This will put the company in a strong position to fund a major exploration program at the highly prospective, 100%-owned Cape Ray Gold Project in Newfoundland, Canada.
The placement along with existing cash and anticipated proceeds from the exercise of listed options means Matador expects to be funded to complete its 2020 and 2021 exploration programs.
Shares up to $A0.38
Shares have up as much as 19% to A$0.38 cents, up from 9.5 cents on March 23, 2020, and the highest price since January 2018.
The placement of 21.43 million shares at a price of A$0.405 per share represents a 28.5% premium to the last closing price of Matador shares on July 1, 2020, of A$0.315 per share.
It also represents a 44.5% premium to the 15-day volume-weighted average price of Matador shares to July 1, 2020, of A$0.28 per share.
Drill program planned
The company will begin a 12,000-metre drill program together with a major greenfields exploration program at Cape Ray later this month.
Site preparations are underway for the drilling, which is expected to start in the coming weeks.
Matador has tenure covering 120 kilometres of continuous strike along the highly prospective, yet largely under-explored Cape Ray Shear in Newfoundland.
A scoping study released in May 2020 outlined an initial 7-year mine life, with a strong IRR (51% post-tax), rapid payback (1.75 years) and LOM AISC of US$776 per ounce.
Issued at premium
Matador was able to issue the shares at a premium, as they were issued as Canadian charity flow-through shares, which provides tax incentives to investors for expenditures that qualify as flow-through mining expenditures under the Act.
Flow-through share is a defined term in the Act and is not a special type of share under corporate law.
In this case, the term refers to an ordinary share that will be issued by the company to an investor under a written agreement with the investor whereby the company agrees to incur flow-through mining expenditure and to renounce tax losses associated with that expenditure to the investor.
If the company and the investor comply with the rules in the Act, the investor will be entitled to deduct the amount renounced in computing the investor’s income for Canadian income tax purposes and as a result, the flow-through shares are issued at a higher price.
The issue of 21,428,571 ordinary shares at $0.405 per share under the placement will utilise Matador’s issuance capacity under ASX Listing Rules 7.1 and 7.1A, with:
- 18,590,000 new shares issued under Matador’s Listing Rule 7.1 issuance capacity; and
- 2,838,571 new shares issued under its Listing Rule 7.1A issuance capacity.
Accordingly, no shareholder approval is required in connection with the placement.