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January 23, 2009 |
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Kinross Gold (NYSE:KGC), one of the world's best performing gold stocks, announced a public equity offering of 20.9 million common shares at $17.25 per share, with gross proceeds of about $360.5 million, to enhance the company's capital position following the funding of recent acquisitions.
In 2008, the gold and silver miner bought Aurelian Resources for around $809 million. Since that time, the shares of stock have had average daily volume of over 11 million shares on the NYSE and traded in a 52-week range of $6.85-$27.40.
The Canada-based company has also granted the group of underwriters, led by UBS Securities Canada Inc., an overallotment option to purchase up to an additional 3.135 million common shares at the offering price. This option is available for 30 days after the offering closes. If this option is excercised in full, it will bump up the total proceeds to about $414.6 million.
The offering is scheduled to close on or around February 5, 2009. The company has 665 million shares outstanding.
Kinross ranks as number one global gold pick among a number of analysts and investors. Production for the group is anticipated to grow around 30% this year to around 2.45 million ounces.
The new money now being raised is targeted for general corporate purposes after recent acquisitions depleted around $180 million of Kinross's existing cash. Just two months ago, Kinross shelled out $250 million on a 6 million ounce gold deposit in Chile.
The last quarter's earnings growth was up an impressive 64% year-over-year, the balance sheet looks better than average with a total debt-to-equity ratio of just .017 and total cash of over $720 million.
The Kinross acquisition may have upped the tone for other gold miners. Harmony Gold (NYSE:HMY), the world's fifth biggest gold miner by ounces produced, on December 22 announced the raising of R979 million before costs, by placing 10.5 million shares at an average price of R93.20 each between November 25 and December 19 2008.
The fresh capital is earmarked mainly to further pay down Harmony's debt, which is targeted, on a net basis, to be around zero by mid-2009.
Among other capital raisings, during November, Agnico-Eagle Mines (NYSE:AEM), a leading Tier II gold digger, raised $252 million in a seemingly effortless offering.
Overall, when it comes to healthy, proactive and well-managed gold mining companies, the offerings are "in response to strong investor demand."
Although right now I have both a long and a short position with KGC, I won't be buying any more until the price per share corrects at least 20% below present levels. But I'm impressed with both the fundamentals of Kinross and the way the investment community views them so favorably.
KGC, along with Goldcorp (NYSE:GG), Barrick Gold (NYSE:ABX), Yamana Gold (NYSE:AUY) and IAM Gold (NYSE:IAG) are shares I want to be accumulating for the year ahead.
The market volatility should help us to buy at lower prices, but the whiff of future inflation and the popularity of gold as a monetary alternative may keep share prices from falling as low as I would like. Patience though, is usually rewarded.
Disclosure: Author holds both a long and short position in KGC
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