Yamana to raise up to $115.2-million in equity issue

December 10, 2008 at 9:01 AM EST

Canadian miner Yamana Gold Inc. said Wednesday it has struck a deal to raise up to $115.2-million through a new issue of common shares, in a bought deal with a group of underwriters.

The offering is to be priced at $6 to 60 cents below its closing price in Toronto Tuesday and $13.79 below its 52-week high last March.

It initially includes 16.7 million common shares, which will net the Toronto company $100.2-million.

However, Yamana said the investment dealers underwriting the issue also have an over-allotment option for an additional 2.5 million shares, which would add $15-million to its proceeds.

The gold miner says on its web site that it has 730.5 million shares outstanding on a fully diluted basis, meaning investors appear to be looking at a dilution of about 2.6 per cent.

Yamana Gold Inc.

The underwriting syndicate is being led by Canaccord Capital Corp. and Scotia Capital Inc., Yamana said.

The mining company, which has grown dramatically by acquisition in recent years, said in a news release that it will use the proceeds “for ongoing operating and working capital requirements,” and possibly “to reduce the level of debt currently outstanding under Yamana's revolving debt facility or for discretionary capital programs as required.”

Yamana said in its third-quarter report to shareholders that, in addition to $334.1-million (U.S.) in non-revolving debt on its books, it also had $245.8-million in revolving debt outstanding on a $250-million line at Sept. 30. No principal payments are due on the revolving loans until 1012, when the entire amount must be repaid.

The company reported a profit of $255.4-million or 36 cents a share on revenue of $940.5-million for the first nine months of this year. This compared with $110.1-million or 30 cents a share on revenue of $528.5-million in the year earlier period, when it had only about half the weighted average number of shares outstanding as it does now.

Founded in 2003, Yamana gained a high profile last year when chief executive officer Peter Marrone, a former investment banker and corporate lawyer, quarterbacked a complex and sometimes bitter $3.5-billion (Canadian) takeover battle that saw the company absorb both Meridian Gold Inc. of Reno, Nev., and Northern Orion Resources Inc. of Vancouver. The deal created a gold and copper producer with mines in Argentina, Brazil, Chile, Central America and Nevada.

The combined companies had a total market cap of nearly $9-billion at the time, although, at Yamana's current share price, this has fallen to about $4.6-billion.

More to come