On October 20, 2021, Arizona Metals Corp. (“AMC.V”) announced that it had entered into an amended agreement with Stifel GMP and Clarus Securities Inc (the “Lead Underwriters”) to increase the size of the previously announced offering.
Following the amended terms of the Offering, the Lead Underwriters have agreed to purchase, on a bought deal basis,
- 10,600,000 common shares of the Company at a price of C$4.25 per Common Share, consisting of 7,500,000 Common Shares issued from the treasury for gross proceeds to the Company of C$31,875,000 and 3,100,000 Common Shares sold by certain existing shareholders for gross proceeds of C$13,175,000.
A bought deal is a financial underwriting contract often associated with a public offering that occurs when an underwriter, such as an investment bank or a syndicate, purchases securities from an issuer before a preliminary prospectus is filed.
The advantages of the bought deal from AMCs perspective include:
- Bought deals are usually priced at a larger discount to market than fully marketed deals, and thus may be easier to sell for the underwriters providing liquidity for the issuers common
- Bought deals eliminate execution or market risk
- And finally, the sponsors cannot sell the securities, they must hold them. This is usually the result of the market price dropping below the issue price, which means the underwriter loses capital.
The company has also agreed to grant the Underwriters an over-allotment option to purchase up to an additional 1,125,000 Common Shares under the “Treasury Offering”. If this option is exercised in full, an additional C$4 million in gross proceeds will be raised pursuant to the Treasury Offering and the aggregate gross proceeds of the Treasury Offering will be C$36,656,250.
The Company plans to use the net proceeds from the Treasury Offering to fund exploration expenditures at the Company’s Kay Mine in Arizona as well as for working capital and general corporate purposes. The Company will not receive any proceeds from the Secondary Offering.
At the end of June 30, 2021, the company had 27 million in cash on their books including 88 thousand in tax recover bales (noncash) and 700 thousand in prepaid expenses. The Treasury offers will bring in gross proceeds of C$36,656,250 that includes the embedded call options and before the fees associated with the underwriting and financing costs.
Thus far the company has spent 8 million on the Kay Mine project and 75 thousand on the Sugarloaf Peak Gold Project. The bulk of their expenditures for the 6 months ended June 20, 2021, went to Acquisition cots (2 million) and Drilling costs (5 million).
In an article on September the 22nd we noted that they planned to spend an additional 27 million on both projects in aggregate and this financing goes hand in hand with the corporate goals and capital allocation objectives. The company has not registered any sales or top-line figures, so they must rely on external financing to fund their capital expenditures and drilling expenditures. it is a key determinant of the business’s success if the management team can deploy this new capital at high rates of return to gain exposure to some of the high-quality assets that they have on the ground.
For now, we wait for the drilling results. Lucky for us Mr. Marc Pais, the CEO of AMC, and his wonderful team are way ahead of us on this front. Since June they have been publishing their drilling results for their Kay Mines project. For reasons not linked to my laziness we won’t go through them on this article but will leave a few links for eager readers who want to dive deep into the grading of Au, Cu, Zn, and Ag Branch Hole.
