US Gold Corp (NASDAQ:USAU) announced that it has entered into a securities purchase agreement with certain investors to raise gross proceeds of approximately $4.9 million.
The US-focused gold and copper exploration and development company said it will sell 1.4 million shares at $3.50 per share in a registered direct offering and, in a concurrent private placement, unregistered warrants to purchase 1.4 million shares at $4.48 per share.
The warrants will be exercisable for six months following issuance will expire five years from the initial exercise date.
The offering is expected to close on or about April 19, 2024, subject to satisfying customary conditions.
The fundraising comes as gold hit a new record high above $2,400 per ounce last week which is expected to be particularly beneficial for junior mining companies like US Gold, founder Edward Karr believes.
“When the gold price increases, these junior companies can become wildly profitable,” he told Proactive.
He argued that a $300 market capitalization was justified for US Gold in this market given that its assets host approximately 1.5 million proven and probably gold equivalent ounces and the benchmark for analyst projections is proven ounces are worth about 10% of the spot gold price, currently about $2,350 per ounce.
“When analysts start rerunning their models and when these majors, mid-tiers and even juniors start reporting their numbers, people are going to be amazed as to how profitable this industry is and how much cash flow it’s throwing off,” he said.
“That will lead to a whole valuation rewrite of the sector, specifically for juniors, and we’re already starting to see some of that in the recent M&A activity with some mid-tiers taken over by other companies.”
Karr also told Proactive that gold is currently in a “stealth bull market” based on his observation that generalist money is yet to come back into the sector.
“That’s a very good sign for investors that this sector has a lot further to go,” he said.
“When you hear your hairdresser or your taxi driver talking about gold, that’s the time you want to sell, and we are nowhere near that in my opinion.”
US Gold is focused on the exploration and development of its projects in Wyoming, Nevada, and Idaho.