The Regis Resources Limited (ASX: RRL) share price won’t be going anywhere on Tuesday.
This morning the gold miner requested a trading halt prior to the market open.
Why is the Regis Resources share price in a trading halt?
Regis Resources requested a trading halt so that it can undertake an equity raising to fund a major acquisition.
According to the release, the company has signed a conditional binding agreement with IGO Ltd (ASX: IGO) to acquire its 30% interest in the Tropicana Gold Project for A$903 million.
The release notes that Tropicana is a low cost, high margin, top five producing Australian open-pit and underground gold mine located in the Albany-Fraser Orogeny in Western Australia. It is one of the largest gold mines in Australia with gold production of 463koz in FY 2020 and guidance of 380koz – 430koz in FY 2021.
Management notes that the acquisition diversifies Regis’ existing production base with a non-operated interest in a high quality, low cost, high margin gold asset.
It also comes with a world class joint venture partner in AngloGold Ashanti. It is a proven gold miner with a successful track record of developing and operating Tropicana and other underground assets.
Regis’ Managing Director and CEO, Jim Beyer, commented: “This is a genuinely transformational transaction for Regis and one that delivers on our strategic objectives to grow as a safe, responsible, reliable, long life, low cost gold producer, generating strong financial returns.”
“Diversifying the Company’s robust portfolio through the acquisition of a 30% interest in the Tropicana operation will deliver significant improvements in the Company’s Resources, Reserves and annual production, along with providing additional immediate cashflows, all of which adds to the strength of our platform for undertaking further organic and inorganic growth activities.”
Equity raising
Regis intends to fund the acquisition through a combination of a fully underwritten equity raising of up to A$650 million.
This comprises a A$200 million institutional placement and an accelerated pro rata non-renounceable A$450 million entitlement offer. The company has also secured a new A$300 million loan facility.
All new shares offered will be issued at a price of A$2.70 per new share, which represents a 14.8% discount to its last close price.
Shareholders of IGO have responded positively to the news. The IGO share price is up 4% in morning trade.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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