Redstar Gold (RGC.V) finally grabbed the market’s attention as not only did the company’s share price increase since the start of this summer, the company has also caught the eye of Eric Sprott, who decided he wanted to take an (initial?) 12.1% stake in the company.
Redstar Gold will be conducting a private placement of up to 41 million shares at C$0.10 per share to raise a total of C$4.1M. Eric Sprott has confirmed he wants to purchase 30 million shares for a total initial investment of C$3M, which would bring his stake at 12.1%. On top of that, Redstar’s Chairman, Jacques Vaillancourt, will also top up his position and will also participate in the current private placement.
This private placement is very important. Not only is it always very positive to add someone like Eric Sprott to the list of shareholders, the C$4M that will be raised in this placement will allow the company to initiate a drill program at the Unga Gold project. On top of that, it will very likely put a floor on the share price which should allow the owners of the warrants with an exercise price of C$0.10 to exercise those warrants without flooding the market. And finally, the cash inflow will allow the company to negotiate any potential JV deal from a position of strength. If all warrants will be exercised, Redstar Gold will have approximately C$8M in cash, and can create more value by drilling the property by itself and any potential partners at the negotiation table will know that Redstar isn’t with its back against the wall.
Having Eric Sprott as a shareholder is a positive development, and the market rewarded Redstar Gold with a share price increase of in excess of 30%.