02/15/2013

San Gold Raises $50 Million

February 13, 2013

San Gold Announces $50 Million Offering of Convertible Debentures
WINNIPEG, MANITOBA--(Marketwire - Feb. 13, 2013) -

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San Gold Corporation (TSX:SGR)(OTCQX:SGRCF) (the "Company") today entered into an agreement with a syndicate of underwriters co-led by Scotiabank and CIBC under which they have agreed to act as underwriters to purchase, on a bought deal basis, 50,000 convertible unsecured subordinated debentures (the "Debentures") of the Company at a price of C$1,000 per Debenture, for total gross proceeds of C$50 million (the "Offering").

The Underwriters have been granted an option (the "Option") to purchase up to an additional 15% of the Offering, exercisable in whole or in part at any time up to 30 days following the closing of the Offering, which is scheduled to occur on or about March 6, 2013 (the "Closing Date").
The Debentures will mature on March 31, 2018 (the "Maturity Date"), unless earlier redeemed, and will bear interest, accruing, calculated and payable semi-annually in arrears on March 31 and September 30 of each year, at a rate of 8.00% per year. The Debentures will be convertible at the holder's option into common shares ("Common Shares") of the Company at any time prior to the close of business on the earlier of the Maturity Date and the business day immediately preceding the date fixed for redemption of the Debentures at a conversion price of C$0.50 per Common Share (the "Conversion Price"), subject to adjustment in certain circumstances.

My Take:

This means that San Gold just diluted their shares by another 100 million shares in the long term. Ouch. No wonder the stock dropped to 34 cents. I’m a shareholder and I like this stock, but I don’t know why they they need $50 million. They don’t have a new mine to build and they don’t have enough reserves to double production. What are they thinking? My only guess is they are going to aggressively drill. Why didn’t they do this organically?