Caledonia prints CB for Zimbabwe gold mine
Caledonia Mining is the latest foreign miner looking to the US convertible bond market by raising an upsized US$125m to fund development of a gold mining project in Zimbabwe.
Sole bookrunner Cantor priced the seven-year CB at a 5.875% coupon and 25% conversion premium, toward the aggressive ends of the 5.75%–6.25% and 22.5%–27.5% talk. The bank had marketed toward a US$100m sum after an earlier wall-cross.
The gold miner’s NYSE American-listed shares tumbled 16.9% post-pricing Thursday to US$26.93, although that is still above the US$26.74 price the stock traded at entering the year.
Investors were told to expect a 15%–20% hit to the stock, one convert arb manager who participated in the wall-cross told IFR.
To offset that hit, Caledonia spent US$12m of the proceeds raised on a capped call to offset dilution from the CB up to a share price of US$56.72, a 75% premium to the US$32.41 Wednesday closing reference price and above the US$40.51 price at which CB investors are eligible to convert.
Including the benefit of the capped call, this financing effectively slots in as lower-cost capital than project or straight debt. It finances a portion of the US$484m Caledonia expects it will need to develop the Bilboes gold mining project in Zimbabwe.
Ahead of the deal launch, Caledonia said that it expects to produce 72,000–76,500 ounces of gold in 2026 and that the bulk of that production will come in the back half of the year. The miner plans to spend US$162.5m on capex this year, US$132m of which is going to develop its Bilboes gold mine in Zimbabwe.
In November, Caledonia said that it was exploring several options to finance the cost of building Bilboes, including senior debt and internally generated cash flows from its producing Blanket mine.
The new CB is senior unsecured and can be settled in cash or stock, providing flexibility to secure additional capital. Caledonia did have to compensate investors in the form of a higher coupon/lower premium because of the overnight execution but offset that cost through the capped call.
Domiciled in the Isle of Jersey with shares also listed on the LSE, Caledonia is the latest foreign company to take advantage of the capped call technology through the sale of a CB in the US. Canadian miners Denison Mines and Vizsla Silver both used the CB-plus-capped call on financings completed last year, both of which were led by Cantor.