Peter Hambro Mining, the London-listed company which mines gold in Russia, announced plans yesterday to raise at least £40m in a new share issue next month.
The placing will be underwritten by HSBC and Canaccord Capital at £4 a share, news of which sent the stock tumbling more than 6 per cent yesterday to 410p, down from Tuesday's close of 436.5p.
The proceeds of the issue are to be spent on the development of Hambro's Pioneer mine and the acquisition of further Russian deposits. The placing is conditional on approval at an extraordinary general meeting on 7 June. However, the board already has irrevocable agreements to vote in favour of the issue from 47.5 per cent of the shareholders. Any shares not sold during the placing will be bought by the underwriters.
Peter Hambro, the executive chairman of the company, said: "Our company has grown from a speculative start-up operation into a substantial mining company, and it has two or three elements needed to allow it to join the team of one million ounce per year producers: namely gold in the ground and management.
"The third requirement, cash, would have been principally provided as it has in the past from internally generated cash flows and bank borrowings. However, the company thought it appropriate to speed up the development process by accepting the offer from Canaccord and HSBC for the equity fund raising."
Analysts welcomed the news. John Meyer, at Numis Securities, said: "I would expect Peter Hambro to become a major player over the next few years. The company's own target is to produce one million ounces of gold per year, which would make them the twelfth largest gold provider in the world."
He also welcomed news of further acquisitions. "The company's acquisitions have so far been very successful, simply because there is so much available in the old Soviet Union."
Peter Hambro launched 10 years ago but has come into its own in recent years after buying the Pioneer mine. Numis estimates Pioneer alone will eventually be worth some £350-400m for the company, and has a target price for the stock of 715p.
The shares have rallied massively over the past 18 months, from 120p in January last year to a high of 569p last month. But the share price has come back in the last three weeks as the gold price has fallen.Reuse content