Sabatica Pty Ltd, a subsidiary of Guinness Peat Group, has been left with over $10 million of Otter Gold Mines shares after the mining company's rights issue proved unpopular with investors.
Sabatica was the underwriter of the Rights issue, in which Otter Gold gave shareholders the chance to subscribe for two fully paid ordinary shares for every five existing shares at the price of 39 cents per share.
The rights issue closed on 27th October, and only 5,575,749 shares were taken up, raising $2,174,542. Sabatica, which did stand to receive an underwriting fee of 4%, must now purchase the shortfall - a total of 26,045,851 shares.
When Otter Gold announced the rights issue beginning of September, it was trading at around 54 cents. The company viewed the 39 cents issue price as "an attractive discount to current market to encourage participation by security holders."
The rights issue was held to raise money for Otter Gold's exploration programme - and to help strengthen the company's capital base which was in need of replenishing following a wet season at their Tanami mine and production delays at the Martha and Beaconsfield mines.
Otter Gold will still get the money, and Guinness Peat Group spokesman Tony Gibbs said that his company was quite comfortable with shortfall. "As an underwriter, we were willing and we expected there to be a reasonable shortfall," he said.
GPG's share price was unmoved following the news, trading at around $1.51. Otter Gold was also stagnant, trading at 41 cents.