Tahoe Resources (THO.to) Bought Deal: That's 1% of its host country's GDP!

 True dat! Take Guatemala's 2009 official exchange rate GDP of $37.66Bn, take the deal and assume the overallotment happens, do the math and it's 0.93%..... close enough.

It's not something we normally comment upon on these pages, but the bought deal financing just announced by Tahoe Resources (THO.to) is a big chunk of change, coming in at $306m (and Goldcorp committed to buying in and keeping their current 42% of the company intact). Here's the cover of the termsheet.

Issue Price:         C$14.10 per common share, 3.8% to market closed 
Jurisdictions:     All Provinces of Canada (excluding Quebec) and to the U.S. via Rule 144A/Reg D 
Settlement:       December 24, 2010

Gross Proceeds:	C$306,027,528
Underwriters’ Option:	The Company will grant the Underwriters an option (the “Over-Allotment Option”) to purchase up to such number of additional Shares as is equal to 15% of the number of Shares sold under the Offering to cover over-allotments, if any, and for market stabilization purposes. The Over-Allotment Option shall be exercisable for a period of 30 days following the Closing Date at an exercise price per Share equal to the Issue Price. The Underwriters shall be entitled to the same Commission (as hereinafter defined) provided for below in respect of any Shares issued and sold upon exercise of the Over-Allotment Option.
Use of Proceeds:	The net proceeds of the Offering will be used to fund the advancement and development of the Escobal Project, for acquisitions and for general corporate purposes.
Type of Transaction:	Bought deal, short form prospectus offering, subject to a formal underwriting agreement, including a standard industry “disaster out" and “material adverse change out” clauses running up to the Closing Date.
Jurisdictions:	The qualifying jurisdictions for this offering will be all provinces of Canada except Québec. The Shares will also be sold to U.S. buyers on a private placement basis pursuant to an exemption from the registration requirements in Rule 144A and/or Regulation D of the United States Securities Act of 1933, as amended. The Shares will also be sold to buyers in the United Kingdom on a private placement basis.
Listing:	The Company shall use best efforts to obtain the necessary approvals to list the Shares on the Toronto Stock Exchange, which listing shall be conditionally approved prior to the Closing Date.
Underwriters:	GMP Securities L.P. 1,2                                                                            50.0% BMO Capital Markets                                                                             15.0% Canaccord Genuity Inc.                                                                          15.0% CIBC World Markets Inc.                                                                       5.0% Merrill Lynch Canada Inc.                                                                      5.0% RBC Capital Markets                                                                                5.0% Dundee Securities Inc.                                                                           2.5% TD Securities Inc.                                                                                      2.5% (1)                                                                          Lead underwriter (2)                                                                         Sole bookrunner and step-up fee of 5.0%

Goldcorp (GG), Guatemala, Marlin, Criminal Charges and general country risk

The following is excerpted from IKN75. We tend to excerpt from the 'Regional Politics' section of The IKN Weekly more than the other parts (Fundamental Analysis of Mining Stocks, Stocks to Follow, Copper Basket, Market Watching) because info contained in the other bits usually pertains to companies we cover or recommend, so it's only fair paying subbers to keep that from the blog. But 'Regional Politics' serves its purpose in the Weekly as well, trying to spot trends and anticipate actions taken by governments that affect the playing fields further down the line. So here are your author's thoughts about mining and Guatemala from last weekend's edition, starting with the current issues faced by Goldcorp and then expanding. DYODD.

Guatemala: Environment Ministry Files Criminal Charges Against Goldcorp

Strangely enough (!) it’s been hard to find a decent English language news report about the action taken against Goldcorp (GG) by Guatemala’s MARN Environmental Ministry last week, but here’s a link to a translation done of one of many Spanish language reports (6) and here’s an excerpt:

Luis Ferraté, Minister of the Environment, has presented a criminal accusation to the Public Ministry against Montana Exploradora [Goldcorp Inc], insisting on an investigation into the discharge of residual waters from the tailings pond at the Marlin mine in San Marcos, because it may contaminate the Quivichil river.

The accusation, received by the Ministry on September 28, states that on September 23, the Marlin mine, owned by Montana, a subsidiary of the Canadian company Goldcorp, discharged water from its tailings pond and that this water may cause heavy metal pollution.

 The commentary after the report above then descends into “You Lie!” “No, You Lie!” etc, with GG denying and MARN assuring that GG had no right to discharge waters from its near overflowing tailings pond (due to recent rains) in the dead of night. There are better reports available in Spanish language (7).

However, be clear that this is a significant move on the part of Guatemala. The Marlin mine has long made the more polemic headlines of course, but this bringing of formal charges against the company by a government ministry is a different level from NGO accusations and GG platitudes. Frankly, our concern is less with Goldcorp at Marlin and more the general political risk atmosphere in Guatemala. The country is attracting attention from both sides of the mining sector, with the companies now looking at the country and its prospective regions with fresh eyes (note Tahoe THO.to, note Radius (RDU.v) and also the anti-mining activists looking upon it as a battleground laid out. With the government suspension of all new concessions and permits still in place (it’s been there a long time and the debate is now on to allow mining or not), the move made by MARN last week will strengthen the hand of those who would make the permitting ban more permanent. Personally speaking, I wouldn’t touch a Guatemala exposed project with a barge pole, no matter how good the rocks might be.

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