At a time when many junior exploration companies are running out of money and are desperately scrambling for an infusion of risk capital, Sirius Minerals (SXX) managed to raise £43m ($72m) from investors in less than eight hours during an accelerated book-build and placing last week.
The prospective mine developer is issuing 359m new shares priced at 12p apiece to fund its flagship York polyhalite project through the permitting process and complete a definitive feasibility study. It is also issuing 179m warrants to placing participants exercisable at 18p a share, providing the company with an additional £32m of funding should they be exercised in full. The placing shares alone will result in dilution of approximately 24 per cent.
That means Sirius' total number of outstanding shares will rise to a staggering 1.9bn, excluding warrants and options, after the placing shares are admitted for trading this month. That's up from 728m before Sirius acquired the project from a private company controlled by chief executive Chris Fraser. What's more, it is likely to pale in comparison to the equity portion of the funds Sirius would need to raise should it eventually progress to mine construction; the mine and associated infrastructure is likely cost in the region of $2bn to build, according to Sirius' latest estimate.
The company's fund-raising comes just days after the mining industry's largest annual conference - the Prospectors and Developers Convention (PDAC) - finished in Toronto. There, North American newsletter writer John Kaiser railed against Canadian companies constantly diluting shareholders by raising money from accredited investors at a discount to the market price, usually with warrants attached.
In a speech to retail investors transcribed by The Northern Miner, Mr Kaiser expressed his anger that institutional investors or accredited investors - individuals with at least $1m in assets outside of real estate - routinely get a manifestly better deal than the average retail investor. "Their favourite strategy [has been] to do a private placement, wait the four months and then unload it onto the retail investor and clip the warrant - in other words, flip the stock, clip the warrant, de-risk their exposure and get a free ride on the fundamentals, while you took the risk of whether or not the project worked out," Mr Kaiser said.
Sirius' warrants have a fairly high exercise price, but are separately transferrable and will be listed "on an appropriate exchange within 90 days of issue", according to Sirius.
