UPDATE 1-NovaGold strikes $60 mln financing deal
Fri Jan 2, 2009 10:23am EST
OTTAWA, Jan 2 (Reuters) - NovaGold Resources Inc (NG.TO) said on Friday it has struck a $60 million private placement deal with Electrum Strategic Resources and will use the cash to repay debt and fund exploration and development.
The Canadian gold miner will issue 46 million units of one share and one warrant at $1.30 apiece to privately-held Electrum, which holds precious metals projects around the world.
Upon closing, New York-based Electrum will become NovaGold's biggest shareholder with 30 percent of its stock. It will control a 46 percent share if all warrants are exercised.
Shares in Vancouver, British Columbia-based NovaGold rose about 10 percent, or 17 Canadian cents, to C$1.94 on the Toronto Stock Exchange and 11 cents to $1.60 on Amex after the deal was announced.
Net proceeds of about $59 million will repay the principal and interest on a $20 million bridge loan from New Jersey-based merchant bank Auramet Trading. Under a refinancing deal struck in mid-December, NovaGold agreed to pay an extension fee and higher interest rate.
The cash will also pay for exploration and development at NovaGold's 50-percent owned Donlin Creek gold property in Alaska and its Galore Creek copper and gold project in British Columbia.
The Rock Creek gold mine in Alaska will also be reviewed and reactivated if warranted. Operations were suspended there in December after starting the previous month due to mechanical problems, predicted lower cash flow, and difficulty meeting environmental requirements.
NovaGold said on Friday that it held talks with other investors to participate in the offering and raise an additional $15 million, but no deals were struck. ($1=$1.21 Canadian) (Reporting by Susan Taylor; editing by Janet Guttsman)
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