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Why the OceanaGold (ASX:OGC) share price sank 10% lower today

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The OceanaGold Corp (ASX: OGC) share price returned from its trading halt with a thud on Thursday.

The gold miner’s shares crashed as much as 10% lower to $2.12 at one stage today before ending the day down 9% at $2.15.

Why did the OceanaGold share price sink lower?

Investors have been selling OceanaGold’s shares after it announced a C$150 million (A$157.1 million) equity raising.

According to the release, the company has entered into an agreement with a syndicate of underwriters, led by Scotiabank and BMO Capital Markets. They have agreed to purchase, on a bought deal basis, 73 million shares at a price of C$2.06 per new share.

This represents a discount of almost 9% to the last close price of its Canada-listed shares.

In addition to this, OceanaGold has granted the underwriters the option to purchase up to an additional 10.95 million shares at the offer price. These options are exercisable in whole or in part until and including 30 days following the closing date of 30 October.

Why is OceanaGold raising funds?

The company advised that the net proceeds from the equity raising will be used to fund organic growth projects.

This includes the Haile underground development in the United States and ongoing exploration and development of its mineral properties in New Zealand.

In addition to this, some of the proceeds will be used for working capital and general corporate purposes.

What about Australian retail investors?

Unfortunately for local retail investors, the company doesn’t have plans to offer them the chance to pick up shares at the same price through a share purchase plan.

Though, given the weakness in its share price on Thursday, investors would have been buying in at roughly the same level as these institutional investors if they picked up shares earlier today.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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