Iamgold launches $200m financing to strengthen balance sheet

VANCOUVER (miningweekly.com) – Toronto-based gold producer Iamgold has entered into an agreement with a syndicate of underwriters that has agreed to buy 38.85-million common shares of the company on a bought-deal basis at a price of $5.15 each, for gross proceeds of about $200-million.

Should the overallotment option be exercised in full, the dual-listed company will raise another $30-million, which it intends to use to fund future growth and to strengthen its balance sheet by reducing indebtedness.

Iamgold plans to use about $150-million of the net proceeds to fund a tender offer for its outstanding 6.75% senior notes, which it also announced on Monday. The company advised that it would pay $970 for each $1 000 principal amount of the notes, comprising an early tender payment of $30 per $1 000 principal amount of the notes and a tender payment of $940 per $1 000 principal amount of the notes.

The rest of the net proceeds would be used to fund internal growth projects, including the expansion of the Sadiola mine, in Mali - a joint venture between Iamgold (41%), operator AngloGold Ashanti (41%) and the Mali government (18%).

Funds will also be set aside for future debt reduction and for general corporate purposes.

As at December 31, the Sadiola mine held total probable reserves estimated at 70-million tonnes grading 1.9 g/t of gold, for 4.36-million ounces of gold. In 2015, the operation produced 169 000 oz of the yellow metal.

A 2010 feasibility study on the Sadiola sulphides project estimated an increase in production at the Sadiola mine to between 350 000 oz/y and 500 000 oz/y (on a 100% basis) with a mine life of 13 years, increasing the total gold output at Sadiola by about 2.2-million ounces beyond the current mine plan. Long-lead items were bought before the global financial crisis put the project into care and maintenance.

An updated feasibility study was completed at the end of 2015, based on the same concepts as the 2010 study, but incorporating the current oxide mining plans, new capital and operating cost metrics, and a lower gold price.

Investors did not take kindly to Iamgold's announcements, which saw the TSX-quoted stock fall more than 11% Tuesday to C$6.68 apiece.