Resource PIPEs robust, Rodman's head banker says; Hecla Mining, ION, Talvivaara sell stock

By Kenneth Lim

Boston, June 2 - The markets have been good for companies in the resources sector that want to raise PIPE capital because of strong metals prices and high volatility, according to Rodman & Renshaw, LLC investment banking head John J. Borer III.

Borer made his comments after Rodman & Renshaw helped Hecla Mining Co. to place $60 million of stock and warrants through a private placement.

Meanwhile, ION Geophysical Corp. said it sold about $40.7 million of its common stock to seven investors in order to pay off a bridge loan.

Talvivaara Mining Co. plc raised £71.3 million through a sale of stock, while Mediterranean Oil & Gas plc agreed to sell £4.25 million of convertible bonds.

Resource-friendly markets

The PIPEs market for companies in the resources and oil and gas spaces is very robust at the moment, Borer told Prospect News. Mining companies that are dealing with precious metals, especially, have it "pretty good."

The strong fundraising environment is a change from the end of 2008, when the PIPEs market was less inviting for resource companies, he said.

"A lot of the companies in the metals space, at the end of the fourth and third quarter, their stocks came down pretty hard...companies were not interested in or able to raise capital," Borer said.

But this year, metal and oil prices have held up, and many of the companies are enjoying better fundamentals.

"Especially with companies producing offshore, the strength of the dollar made those companies' cost of production quite low in dollar terms," he said.

The volatile markets have actually helped both investors and issuers, Borer said.

"It's the best state to be in," he said.

Hecla raises $60 million

Hecla plans to sell $60 million of stock and warrants through a private placement, according to a press release by the company.

The offering comprises about 17.4 million common shares at $3.45 apiece and six-month series 4 warrants. The warrants are exercisable into 12.2 million common shares at a strike price of $3.68 per share.

Hecla common stock (NYSE: HL) closed at $3.48 on Tuesday, lower by 5.95% or $0.22.

Rodman & Renshaw is the placement agent.

Proceeds will be used to partially repay term debt.

Hecla is a Coeur d'Alene, Idaho-based provider of precious and base metals.

"This transaction reduces term debt to about $55 million which significantly lowers borrowing costs," Hecla president and chief executive Phillips S. Baker, Jr. said in a statement. "With this level of debt and an amortization schedule that does not begin until March 2010, our risks are reduced and the flexibility to grow reserves and production is improving."

ION to sell stock

ION Geophysical has agreed to sell about $40.7 million of its common stock to seven investors, according to a filing with the Securities and Exchange Commission.

The company will place 18.5 million shares at $2.20 per share. ION common stock (NYSE: IO) gained 2.63% or $0.08 to close at $3.12 on Tuesday.

Barclays Capital Inc. was the placement agent.

Proceeds will be used together with about $3 million of cash on hand to fully repay a bridge loan.

The loan repayment, together with new amendments to a credit facility that relax certain covenants, will help the company to avoid potentially breaching any financial covenants, it said. After the repayment of the bridge loan, ION will have outstanding indebtedness of about $248.6 million, consisting of $115.6 million in five-year term borrowings and $98.0 million in revolving credit facility borrowings under a senior secured credit facility, $35.0 million of subordinated indebtedness outstanding under a five-year term promissory note, and various capital lease obligations.

ION is a Houston-based seismic solutions company that serves the oil and gas industry.

Talvivaara raises £71.3 million

Finland's Talvivaara raised £71.3 million through a placement of 22.28 million ordinary shares at 320p apiece.

The company's common stock (LSE: TALV) closed at 364.75p on Tuesday, lower by 3.31% or 12.5p.

New and existing institutional shareholders took part in the placement, according to a press release.

Merrill Lynch International and Liberum Capital Ltd. were the bookrunners.

Talvivaara is an Espoo, Finland-based nickel, cobalt, zinc and copper mining company.

Mediterranean to sell convertibles

Mediterranean Oil & Gas plans to sell £4.25 million of 9.9% convertible bonds due Nov. 30, 2011 through a placement, according to a press release.

Tristone Capital is the agent for the offering.

The convertibles will have an initial conversion price of 40p. Mediterranean common stock (LSE: MOG) closed at 44.8p on Tuesday, up by 4.19% or 1.8p.

Each convertible will have an attached warrant that is exchangeable into 2,500 new common shares at 45p per share. The warrants expire on Nov. 30, 2012.

Parties related to directors Anthony Trevisan have subscribed for £650,000 of the notes, while parties linked to director Michael Bonte-Friedheim have subscribed for £130,000 of notes. Mediterranean substantial shareholder Stark Master Fund Ltd. subscribed for £1.3 million of the notes.

Proceeds will be used to study and develop the Ombrina Mare development and for general corporate purposes.

"In the current challenging economic and market conditions this raising will place the company on a sound footing to continue to aggressively pursue the development of Ombrina Mare," Bonte-Friedheim, who is the company's chairman, said in a statement. "The company structured the [convertible loan notes] to avoid dilution of existing shareholders, who supported the company by agreeing to participate in the raise. I wish to thank them for the continued support of the company."

Mediterranean Oil & Gas is a London-based oil and gas exploration and development company.

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