Red Eagle Mining Endures Stracon Selling
On March 1st it was disclosed that one of the Red Eagle Mining’s (R: TSXV) largest previous shareholders had sold 23 million shares. Red Eagle was trading just 13 cents above its 52-week low of $0.63 Tuesday.
The past 34 months have been busy for Red Eagle with positive development hitting the tape at every turn. For this reason, upon initial review, the huge sale lends itself to a degree of curiosity. On March 1st, in the company’s filing statements, it was reported that STRACON GyM S.A., a subsidiary of Graña y Montero Group, had sold 23 million shares of Red Eagle Mining on the Lima Stock Exchange. The sale represented approximately 8.69% of the outstanding shares of Red Eagle.
While Stracon had every right to sell its shares, there is a lesson to be learned. When public companies issue shares for services, often, those shares will come back to the market as hard costs and payroll need to be met.
“The sale followed the successful completion of construction and initial gold production at the San Ramon mine developed by Red Eagle, for which STRACON GyM provided mining services.”
STRACON GyM continues to hold 10,539,360 shares of Red Eagle, representing approximately 3.98% of the outstanding shares. Their position is now relatively inconsequential given Red Eagle has over 264 million shares outstanding.
Note: The aggregate sale price of Stracon’s 23 million shares was US$11,500,000 or approximately US$0.50 per share.
Reports suggest STRACON GyM will continue with its contract for Red Eagle, signed in 2015, to operate the San Ramón mining project, located in Antioquia, Colombia.
Marketwired.com also noted that,
“This is the third sale that the Graña y Montero Group has completed as part of its objective to sell non-strategic assets (up to an amount of US$ 300 million) to fulfill the obligations derived from the termination of the Peruvian Southern Gas Pipeline (GSP). The non-strategic assets that the Graña y Montero Group has put up for sale do not impact the company’s business strategy in the medium-to long-term.”
Red Eagle Mining management is focused on building shareholder value, through discovering and developing gold projects with low costs and low technical risks in Colombia. The company’s San Ramon Gold Mine lies in a jurisdiction with prolific historic production but has had limited modern exploration, until recently.
Management proved its speed and efficiency, by reaching first gold pour on November 6th, only 14 months after breaking ground on the project. While the company may be in production, the exploration is nowhere near complete.
On January 17th, Red Eagle reported intersecting 5 metres of 33 grams per tonne gold.
On February 21st, Red Eagle closed a bought deal financing of 20,000,000 Common Shares at a price of $0.75 per Common Share for aggregate gross proceeds of $15,000,000.
The net proceeds of the offering will be used to advance exploration of the Santa Rosa Gold Project.
Red Eagle Mining was off 1.3% to $0.76 per share Tuesday.
GDXJ Down 24% from February High
With PDAC winding down and officially ending this week, the typical weakness at this time of year in gold stocks may be upon us.
After starting the year in fantastic fashion, the GDXJ has been in free-fall mode for weeks. On February 8th, the GDXJ hit $43.01 and has since shed $10 or 24.22% to a low of $32.66 today. I am watching the action in the miners very closely and will write a more detailed piece when a new trend develops.
GDXJ – 6 Month Chart
With gold waffling, the next catalyst for the metal could come later this month as the U.S. debt ceiling prepares to take center stage on March 15h. In the meantime, junior gold stocks such as Red Eagle cannot concern themselves with insider selling or the fickle gold market, but on executing its fundamentals. Red Eagle has been doing exactly that for the past few months as can be seen through it reaching production, putting out high-grade drill results and closing a significant bought deal financing.