TORONTO (miningweekly.com) – Greece's debt worries left markets reeling on Monday, but did little to hold back shares in TSX-listed European Goldfields, which is building mines in the country, after the company announced Qatar's sovereign wealth fund was pumping around $1-billion into it.
The stock surged over 20% before easing slightly, as it answered questions as to how it would fund its two Greek gold projects, which had created an overhang on the stock.
European Goldfields announced it had struck an agreement to borrow $600-million from Qatar Holding, a unit of the Qatar Investment Authority, and also issued the sovereign wealth fund warrants to buy 40-million shares for $367-million, or C$9.08 apiece.
Additionally, Qatar Holding had bought 10% of the company from existing shareholders for C$180-million, and entered into a call option agreement that allows it to buy another 9.3-million shares for C$13 apiece, that could take its total ownership up to nearly 15%.
If it exercised all options and warrants, Qatar Holding would own 30% of European Goldfields, making it the biggest shareholder.
“In these very uncertain times, these financings will provide all of the development capital required to bring the group’s entire project portfolio into production and allow us to accelerate the development of all our projects,” European Goldfields chairperson Martyn Konig said in a statement.
As European Goldfields made the announcement, Greece itself was issuing bad news that sent stock markets into a tailspin.
The country, struggling with major debt problems, said on Monday it would not meet its deficit reduction targets for 2012, after having admitted it would also miss 2011’s targets, on Sunday.
Qatar Holdings, a unit of the Arab emirate’s sovereign wealth fund, said the investment flowed from an agreement the company penned with Greece in New York two years ago.
“We see the transaction as one that will create a lot of value for all shareholders, and represents our positive view on Greece in general,” Qatar Holding CEO Ahmad Mohamed Al-Sayed said of the investment, his company's first foray into gold.
European Goldfields said the capital injection would more than cover what it needed to complete building its two mines – Olympias and Skouries - in Greece, as well as its Romanian project, called Certej. All three required a total $680-million.
The company aims to produce around 450 000 oz/y of bullion by 2014, building up to around 650 000 oz/y in five years time.
Shares in European Goldfields ended the day 15% higher in Toronto at C$9.60 apiece.