Kereco plans C$121 million private placement; Syntroleum wraps $70 million direct deal

By Sheri Kasprzak

Atlanta, March 21 - Mineral exploration companies continued to dominate private placement issuance Monday, still pushed by strong resources stocks.

"[Oil] prices were off a bit today after making some gains earlier in the day, but I think issuance is still sort of propelled by last week's gains," said one sell-side source. "Minerals are still strong, but again the issuance we're seeing today could be a reflection of stronger stocks last week."

Mineral and metal exploration companies like Mercator Minerals Ltd., Platinum Group Metals Ltd. and Solid Resources Ltd. all announced their intentions to raise money in the private placement arena Monday.

Oil dipped $0.10 to close at $56.62 per barrel on Monday.

In other oil news, Baker Hughes Inc. reported that the number of rigs actively exploring for oil and natural gas in the United States has risen by 38 to 1,320. A year ago, the count was 1,128.

In spite of lower stocks Monday, one sell-side source in the United States said volume was strong, but limited to mostly smaller deals.

"I have been seeing some issuance out there, but it's mostly small deals," the source said.

Up in Canada, a sell-sider there reported the same thing, aside from a C$121 million offering from Kereco Energy Ltd.

"Other than that [the Kereco deal] nothing that exciting other than the normal number of smaller deals," the Canadian sell-sider said.

Kereco Energy lead private placement news in a big way Monday, announcing its plans to head to the market with a C$121 million offering.

The natural gas exploration company plans to sell 11 million shares at C$11 each through a syndicate of underwriters co-led by GMP Securities Ltd. and Tristone Capital Inc.

The underwriters have an over-allotment option for up to 2 million additional shares.

The company plans to use the proceeds from the deal to acquire a private company for C$188 million in cash.

Both the private placement and the acquisition are expected to close April 19.

"[The] market liked the pricing and the acquisition as the stock was up strong on the day," said one Canadian market source who had seen the deal. "Looks like they went around and told the story and put a book together. All the buyers should be happy."

After the deal was announced Monday morning, Kereco's stock climbed C$0.77 to close at C$11.87.

The company will also acquire assets in the Sturgeon Lake South field of Northwest Alberta as part of its acquisition.

Kereco is based in Calgary, Alta.

Syntroleum's direct placement

In another oil-related offering, Syntroleum Corp. announced and then closed a $70 million direct placement.

The company sold 7 million shares at $10 each to Legg Mason Opportunity Trust.

The shares were sold under Syntroleum's shelf registration.

Based in Tulsa, Okla., Syntroleum turns natural gas in to synthetic liquid fuels, gasoline and other products. The company plans to use the proceeds to fund a portion of the costs associated with its share of drilling two initial wells offshore Nigeria, to acquire the interests in and drilling of wells on other oil and gas properties, to pay the costs of gas processing plants, to fund its GTL barge initiative and to fund continued research and development activities. The remainder will be used for working capital and general corporate purposes.

Syntroleum's stock closed up $0.27 at $11.21 Monday, and was up another $0.06 in after-hours trading.

Verilink raises $10 million

Verilink Corp. closed a private placement of convertible debentures Monday for $10 million, the company said.

The debentures bear interest at 6% annually, mature in three years and are convertible into common shares at $3.01 each. The conversion price represents a 15% premium to the company's closing price March 18.

Verilink may force the conversion of the debentures if its closing stock price exceeds 200% of the conversion price for 20 consecutive trading days.

The offering includes additional investment rights for up to $5 million in debentures.

The company also issued warrants for 830,567 shares at $3.41 each for five years. The warrants become exercisable six months after the deal closes.

"I think it looks pretty good, at least from their perspective," said one market source. "I don't think the investors are disappointed with the deal either and the company will certainly make a killing on the warrants. Broadband companies like this one have been doing okay. And we've been seeing a lot more of these types of companies in the market."

Even so, Verilink's stock closed down $0.06 Monday at $2.56.

Kaufman Bros., LP was the placement agent.

"This investment products us additional capital resources to execute our strategy, which is focused on growth and strengthening our position in the global broadband access market," said Leigh Belden, the company's president and chief executive officer, in a statement. "With the integration of last year's acquisitions now largely completed, we believe Verilink is well-positioned to address carrier requirements for today's networks while providing an elegant migration path to tomorrow's networks delivering [voice over internet protocol] and native Ethernet services."

Verilink, based in Centennial, Colo., is a broadband access company. It plans to use the proceeds from the deal to repay a $3.5 million revolving line of credit with RBC Centura Bank. The remainder will be used for working capital and general corporate purposes.

CGX raises $8.4 million

CGX Energy Inc. wrapped an oversubscribed private placement for $8,412,000.

The company sold 10,515,000 units at $0.80 each.

The units are comprised of one share and one half-share warrant. The whole warrants allow for an additional share at $1.10 each for 18 months.

The deal was first announced March 7 as a $5 million offering of 6.25 million units under the same terms.

"This financing will allow us to advance our exploration offshore Guyana, where exploration to the east and west of our concessions has intensified over the last six months,' said Kerry Sully, CGX's president and chief executive officer, in a statement. "To the northwest, exploration by ChevronTexaco and ConocoPhillips on the Deltana Platform offshore Venezuela is reported in the press to have discovered more than five trillion cubic feet of gas."

Based in Toronto, CGX is an oil and gas exploration company. The company plans to use the proceeds to fund exploration offshore of Guyana.

On Monday, CGX's stock closed unchanged at $0.82.

Axion closes $2.81 million deal

Axion Power International, Inc. completed a private placement of preferred stock for $2.81 million in a private placement.

The company sold 281,000 shares of preferred stock at $10 each to 11 investors for $2.81 million.

The preferreds pay dividends of 8% annually and are convertible into common shares at $2 each.

The investors also received warrants for 503,500 shares at $2 each for two years.

"During our first 17 months of operations, our capital-raising activities kept pace with our cash outlays, but our working capital was always limited," said Axion's chief financial officer Peter Roston in a statement. "The private placement increased our stockholders' equity by over 300% and will give us a solid financial foundation for the future development of our Eł Supercell technology. We also believe our sale of preferred stock and warrants at a reasonable, fixed valuation will support our efforts to obtain a more favorable listing for our stock."

Based in Vaughan, Ont., Axion develops hybrid electrical energy storage devices called Eł Supercells.

Axion's stock closed unchanged at $2.99 Monday.

Trinity Plumas closes deal

Trinity Plumas Capital Corp. closed the final tranche of its previously announced C$15,563,361 private placement for C$11,175,860.

The company sold 13,148,071 units at C$0.85 each in the third and last tranche.

The units include one share and one half-share warrant. The whole warrants allow for an additional share at C$1.30 each for two years.

The company closed the first tranche closed Dec. 23 for 3 million units and the second tranche Jan. 10 for 2,161,766 units.

The deal was first announced Dec. 22 as a C$12.75 million offering.

"The closing of this private placement enables us to fully exploit the opportunities presented in the Barnett Shale of Texas," said Robert Chamberlain, the company's chairman, chief executive officer and chief financial officer, in a statement. "Oversubscription of the placing demonstrates that this potential is recognized by specialist institutional investors, and we look forward to continuing Trinity's high-impact development program."

Fox-Davies Capital Ltd. is the underwriter in the offering.

Based in Vancouver, B.C., Trinity is an oil, gas and gold exploration company.

The company's stock closed down $0.01 at $1.07.

Duvernay's stock slips

After announcing its plans to raise C$40,825,000 in a private placement Friday, Duvernay Oil Corp.'s stock dipped slightly Monday.

The company's stock ended the day down C$0.10 to close at C$30.75.

On Friday, after the offering was first announced, Duvernay's stock gained C$1.35 to close at C$30.85.

Heading up activity was a C$40,825,000 offering from Duvernay Oil Corp.

The company plans to sell flow-through shares at C$35.50 each.

Based in Calgary, Alta., Duvernay is an oil and natural gas exploration and development company.

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