CONTINENTAL GOLD I COM NPV (OTCMKTS:CGOOF) is a penny play that’s clearly begun to spur some interest among players in the marketplace as shares bounce up off recent lows in an aggressive gap-and-go move. The principal catalyst behind the move was the company’s announcement that Newmont Mining Corp (NYSE:NEM) has agreed to purchase 37.38 million common shares of CGOOF at a price of C$4.00 per share for a total investment of US$109 million in a non-brokered private placement.
Traders should also note that, concurrently with Newmont’s investment in Continental, RK Mine Finance Master Fund I Limited has also agreed to purchase 8.59 million common shares of CGOOF on a private placement basis at a price of C$4.00 per share for a total investment of US$25 million, as contemplated in Continental’s secured project credit facility with Red Kite. According to the release, “after giving effect to the private equity placements, Newmont and Red Kite will own approximately 19.9% and 4.6%, respectively, of the issued and outstanding common shares of Continental on a non-diluted basis. The private placements will not close before May 18, 2017 post receipt of regulatory approvals, including by the Toronto Stock Exchange.”
CONTINENTAL GOLD I COM NPV (OTCMKTS:CGOOF) trumpets itself as an advanced-stage exploration and development company with an extensive portfolio of 100%-owned gold projects in Colombia.
Formed in April 2007, the Company — led by an international management team with a successful track record of discovering and developing large high-grade gold deposits in Latin America — is focused on advancing its high-grade Buriticá gold project to production.
According to company materials, “Continental Gold Inc., together with its subsidiaries, acquires, explores for, evaluates, and develops gold resource properties in Colombia. It holds the rights to develop and explore 1 advanced-stage gold project, as well as explore 3 early-stage projects in Colombia covering an area of approximately 76,870 hectares. The company’s flagship project is the Buriticá project comprising 24 concessions covering an area of 29,812 hectares and 42 concession applications totaling an area of 40,153 hectares located to the northwest of Medellín in the Antioquia Department in north-western Colombia. Continental Gold Inc. was founded in 2007 and is headquartered in Toronto, Canada.”
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As noted above, CGOOF has exploded higher as the result of two major private placement investments in the company by what most investors would likely see as “smart money” in the precious metals space.
Ari Sussman, CEO of Continental, commented: “After completing a formal process in which a number of alternatives (including multiple equity financing offers) were evaluated, we are pleased to be welcoming Newmont and Red Kite as investors in Continental. Newmont is our first choice for a cornerstone investor with its best-in-class balance sheet, excellent operating team and recent track record of delivering projects on schedule and under budget. We look forward to capitalizing on Newmont’s experience to successfully kick-off formal construction at the Buriticá project later this year. With Newmont as a partner and the completion of this financing, Continental will be well-positioned to build Buriticá and create significant value for our shareholders with first gold pour on track for early 2020.”
From what we can see, provisions in the deal – such as right of first refusal on new funding rounds, a seat on the board, a lockup, and a stall into commercialization tied directly to the Buritica project – suggest the investors’ side of the deal is confident that the project will be a big score over time.
Hence the aggressive action in the stock. Traders will note 34% piled on for shareholders of the company during the trailing week, with 31% of that coming in reaction to this news. In addition, the company has benefitted from a jump in recent trading volume to the tune of exceeding 110% over the long run average.
Earning a current market cap value of $373.9M, CGOOF has a significant war chest ($19M) of cash on the books, which is balanced by approximately $11M in total current liabilities. The company is pre-revenue at this point. We will update the story again soon as further details emerge. For continuing coverage on shares of $CGOOF stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!