MIDAS GOLD CORP COM NPV (OTCMKTS:MDRPF) share price has appreciated about 60% since January and currently up 9% since the beginning of the month. Weekly volume hit an all time record of over 1.2 million shares trading hands. It is not hard to see why investors having been bidding up MDRPF’s share price.
A recent development is that MDRPF have entered a strategic agreement with Paulson & Company. The agreement has allowed MDRPF to raise over C$55M (Canadian dollars). The notes can be converted to equity at a share price of C$0.3541. The proceeds of this huge offering will be used to advance its Stibnite Gold Project in Idaho. MDRPF completed its preliminary feasibility studies in December 2014.
The Stibnite project is at a crucial point and is expected to have a long project life. It will take over three years for the site to be cleaned-up and construction to commence. There will likely be 12 years of production according to the feasibility study. The finance package allows the company to successfully continue on the project despite the dilutive nature of the offering. However, the capital was essential to raise before beginning to permit. In addition Paulson is a huge vote of confidence for investors and will be an extremely strategic investor. Given his large ownership in the company (if conversions occur), he will have a huge push to see the project through in a timely manner and on budget.
Given the size of the offering, shareholders will have to approve the financing package. It will likely pass without hitch given that this is the best opportunity the company has to move forward. If the conversion was to occur, the numbers of shares issued would be 156,252,470 shares. This would almost double the share count which will likely add huge dilutive pressure to the share price. Any meaningful advance would be weighed down by the conversion.
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MDRPF is currently trading at a $46 million market valuation. The company has raised a significant amount of capital to commence its mining project which should be profitable once it comes online in three years. This is a long-term project in which investors will have to be patient. MDRPF boasts a trailing 12-month P/E ratio of 30 which means the company does have earnings. The stock looks ready to breakout but the dilutive nature of the capital raise should be taken seriously. Stay tuned for more updates.
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Disclosure: we hold no position in MDRPF either long or short and we have not been compensated for this article.