Vancouver — Metallica Resources (MR-T, MRB-X) has arranged a $30-million bought-deal financing that will allow it to continue development of its Cerro San Pedro gold-silver project in Mexico, as well as other exploration projects in the company’s portfolio.
The financing is a boost for Metallica, which has been fighting efforts by local land owners in the state of San Luis Potosi to ban the use of explosives on certain parts of the Cerro San Pedro property, including the access road and pit.
Under an agreement, investment firm Canaccord Capital will buy 6.67 million shares of Metallica at $4.50 per unit in the private placement. Each unit is comprised of one common share and half a warrant.
One warrant entitles the holder to subscribe for one additional share of the company at a strike price per warrant share of $5.50 for three years from the closing date of the financing.
Shares of Metallica fell 14 to $4.55 Monday, after terms of the financing were announced.
The company has granted the underwriter an overallotment option to purchase up to an additional 15% of the units at a price of $4.50 per unit, on the same terms and conditions for up to 30 days after the closing date. If the option is exercised, total gross proceeds to Metallica will rise to over $34.5 million.
Under the agreement, Metallica will pay the underwriter a cash commission of 5% of the gross proceeds of the financing, which was scheduled to close on Dec. 20.
Richard Hall, Metallica’s Denver, Colo.-based CEO, says about US$14 million will be devoted to Cerro San Pedro, where the company recently won a court ruling enabling it to continue using explosives on the property.
Metallica is deploying heap-leach mining methods at the site and hopes to reach commercial production by the third quarter of 2007, Hall says.
The Cerro San Pedro property is located about 20 km outside the city of San Luis Potosi.
The company is forecasting an annual average production rate of roughly 85,500 oz. gold and 2 million oz. silver, or 115,000 oz. of gold-equivalent, over an estimated 9-year mine life.
Part of the proceeds of the financing will also be used to fund exploration work at properties in Chile and Alaska, Hall says.
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