Oreninc Index Update: January 19, 2017
ORENINC INDEX DIPS BUT GOLD CONSOLIDATES ABOVE $1,200 USD
ORENINC INDEX - Monday, January 23, 2017
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AuRico Metals (TSX: AMI) – Royalty Update
The Oreninc Index fell in the week ending January 20, 2017 albeit following one of the best weeks seen in Canadian equity financings for a long time. Total dollars announced fell to $191.8m from $285.6m, which included five brokered financings for a total of $41.5m, and one bought-deal financing for $30.0. The average offer size fell from $11.9m to $5.2m.
Whilst the dollar values may have fallen, the total number of financings increased to 38 as gold consolidated its move above the 1,200 USD mark, continuing the rally that began in late December 2016. The industry’s leading benchmark index, the van Eck managed GDXJ continued its upward trend and is up 18.76% so far in 2017.
Donald Trump is now the US President and the ten-year Treasury Inflation Protected Securities (TIPS) yield continues on its path to pre-election levels.
This week sees the start of the conference season with the Vancouver Resource Investment Conference 22-23 January (come and say “hi” to the Oreninc team and catch CEO Kai Hoffmann present on The True State of the Junior Resource Market at 2:20pm on Sunday the 22nd in Workshop 4). For those of you with a deeper interest in geology, this is followed by the AME Round Up on 23-26 January, also in Vancouver.
Financial news highlight
Of particular note this week, Lithium Americas Corp. (TSX:LAC) announced major financings including private placements for an aggregate $106.5 million that highlights the serious interest in the lithium space, particularly from China, as it seeks to obtain access to the raw material that it needs for its battery plants.
Ganfeng agreed to purchase 75 million shares at C$0.85 each for gross proceeds of C$64 million, some 19.9% of the company, and a couple of days later BCP Innovation Pte Ltd (BCPI) agreed to purchase 50 million shares at C$0.85 each for gross proceeds of C$42.5 million, some 16.4%.
But the money flow did not stop there as debt commitments from both purchasers mean LAC will have raised US$286 million, enough to finance its 50% share of stage 1 of the Cauchari-Olaroz lithium carbonate joint venture project in Argentina with leading producer SQM.
Ganfeng will provide US$125 million in debt at an 8-9.5% with a six-year term with an offtake entitlement to 70% of LAC’s share of Cauchari-Olaroz stage 1 production, and BCPI will provide US$80 million in debt on the same terms for 15% of LAC’s share of Cauchari-Olaroz stage 1 production.
Summary:
- Number of financings increased to 38
- Five brokered financings were announced for $41.5m, a two-week low.
- One bought-deal financing was announced for $30m, a two-week low.
- Total dollars lowered to $191.8m, a two-week low.
- Average offer size dropped to $5.2m, a two-week low.
Major Financing Openings:
- Lithium Americas Corp. (TSX:LAC) opened $106.5 million in two offerings on a strategic deal basis.
- Golden Star Resources Ltd. (TSX:GSC) opened a $30 million offering underwritten by a syndicate led by Clarus Securities Inc. on a bought deal basis. The deal is expected to close on or about February 7, 2017.
- Hudson Resources Inc. (TSX-V:HUD) opened an $8.05 million offering on a best efforts basis. Each unit includes a 1/2 warrant that expires in 36 months.
- Colonial Coal International Corp. (TSX-V:CAD) opened a $7.5 million offering on a best efforts basis. Each unit includes a 1/2 warrant that expires in 36 months. The deal is expected to close on or about February 2, 2017.
Major Financing Closings:
- Entree Gold Inc. (TSX:ETG) closed a $7.6 million offering on a best efforts basis. Each unit includes a 1/2 warrant that expires in 60 months.
- NxGold Ltd. (TSX-V:NXN) closed a $5.49 million offering on a best efforts basis. Each unit includes a 1/2 warrant that expires in 36 months.
- Standard Lithium Ltd. (TSX-V:SLL) closed a $5 million offering on a best efforts basis.
- Forum Uranium Corp. (TSX-V:FDC) closed a $1.7 million offering on a best efforts basis.
ORENINC SPONSOR NEWS
AuRico Metals (TSX: AMI) C$1.18, Mkt Cap C$176.7m – royalty update
- AuRico expects 2016 royalty revenue to be at the high end of its guidance range of US$7.7-8.1 million.
- 2017 gold production at Young-Davidson (1.5% NSR royalty) is forecast to be 18% to 24% than in 2016 at between 200,000 and 210,000 oz.
- 2017 production guidance at Fosterville (2% NSR royalty) if for 140,000-145,000 oz, down from the record production in 2016 of 151,755 oz. Resource expansion drilling is underway and the operator expects to provide a reserve and resource update in 1Q17.
- Stawell (1% NSR royalty) is now on care and maintenance pending exploration success to restart operations.
- 2017 production at Eagle River (0.5% NSR royalty) is expected to increase by 12-22% to 45,000-49,000 oz.
- A preliminary economic assessment and updated resource statement on the GJ Property (0.98% NSR royalty) is expected to be released in 2Q17.
- The acquisition of Kiska Metals that includes six royalties is expected to close in 1Q17.
Conclusion: A strong royalty revenue stream continues to grow through increased production by operators and acquisition of new royalties.
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