Real Gold Mining raises $130 million via top-up placement

The Chinese gold producer raises money to fund a new mining project, while US-listed Renesola launches a follow-on.

Real Gold Mining yesterday raised HK$1 billion ($130 million) through a top-up placement, bringing in money to develop a new mine. On the same day, US-listed Renesola began a roadshow for a follow-on that is expected to raise around $84 million.

The Real Gold deal consisted of 90 million shares, representing 12% of the company's enlarged share capital. The shares were offered at a price between HK$9.60 and HK$10.28 apiece, which translated into a discount of between 9% and 15% on the closing price of HK$11.30 recorded at yesterday's morning session just before the deal was launched.

The deal stayed open until the start of US trading, finally pricing at HK$9.60 for the full 15% discount. There was an upsize option, which could have introduced up to 25 million more shares. The level of demand justified the addition of an extra 15 million shares, bringing the final offering size to 105 million.

There were 50 investors in the book, with demand from long-only funds, global hedge funds, and private banks. More than half of the investors were from Asia, with the remainder evenly split between the US and Europe.

The company is raising money to develop its latest gold project. On September 8, it entered into an agreement to acquire 95% of Yunnan Gudao for Rmb90 million ($13.2 million). The target is currently acquiring an exploration permit to examine three areas of land around the Fuyuan Gold Mine in Yunnan Province. The land is estimated to have 15,983 kilograms of metal reserves.

By Wednesday's close Real Gold's share price had gained 25% since the announcement of the acquisition, reaching HK$11.92. In the morning session yesterday, the shares dropped 5.2%, however.

The share price will also have been helped by the strong performance in gold prices: the precious metal is trading comfortably above $1,000 an ounce. To put this rise into perspective, last November it was trading at around $710 per ounce.

Real Gold Mining is a Chinese gold miner that has three mines in Inner Mongolia. It raised $132 million in an initial public offering in February this year, which made it the first sizable Hong Kong IPO since the financial crisis started last year (the previous one being Renhe Commercial Holdings in October 2008). By listing early, Real Gold has been able to take part in this year's market rally right from the beginning and yesterday's closing price is 80.8% above the IPO price of HK$6.25. The same banks that arranged the IPO, Citi and Macquarie, were also on yesterday's placement.

Separately, Renesola, a Chinese manufacturer of solar wafers, is on the road to sell 14.4 million new shares which, based on the current share price, could result in a deal of approximately $84 million. The New York-listed company yesterday launched a roadshow that is expected to end with a pricing next Tuesday.

Renesola is raising money to repurchase and redeem 1% convertible bonds that are due in 2012. There is currently $99 million worth of principal outstanding, and investors have the option to force the company to redeem the bonds next March at 103.4% of the principal plus interest. In a stock exchange filing, the company said it may repurchase the bonds through a tender offer, open market purchases or negotiated transactions. It will also use the proceeds from the follow-on for general corporate purposes, including capital expenditures.

Chinese companies listed in the US were strong performers at the beginning of the stock market rally, but in the past couple of months they have slowly come down from their summer highs. Suntech Power Holdings for example, climbed to $20.58 per American depositary receipt in early August, but is now trading at $16.90. And LDK Solar, which reached $13.90 in June, on Wednesday closed at $9.14. Renesola is suffering from the same malaise: in June it reached $7.76, only to come down to $6.01 by Wednesday.

Credit Suisse and UBS are joint bookrunners for the Renesola offering.

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