• Yamana Gold (TSX:YRI) is selling 12 million shares in Equinox Gold at C$10 per share
  • The company is selling in tranches, with total purchases potentially totalling $200 million
  • The first tranche of 12 million allows purchasers 0.5 of a warrant for another Equinox share at $13.50 each
  • If all shares and warrants are purchased, the company will have divested from Equinox by 82.91 per cent
  • Yamana Gold (TSX:YRI) is down 2.6 per cent, and trading for $5.10 per share

Yamana Gold (TSX:YRI) is selling 12 to 18 million of shares in Equinox Gold (TSXV:EQX), divesting by 82 per cent.

The company announced that, if all shares and warrants are bought, the sale will net Yamana some C$200 million.

The deal consists of an initial 12 million shares tranche sale, at $10 a piece. Each share will contain half a warrant option for a second share to be bought at $13.50. Yamana will only issue the second tranche of 6 million shares, if all 12 million initially offered shares are purchased.

The warrant expires nine months after the date of issue.

The divestment represents a sale of 8 per cent of total issued shares of Equinox Gold, valuing the company at $2.5 billion. That is significantly over the company’s market cap of $900 million.

Yamana also holds warrants to acquire 8.5 million shares in Equinox at $11 per share until May 24. The company has not announced if it will exercise this option. If it does, Yamana’s holdings in Equinox would total 7.22 per cent in the company.

However, if Yamana follows through on the second tranche, the sale would leave them with some 1.2 million Equinox shares. The company has not indicated that it has any intention of selling.

Yamana has been struggling recently, with recent market volatility and poor earnings hurting performance. The company posted its Q1 2020 financials in February, and the results were slightly down on predictions.

Yamana’s quarterly revenue fell 20 per cent, with its net margin sitting at 1`4 per cent for the quarter.

Company earnings per share were $0.03 per share, just below the predicted $0.04 for the quarter.

Yamana has stated that it intends to use the funds of the sale for “general corporate purposes.”

This seems a sound decision, as earnings have almost certainly been affected by COVID-19 shutdowns and market volatility, following a relatively poor Q1.

Yamana Gold (TSX:YRI) is down 2.6 per cent, and trading for $5.10 per share at 10:03am EST.

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