Capstone Copper unveils $285 million offering details

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Capstone Copper Corp. [CS-TSX] shares were active Thursday after Capstone and affiliates of the company’s largest shareholder Orion Mine Finance announced details of a $285 million secondary bought deal offering of common shares.

Capstone and Orion Fund JV Ltd., Orion Mine Finance Fund 11 LP and Orion Mine Finanace (Master) Fund I-A LP (collectively Orion) have struck a deal with an underwriting syndicate which is acquiring 50 million shares on a bought deal basis, priced at $5.70 per share.

Prior to the announcement Orion Mine Finance held a 32% stake in Capstone.

The underwriters have been granted an option to purchase an additional 7.5 million common shares at the offering price to cover over-allotments. That option, which remains open for 30 days after the closing date, could increase the proceeds to $327.75 million.

Closing is expected to occur on March 31, 2023. Net proceeds will be paid directly to the selling shareholders. The company will not receive any proceeds of the offering.

Capstone shares moved lower on the news, falling 6.64% or 40 cents to $5.62 on volume of 3.74 million. The shares are currently trading in a 52-week range of $7.72 and $2.25.

Capstone is a Canadian base metals mining company with a focus on copper.

Its portfolio includes the Pinto Valley copper mine in Arizona, and the Cozamin copper-silver mine in Zacatecas, Mexico, the Mantos Blancos copper-silver mine in Chile and 70% of the Mantoverde copper-gold mine. In addition, Capstone holds a 70% interest in Santo Domingo, a large scale, fully-permitted, copper-iron-gold project, in partnership with Korea Resources Corp.

The fully-permitted Santo Domingo project is located near the Mantoverde mine, which is currently undergoing construction of a 32,000-tonne-per-day sulphide concentrator with wet commissioning expected in late 2023.

On Thursday, the company said the selling shareholders (Orion Mine Finance) currently hold a 32% stake in the company. But that stake will fall to 24.83% of the company’s outstanding shares after the offering closes. If the over-allotment options are fully exercised, the selling shareholders’ interest will fall to 23.75%.

Capstone recently outlined its asset integration and synergy study plan for its Mantoverde copper mine and undeveloped Santo Domingo copper-iron-gold projects, which are located 35 kilometres apart.

By combining those assets, Capstone aims to create a “world-class’’ mining district targeting over 200,000 tonnes per year of low-cost copper production, with the potential to become one of the world’s largest producers of cobalt outside of the Dominican Republic of Congo.

A key component of the plan is the potential for cost synergies of between $80 and $100 million.

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