Banro raises funds in tough market

These are hard days for Canadian junior gold miners.

And Banro‘s (BAA-T, BAA-X) recent financing depicts just how hard.

The Toronto-based company with a portfolio of four exploration projects in the Eastern Democratic Republic of the Congo was once the envy of the junior circuit based on great drill results and a top notch management team.

But falling gold prices and growing uncertainty about what the DRC government’s plans are for exploration companies there, have conspired to deflate almost all of the markets previous enthusiasm.

While Banro shares had been trading close to $12 per share at the beginning of the year, they were trading for just $1.58 in Toronto on Sept. 11th.

Despite the downturn, funds are still needed as it seeks to develop its four wholly-owned gold projects along the 210 km-long Twangiza-Namoya gold belt. So the company was left to strike a deal to sell 11 million units at a price of US $1.75 per unit which will raise it roughly US$19.25 million.

Each unit is made up of one common share and one half of one warrant that lets the holder buy a Banro share for US$2.20 for 36 months.

The deal also allows the underwriters to buy another 1 million common shares and 500,000 warrants within 30 days of closing the deal. The proviso is to allow for covering over-allotments and market stabilization purposes.

Recent comments from an official at the DRC’s ministry of mines have, no doubt, added to the markets trepidation around the shares. The official was quoted by Bloomberg last week as saying that projects that had not yet finished a feasibility study on their projects would be subject to the government taking a 51% stake in them.

Banro has 1.4 million oz. of gold in the measured category from its Twangiza project alone, 3.3 million oz. in the indicated category from Twangiza and Namoya, and another 4.9 million oz. in the inferred category when all four projects — Twangiza, Namoya, Kamituga and Lugushwa — are combined.