Fortuna Completes Offering of Convertible Senior Notes
Fortuna Silver Mines has completed its offering of 3.75% convertible senior notes due 2029, raising US$172.5 million, including an additional US$22.5 million from the exercise of an option. The initial conversion rate is set at 151.7220 shares per US$1,000 principal amount, equating to a conversion price of approximately US$6.59 per share.
The proceeds will be used to repay bank debts, fund working capital, general corporate purposes, and to redeem its existing 4.65% senior subordinated unsecured convertible debentures. Debenture holders have until July 10, 2024, to convert or receive cash payment. The notes and shares are not registered under the U.S. Securities Act and cannot be sold in the U.S. without registration or exemption.
- Raised US$172.5 million, including an additional US$22.5 million.
- Initial conversion rate set at 151.7220 shares per US$1,000 principal amount.
- Proceeds to repay bank debts and fund working capital.
- Redemption of existing 4.65% senior subordinated unsecured convertible debentures.
- Notes and shares are not registered under the U.S. Securities Act.
- Potential dilution for shareholders due to convertible feature.
- Existing debenture holders face a choice between conversion or cash redemption.
Insights
Fortuna's recent completion of its offering of $172.5 million in convertible senior notes is significant for investors due to several key points. Firstly, the 3.75% interest rate on these notes is relatively low, which suggests favorable borrowing conditions for the company. The conversion rate of 151.7220 common shares per $1,000 principal amount translates to a price of approximately
The strategic use of proceeds is also critical. Repaying bank indebtedness and funding working capital can strengthen Fortuna's balance sheet and liquidity position, making it more resilient against market volatility. Additionally, refinancing its existing higher-interest 4.65% senior subordinated unsecured convertible debentures should reduce interest expenses, improving profitability. However, the reliance on convertible debt introduces potential dilution for shareholders if the notes are converted into equity.
For retail investors, it's important to understand the implications of convertible notes. They offer a blend of debt and equity features, providing the company with cheaper capital while giving investors potential upside through conversion into shares. However, the risk of dilution needs to be considered, especially if the stock price rises significantly above the conversion price.
The successful issuance of Fortuna's convertible senior notes can be seen as an indicator of market confidence in the company's future prospects. Convertible notes are appealing to investors who seek a combination of fixed income and potential equity upside and the full exercise of the additional $22.5 million option shows strong demand.
This financing move can be interpreted as part of a broader strategy to enhance operational flexibility and reduce financing costs. Fortuna's choice to refinance its higher-interest debentures aligns with a trend among companies to optimize their debt structures amid current low interest rates. By lowering its interest obligations, Fortuna can allocate more resources to growth initiatives and operational improvements.
However, it's worth noting that the issuance of these notes without registration under the U.S. Securities Act implies certain restrictions on resale, which might affect liquidity for investors. Furthermore, the company's ability to meet its obligations and avoid excessive dilution will depend on its financial performance and stock price movements in the coming years.
VANCOUVER, British Columbia, June 10, 2024 (GLOBE NEWSWIRE) -- Fortuna Silver Mines Inc. (TSX: FVI) (NYSE: FSM) (“Fortuna” or the “Company”) has closed its previously announced offering of
The Company intends to use the net proceeds from the Offering to repay bank indebtedness, to fund working capital requirements, for general corporate purposes and to fund the repayment of its existing
As previously announced, the Company has issued a notice of redemption in respect of the Debentures, which are expected to be redeemed on July 10, 2024. Holders of the Debentures may choose to convert their Debentures prior to the redemption date or receive a cash payment from the debenture trustee.
The Notes and the Shares issuable upon the conversion thereof have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or qualified by a prospectus in Canada. The Notes and the Shares may not be offered or sold in the United States absent registration under the Securities Act or an applicable exemption from registration under the Securities Act.
This news release is neither an offer to sell nor the solicitation of an offer to buy the Notes or any other securities and shall not constitute an offer to sell or solicitation of an offer to buy, or a sale of, the Notes or any other securities in any jurisdiction in which such offer, solicitation or sale is unlawful.
About Fortuna Silver Mines Inc.
Fortuna Silver Mines Inc. is a Canadian precious metals mining company with five operating mines in Argentina, Burkina Faso, Côte d’Ivoire, Mexico, and Peru. Sustainability is integral to all our operations and relationships. We produce gold and silver and generate shared value over the long-term for our stakeholders through efficient production, environmental protection, and social responsibility.
ON BEHALF OF THE BOARD
Jorge A. Ganoza
President, CEO, and Director
Fortuna Silver Mines Inc.
Investor Relations:
Carlos Baca | info@fortunasilver.com
Forward-looking Statements
This news release contains forward-looking statements which constitute “forward-looking information” within the meaning of applicable Canadian securities legislation and “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (collectively, “Forward-looking Statements”). All statements included herein, other than statements of historical fact, are Forward-looking Statements and are subject to a variety of known and unknown risks and uncertainties which could cause actual events or results to differ materially from those reflected in the Forward-looking Statements. The Forward-looking Statements in this news release include, without limitation, the redemption of the existing debentures and the anticipated use of proceeds. These Forward-looking Statements are based on certain assumptions that Fortuna has made in respect thereof as at the date of this news release. Often, but not always, these Forward-looking Statements can be identified by the use of words such as “estimated”, “potential”, “open”, “future”, “assumed”, “projected”, “used”, “detailed”, “has been”, “gain”, “planned”, “reflecting”, “will”, “anticipated”, “estimated” “containing”, “remaining”, “to be”, or statements that events, “could” or “should” occur or be achieved and similar expressions, including negative variations.
Forward-looking Statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Fortuna to be materially different from any results, performance or achievements expressed or implied by the Forward-looking Statements. Such uncertainties and factors include, without limitation, those factors discussed under “Risk Factors” in Fortuna’s Annual Information Form for the fiscal year ended December 31, 2023, a copy of which can be found on the Company’s profile on the SEDAR+ website at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar. Although Fortuna has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in Forward-looking Statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended.
Forward-looking Statements contained herein are based on the assumptions, beliefs, expectations and opinions of management and such other assumptions as set out herein. Forward-looking Statements are made as of the date hereof and Fortuna disclaims any obligation to update any Forward-looking Statements, whether as a result of new information, future events or results or otherwise, except as required by law. There can be no assurance that these Forward-looking Statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, investors should not place undue reliance on Forward-looking Statements.
FAQ
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