Shares of Agnico Eagle Mines Limited (AEM) rose around 0.7% during the trading session following the news that it agreed to subscribe for 19,800,000 units of Pershimco Resources Inc. in a private placement. The company’s shares eventually closed at $25.19, gaining around 0.2%.
Each unit subscribed comprises one common share and one common share purchase warrant. Each share purchase warrant affixed with each unit subscribed allows the holder to acquire one common share of Pershimco at C$0.54 (or 51 cents) any time within two years from the closing date.
The subscription is priced at C$0.47 per unit (or 44 cents). This amounts to a total consideration of C$9,306,000 or ($8,764,780).
The proposed private placement is subject to regulatory approval and other closing conditions. The private placement is expected to close on or about Jan 10, 2014.
On closing of the private placement, Agnico Eagle will hold 19,800,000 common shares and same number of warrants. This represents 9.9% of the issued and outstanding common shares on a non-diluted basis and 18.1% of the common shares on a partially diluted basis.
Both the parties are anticipated to enter into an investor rights agreement at the closing of the private placement. Under the agreement, Agnico Eagle will acquire the right to appoint one director. Moreover, if the numbers of directors is increased to 10 or more, the company can appoint one additional director.
The agreement will also bestow Agnico Eagle with a participation right wherein it can take part in future equity financings of Pershimco in order to maintain its proportionate ownership of the latter at 9.9% on a non-diluted basis.
However, Agnico Eagle will not be allowed to use the participation right if it owns more than 20% of the outstanding common shares of Pershimco (on a non-diluted basis). It will also not be allowed to exercise a warrant if and to the extent that, after exercising the warrants, it gains more than 20% of the outstanding common shares (on a non-diluted basis).
Moreover, Agnico Eagle will not be allowed to acquire more than 19.99% of the common shares (on a fully diluted basis) or to act jointly or in concert with others in relation to the securities of Pershimco for one year from the closing of the private placement.
Agnico Eagle is acquiring the units of Pershimco in the form of an investment. However, acquiring additional common shares or other securities of Pershimco or disposing some or all of the common shares or warrants will depend on market conditions.
Agnico-Eagle currently has a Zacks Rank #4 (Sell).
Better-ranked stocks in the gold mining industry include Golden Star Resources, Ltd. (GSS), Pretium Resources Inc. (PVG) and AngloGold Ashanti Ltd. (AU). While Golden Star Resources carries a Zacks Rank #1 (Strong Buy), Pretium Resources and AngloGold Ashanti hold a Zacks Rank #2 (Buy).
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