Mountain Province Diamonds (TSE:MPV) (NASDAQ:MDM), a natural resource exploration and development company, had its target price decreased at Dundee Capital Markets, which cited a more dilutive than expected rights offering.
Dundee, which maintained its “buy” rating on Mountain but said its peer Stornoway Diamond (TSE:SWY) is a better deal, lowered its target price objective to $6.50 from $7.00.
Mountain Province yesterday undertook a C$95 million rights offering backstopped by its largest shareholder, Dermot Desmond, to fund a $75 million cost overrun facility.
The cost overrun facility is a condition for the drawdown of its previously announced $370 million term loan facility.
Dundee said yesterday's offering is slightly more dilutive than its previously modeled $50 million overrun facility and $50 million equity raise. The deal represents 23.8 million in additional shares.
Shares of the Toronto, Ontario-based company sank 6.3 percent to $3.43 at 3:17 p.m. in New York. The stock has lost 33 percent over the past year.
Along with current cash, Mountain Province should now be able to meet its March cash obligation and maintain its 49 percent interest in Gahcho Kué, Dundee said in research note to investors today.
Mountain Province’s share of the $433 million in planned capital expenditures for 2015 is $212 million, of which Dundee expects $40 million to be due in March.
Physical construction is approximately 10 percent complete, with Mountain Province indicating the overall project is now more than 50 percent complete. Gahcho Kué remains on track for initial production in the second half of next year as of December 31, 2014.