Investors disappointed with Contango ORE's secondary offering parameters

Contango ORE shares plunge after announcement of secondary offering price / Photo: Shutterstock

Shares of the mining company Contango ORE, which has a market capitalization of $189.17 million, plummeted more than 21% during trading on Tuesday, June 11. The company announced a $15 million secondary offering that day, during which shares would be available at a discount.

Details

Contango ORE, a company engaged in the exploration of gold-rich deposits, saw its stock price drop 21.2% to $19.64 per share on June 11 — its lowest point in nearly a month.

Why the stock fell

On the morning of June 11, Contango ORE announced the parameters of the secondary offering. The company will sell 731,800 shares at $20.5 per share, which is 21% cheaper than the closing price on June 10.

Each share will come with half a warrant for future shareholders. One warrant can be converted into one share within three years at a price of $26 per share, which is 4% higher than the closing price on June 10.

The secondary offering will raise approximately $15 million for the company, minus the expenses of conducting the deal. The transaction is expected to close around June 12, 2024.

Contango ORE plans to use the proceeds for general corporate purposes, such as replenishing working capital, continuing the exploration of the Lucky Shot project, or exploring the HighGold deposit, which is part of an ongoing acquisition.

Context

Contango ORE is involved in the exploration of gold and associated mineral resources in Alaska. The company owns 30% of the shares in the Peak Gold joint venture, with the remaining 70% owned by a subsidiary of Kinross Gold Corporation. Peak Gold leases land for the exploration and development of the Manh Choh gold mining project in Alaska.

The company also leases the Lucky Shot project, owns several thousand hectares in Alaska through a subsidiary, and holds exclusive rights to explore and develop mineral resources on these lands. By the end of July, Contango plans to complete the acquisition of 100% of the outstanding interests in HighGold Mining Inc.

What analysts are saying

Since the beginning of the year, Contango ORE shares have gained 9.8%. Five analysts are monitoring the company’s performance, according to MarketWatch. Four recommend buying the stock, while one has rated it “overweight.” Their average target price is $33.93 per share, indicating a potential upside of nearly 73%.