TORONTO (miningweekly.com) – Africa-focused base and precious metals project developer Ivanhoe Mines on Monday announced the terms of a nonbrokered private placement with a group of investors to raise C$100-million, aimed at advancing its Democratic Republic of Congo projects.

However, the proposed transaction was seen as a “small negative” by GMP Securities mining analyst Brock Salier, who said that executive chairperson and company founder Robert Friedland’s strength in the past had been in raising project-level funds at nondilutive valuations.

Under the terms of the agreement, the company would issue 50-million new Class A common shares at C$2 a share and could potentially issue up to a total of 54-million shares, which would raise up to C$108-million.

Friedland would subscribe for $25-million of the offering, effectively proportionate to his holding in the company.

Salier held that Ivanhoe had access to “the best” undeveloped copper and platinum group metals assets in the world, bar none.

“As such, although the company stated today that talks are ongoing with strategic partners, a positive, it is a shame that about 10% dilution was required before then. On the flipside, this should strengthen the company’s ability to negotiate,” he said in a note to clients.

The proceeds of the offering will advance the development of the company's Kamoa copper discovery, the Kipushi zinc/copper/lead/germanium/precious metals project, and for general corporate purposes.

The offer, which was subject to regulatory approvals, was expected to close within two weeks.

Ivanhoe Mines CEO Lars-Eric Johansson noted that confidential discussions and due diligence were continuing with a selected number of international, private and State-owned mining companies that had expressed interest in participating in the company's assets, both at the project and corporate levels.

"Ongoing talks could lead to the formation of a significant strategic corporate partnership or syndicate for continued exploration and development of the company's discoveries and associated infrastructure," Johansson said.

“Of note, given the proposed C$2-a-share price is well under recent C$2.56-a-share price, we think the market will take the news negatively in the short term,” Salier said.

He added that Ivanhoe’s biggest per share value risk was “pre-mine-funding financing for exploration or engineering studies”, as announced on Monday.

He added that indications were that management could conclude a strategic investment earlier than expected.

The analyst also expressed his hope that Kipushi would have been dewatered by now, according to the original schedule, which would have had the double benefit of reducing the company’s cash burn, and opening the door to sell the asset to avoid diluting the value of the Platreef project, in South Africa, and Kamoa, both of which declined in per share value by about 10% on Monday.

“Although that opportunity has been missed, we do see potential for such a sale next year to fill any further funding gaps and to reduce burn,” Salier said.