche Bank AG may require that the Company enter into hedging transactions equal to the lesser of 60% of the anticipated monthly production of gold from the Lamaque Mine, and 5,000 ounces of gold per month. At June 30, 2010, the Company had Nil ounces of gold to be delivered under forward contracts.``

Anonymous said...

Someone (maybeProd5) explain to me why a company like Romarco can be worth 1.1B without drilling a single ounce of gold ...yet...while CMM producing mine gets $150M? Shouldn't the values be reversed?

Yeah Romarco has 150M cash but I've read thru the presentation and they don't even know how much it will cost/per oz to drill, not to mention construction/ramp up costs always more than initial estimates.

Is it just better marketing or is Romarco just a better run company?

The street must like Romarco for a reason to give it 1.1B M/C for producing nothing...

Curious Canuck

Anonymous said...

Mid-tier producer... of shares

production05 said...

Hi Curious Canuck,

The primary difference comes down to institutional support. Century has virtually none, for all intents and purposes (not counting significant private investors Finskiy and Scola). Romarco has a boatload - 70% of their shares are institutionally held.

Best I can tell, Peggy was unsuccessful in bringing on significant numbers of analysts and institutions with the site tours and promotional campaigns during this year. Best I can tell thus far, Hulley has not delivered any better on that front (even though things may be in the works behind the scenes, us shareholders have seen nothing thus far, other than a decline in share while the gold price has hit all time highs again, and of course, we have also seen a stoppage of the monthly updates).

We will have to wait and see if the new CEO will eventually be able to deliver better on this front.

The gold price is expected to remain strong in 2011. With the Bedard Dyke and the North Wall successfully onstream in the next few months, and Century delivering closer to planned levels, more institutions will eventually be kicking the Century tires.

If 14 analyst types attended the site tour then they must have been interested enough in Century to make that effort. Such being the case, they will be even more interested in covering Century once Century can demonstrate it is delivering the goods.

I don`t know how many institutions met with Century already, but I imagine their approach would be similar to the one taken by the analysts.

The institutions likely flocked to Romarco due to having confidence in Romarco`s management to deliver the goods, as well as its project.

With Century, it`s about earning the trust first, before institutional support arrives, IMO.

Carib said...

The difference between Century and many other companies like Romarco with much higher market caps is that other companies can say what they are going to do and the market will give them the benefit of the doubt. But when you have a history of not delivering on forecasts, then it doesn't matter what you say anymore, but what you do.

Having said that we are currently trading at about 9 times next year's cash flow from San Juan alone if we can produce 24,000 oz at a cash cost of $575/oz.

24,000 x ($1,265-$575)= $16,560,000

9 times $16,560,000 = $149,000,000 which is pretty close to our current market cap. We are getting nothing for Lamaque which is unbelievable.

Carib said...

Anonymous posters please check the Name/URL box instead of Anonymous and enter a name and use that same name for all subsequent posts.

Carib said...

Keith, the company probably needs the $9 million held in escrow by Deutsche Bank, but we can't get it until we reach a rate of production of 70,000 oz/yr for 4 consecutive months.

Century cannot force Finskiy to exercise his warrants and we are fortunate that he has exercised quite a few so far to provide the cash we need. We can only force exercise after 12 months after the Agreement and only if the share price stays above 60 cents for 45 days.

I don't think Finisky wants to be carrying the whole financing load by himself. I was somewhat surprised that he agreed to the DB deal to sell 61k ounces of gold at a deemed price of $565 (or thereabouts) in exchange for $33 million. He and/or his friends could have kept that arrangement for themselves if they wanted to.

I don't think we should need more cash. We must be cash flow positive at Lamaque now and San Juan is generating free cash. However it is probably not enough to accelerate development at Bedard Dyke and the North Wall to enable us to meet our production targets at Lamaque in the short term. It's a bit of a catch-22 without the PP. We need money to increase production, but we can't get access to the escrow funds until we do increase production.

Curious Canuck said...

Thank you Prod5 and Carib.

I still cannot believe the 150MC on Century. I thought I did my due diligence on this one, and companies like Romarco's MC just blow me away!

Nothing for Lamaque is just insane. I suppose i will hold and hope next Sept 2011 will be better valuation for Century.

I thought I read somewhere the costs are $700/oz...?! That seems high to me...I thought it was more in line with $550.

Mike said...

Sorry about the 1.5% dilution .. was having a bad math day yesturday.

At a SP below 60 cents 12.8/ 410 outstanding = 3.1 %

When the SP hits 60 cents I am a happy camper .. regardless of 6 million more shares dilution.

If 5 million gets us to the 2011 target of 100,000 oz .. so be it.

Using a "high" cash cost of 700/oz and a low gold price of 1100/oz

400 profit x 100,000 oz = 40 M

Using a low P/E of 10 gives a market cap of 400 million.

Now compare 410 M shares outstanding to 430 M shares outstanding.

400/410 = 98 cents/share
400/430 = 93 cents/share

I have 93 cents/share .. guaranteed due to having enough cash to get the job done

Than a hope of 98 cents/share with the risk of struggling and more delays due to cash flow issues.

Now CMM is in a better position to make the first benchmark of 70,000 oz.

If/when that benchmark is achieved .. not only is CMM going to be cashflow positive .. but at the same time they will get a 9 Million dollar cash injection from Deutchbank.

That has got to make the financials look a whole lot better.