Seeking Alpha
Gold & precious metals, macro, research analyst, deep value
Profile| Send Message|
( followers)  

Summary

  • Klondex Mines entered into an agreement to raise C$14 million in a private placement valued at C$2/share--a 4% discount to the market value.
  • The company plans to use the money to accelerate the development of its projects and to further explore its properties.
  • The stock remains a compelling speculation play, although a dilution often comes with a pullback, so I'd wait before buying.

Klondex Mines (OTCQX:KLNDF) announced its intent to raise C$14 million through a private placement deal with Mackie Research, Dundee Securities, Dominion Securities, RBC, and others. The company claims that it wants this capital in order to explore its properties and to accelerate the development of its Midas and Fire Creek Projects, and to further explore its properties.

This doesn't change the investment thesis much, although it does provide insight into management's goal, which seems to be rapid growth and expansion of its resource. It recognizes that its share price didn't suffer the way that the rest of the sector did and so it can issue stock without diluting shareholders very much in order to avoid issuing debt. I think that the secondary also suggests that the company has just about run out of cash since its latest financial statement in March, when it had C$7 million.

Investors should note that, as I mention in my latest article on the company that the PEA for its Fire Creek Project projects that the project's value is lower than its valuation. While I, along with the company's management, believe that at some point the Fire Creek Project will expand the resource and the mine plan, the stock is speculative.

Editor's Note: This article discusses one or more securities that do not trade on a major exchange. Please be aware of the risks associated with these stocks.

Source: Update: Klondex Mines To Raise C$14 Million