Photo: Canadian Press

Photo: Canadian Press

BMO Privately Embarrassed by Romarco Deal

Issue 115, February 2015

BMO Capital Markets has been left holding a sizable slug of shares in gold hopeful Romarco Minerals, after a C$300m ($238m) placement by the company due to close this week.

The placement, or bought-deal, was fully underwritten by a syndicate led by BMO and Toronto-based Cormark Securities, who are currently lumbered with a large shareholding, according to brokers familiar with the matter.

According to one source, BMO has struggled to shift as much as C$100m in stock, though the figure would put BMO in breach of Canadian disclosure standards that oblige shareholders to report investments above 10 per cent of a company’s stock.

Romarco’s fundraising lifted its total share count by more than 70 per cent and was the largest of a flurry of bought-deals, totalling C$790m, in a frenetic two days of placements near the end of last month. Osisko Gold Royalties raised C$200m through Macquarie Canada and RBC, whilst BMO was involved in underwritings for Detour Gold, Asanko Gold and Richmont Mines totalling C$215m.

The eager fundraising round was widely interpreted as a sign that investor appetite for gold miners had returned, signalling a positive start to 2015, after four bleak years of equity funding for the sector. News that BMO has been left carrying Romarco’s stock however suggests that demand remains flat, with market conditions tough for brokers and miners alike.

Led by banker Jason Attew, BMO had appeared to pull-off a well-timed funding coup for Romarco, capitalising on an uptick in gold prices to fully fund Romarco’s Haile gold project in South Carolina, but instead appears to have over-egged the market.

Attew, who advised HudBay Minerals in its audacious takeover of Augusta Resource Corp. last year, has previously cautioned that investors are being “very selective”, with “money going to high quality management teams and high quality assets.”

Shares in Romarco closed Wednesday at C$0.58, equal to the offer price and down 8 per cent since the bought-deal was announced.

“It is very selective.”

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