Northland Resources announces US$375M fund raising effort; plunges 40 per cent

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LUXEMBOURG - Stock in Northland Resources S.A. (TSX:NAU) plunged more than 40 per cent in heavy trading Monday after the development stage miner announced plans to raise US$375 million in equity and bond offerings.

On the Toronto Stock Exchange, Northland shares were down 8.5 cents at 12.5 cents on volume of more than six million shares, making it the third most active on Toronto's main board.

Northland, whose stock had been halted on Friday, said Monday that it had launched an equity offering equivalent to US$250 million.

By issuing new shares, a company spreads its future profits over more shares and reduces its return on equity and earnings per share, two key ratios used to determine a company's financial health and investment rating.

As well, the company, with an iron ore project in Sweden and a copper-gold project in Finland, said it plans an additional tap issue of US$125 million on the existing US$350-million senior secured bond.

Proceeds from the offerings — part of an additional US$450 million the company said last week it would need — will be used to fund capital and operating expenditures related to the Kaunisvaara project in Sweden and associated logistic chain, and general corporate purposes, including the Hannukainen project in Findland.

"In light of the increased funding need, these proposed measures represent a flexible source of financing to resolve Northland's short-term liquidity requirements, and are expected to provide the required financing to bring the Kaunisvaara project to full production in the third quarter of 2014," president and CEO Karl-Axel Waplan said in a release.

Organizations: Northland Resources S.A., TSX, Toronto Stock Exchange

Geographic location: LUXEMBOURG, Sweden, Toronto Finland US Findland

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