Gran Colombia Gold Corp. (TSX: GCM; OTCQX: TPRFF) has announced that it has closed its direct private placement with Canadian investor Eric Sprott of 7,142,857 units of the company at a price of $5.60 CAD per unit for total proceeds of $40 million CAD. Each unit consists of one common share and one common share purchase warrant exercisable into a full common share at $6.50 CAD per share expiring February 6, 2023. As of last week, Gran Colombia Gold has 60,812,630 common shares issued and outstanding and, including the effect of warrants, stock options and convertible debentures, the total would be 88,710,189 common shares on a fully diluted basis.
Gran Colombia Gold stated that it will use a portion of the net proceeds of the private placement to redeem 30%, equivalent to $19,162,500 USD, of the aggregate principal amount outstanding of its 8.25% Senior Secured Gold-Linked Notes due 2024 (TSX: GCM.NT.U) on the redemption date of March 31, 2020 reducing the aggregate principal amount outstanding to $44,712,500 USD. The redemption price will be equal to 100% of the aggregate principal amount of the gold notes redeemed plus the applicable premium calculated in accordance with the provisions of the gold notes Indenture, currently estimated to be approximately 10%.
This represents an increase in the number of common shares held or controlled by Eric Sprott by 5.15% on a non-diluted basis and by 8.72% on a partially diluted basis.
Further details, including the actual amount of the applicable premium, will be announced later in March as it gets closer to the redemption date. The balance of the net proceeds of the private placement will be used for general working capital and corporate purposes, including potential repurchases of the company’s listed warrants (GCM.WT.B) under its normal course issuer bid.
Serafino Iacono, Executive Chairman of Gran Colombia, stated, “We are pleased to see Mr. Sprott, a well-known gold investor, increase his stake in Gran Colombia to over 10% and to welcome investment from other key strategic and institutional investors. While our operations continue to generate free cash flow, we believe the opportunity to apply a significant portion of the net proceeds of this private placement toward a further deleveraging of our balance sheet creates value for our shareholders, particularly in the current gold price environment, enabling us to reduce our debt service ahead of schedule and preserving for our shareholders the gold premium we would otherwise be paying on the gold notes we intend to redeem.”
Prior to completion of the private placement, Eric Sprott already owned or controlled 3,260,870 common shares and 3,260,870 warrants of the company, which represented 6.09% of the issued and outstanding common shares of Gran Colombia Gold on a non-diluted basis and approximately 11.48% on a partially diluted basis. Through the private placement, 2176423 Ontario Ltd., a corporation that is beneficially owned by Sprott, acquired 3,571,429 Units of Gran Colombia at a price of $5.60 CAD per unit for a total investment of $20 million CAD.
As a result of the private placement, when combined with existing holdings, Sprott will beneficially own or control 6,832,299 common shares and 6,832,299 warrants of the company representing 11.24% of the issued and outstanding common shares of Gran Colombia on a non-diluted basis and approximately 20.20% of the issued and outstanding common shares of Gran Colombia assuming only the exercise of the warrants.