Deciding it made enough money off its 35 per cent stake in Lake Shore Gold Corp. , Hochschild Mining PLC brought a secondary offering to the market Thursday morning and sold $392-million of its position. Going forward, the Peru-based firm will continue to hold around 6 per cent of Lake Shore.
The deal isn't all that surprising. Because Hochschild held an equity position, it couldn't consolidate any of Lake Shore's production into its accounting statements. Instead, it was only allowed to report changes in the equity value.
Hochschild was also under a standstill agreement with Lake Shore that stated it could not own more than 40 per cent of the company until Nov. 23. It would be hard for Hochschild to buy even more of Lake Shore anyway, because it doesn't have much room on its balance sheet and Lake Shore continues to ramp up production.
Rather than wait to buy any more shares, Hochschild decided to sell most of its position, which it started buying in 2008 via private placements at an average price around $2.58, according to analyst calculations. Thursday morning's bought deal was sold at $3.60 per share, meaning Hochschild booked profit of about $110-million.
As for the new investors, Lake Shore's stock closed at $3.70 Wednesday, meaning they bought in at a 2.7 per cent discount.
RBC Dominion Securities, BMO Capital Markets and CIBC World Markets were co-lead managers.