The St Barbara Ltd (ASX: SBM) share price has returned from its trading halt and tumbled sharply lower this morning.
At the time of writing the gold producer's shares are down over 22% to $2.57.
Why was St Barbara in a trading halt?
On Wednesday the company requested a trading halt whilst it undertook a capital raising to part-fund the A$768 million acquisition of Canada based and TSX-listed low-cost gold producer Atlantic Gold Corporation.
Atlantic Gold Corporation is the owner and operator of Moose River Consolidated in Nova Scotia, Canada. In calendar year 2018 it produced 91,000 ounces of gold at an all-in sustaining cost of A$761 an ounce. This is expected to increase to over 200,000 ounces per annum once all four pits are developed and operational.
St Barbara aimed to raise approximately A$490 million through an underwritten pro-rata accelerated non-renounceable entitlement offer at A$2.89 per new share to partly fund the transaction, with the balance to be funded via its existing cash reserves.
This morning the company announced that it has successfully completed the institutional component of its underwritten entitlement offer, raising approximately $355 million at the offer price of $2.89 per share.
According to the release, the institutional entitlement offer was well supported by existing eligible institutional shareholders who took up approximately 81% of the new shares made available. The rest is now expected to be raised via a retail entitlement offer which is scheduled to open on May 21.
St Barbara's managing director and CEO, Bob Vassie, was pleased with the result.
He said: "We are extremely pleased with the support for the Acquisition and the Entitlement Offer shown by our existing institutional shareholders, and also welcome a number of new domestic and international institutional investors. The success of the Entitlement Offer provides a strong endorsement that investors share our confidence in St Barbara's strategic direction and the significant opportunity for shareholders provided by the acquisition of Atlantic Gold."
One broker that wasn't convinced by the acquisition was Credit Suisse. According to a note out of the investment bank, its analysts have downgraded the gold miner's shares to an underperform rating and cut the price target on them to $2.72. It appears to believe that St Barbara has overpaid and will require success on an exploration level to create value for shareholders.
Elsewhere in the industry today the Newcrest Mining Limited (ASX: NCM) share price and Northern Star Resources Ltd (ASX: NST) share price have dropped lower this morning after the gold price tumbled lower overnight.