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Donner Metals To Raise Up To $4.5 Mln For Quebec Projects

Donner Metals (CVE:DON) says it will raise up to $4.5 million through a private placement financing, with the majority of the funds to be used for its share of the capital and operating costs at the Bracemac-McLeod mine in Quebec.

The agreement, with Secutor Capital Management and Marquest Capital Markets as agents, will see up to $3.0 million units issued at a price of 10 Canadian cents apiece, and up to $1.5 million flow-through units at a price of 11.5 Canadian cents each.

Each unit will be made up of one common share in Donner and one share purchase warrant, with each warrant good for one additional common share at a price of 15 cents, for a period of 5 years from closing.

Every flow-through unit, meanwhile, will consist of one common share designated as a "flow through share" for the purposes of the Income Tax Act in Canada, and one half of one share purchase warrant. Each warrant will get the holder one common share at a price of 15 cents apiece for a period of three years from closing.

Under the offering, the agents also have an option, which can be used in whole or in part at any time prior to the closing date, to sell up to an additional C$1.5 million of flow through units, and up to another $3.0 million units.

The $3.0 million from the unit placement will be used to not only fund expenses at the Bracemac-McLeod mine, but also for exploration costs at its projects in Quebec, and other working capital needs. The remainder of the new funds, hailing from the flow-through units, will be used to fund exploration and development expenditures that classify as "100 per cent Canadian exploration expense" at its projects in Quebec, Donner said.

The deal still needs formal documents to close, as well as regulatory approvals.

Donner last month hit high grade mineralisation at the McLeod Deep zone at the Bracemac-McLeod project, where production kicked off in the middle of May at the anticipated rate of 3,000 tonnes per day. A recent intercept hit 9.49% zinc, 1.75% copper, 52.96 g/t silver and 1.03 g/t gold over 34.8 metres, the company told investors.

The results were relayed by partner and project operator GlencoreXstrata, and the drill program - to be completed this year - is aimed at both expanding and confirming resources and establish a higher confidence indicated resource. As of late May, 11 holes of the 54 hole program had been completed The work should provide a better understanding of the potential size of the resource below the reserves currently scheduled to be mined at McLeod.

The deposit contains proven and probable mineral reserves of 3.7mln tonnes, grading 9.60% zinc, 1.26% copper, and 28.25 grams per tonne (g/t) silver and 0.43 g/t gold. Inferred mineral resources stand at 2.6 million tonnes grading 8.79% zinc, 1.31% copper, 38.84 g/t silver and 1.06 g/t gold lie near to the proven and probable mineral reserves.

Discovered in 2007 by the Donner and Glencore Xstrata team, the Bracemac-McLeod mine is 65% owned by Glencore Xstrata, with the remainder held by Toronto-listed Donner.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.