Why Banro Corporation (USA) (NYSEMKT:BAA) Shares Got a Big Boost

Banro Corporation (USA) (NYSEMKT:BAA) shares were down 12.39% on Tuesday to $0.162 but recovered 18.89% to $0.193 in after-hours trading. Share prices have been trading in a 52-week range of $0.13 to $0.48. The company has a market cap of $48.58 million at 303.48 million shares outstanding.

Banro Corporation is a Canada-based gold mining company. Through its subsidiaries, it holds interest in a number of gold properties, including Twangiza, Namoya, Lugushwa and Kamituga. It is focused on production from the Twangiza gold mine in the Democratic Republic of the Congo and its properties, totaling approximately 2,000 square kilometers, are covered by a total of over 10 exploitation permits or mining licenses.

Through its DRC subsidiary, Banro Congo Mining SA, the company holds over 10 exploration permits covering an aggregate of over 2,600 square kilometers. Approximately 10 of the exploration permits are located near its Twangiza property and approximately four are located near the Namoya property. The Twangiza property is located in the South Kivu Province of the DRC, and has an area of approximately 1,000 square kilometers. Namoya consists of prospects, including Mwendamboko, Muviringu, Kakula, Namoya Summit, Seketi and Kangurube.

In a press release this week, Banro Corporation announced that it has entered into a support agreement with major stakeholders to recapitalize the Company by refinancing a total of US$207.5 million of outstanding debt. This will equitize the outstanding preferred shares and raising US$45 million by way of a gold forward sale to reduce debt, improve liquidity, and position the company to optimize operations and enhance its substantial gold mining assets in the Democratic Republic of the Congo.

We are pleased to have reached agreement with our key stakeholders on the terms of a recapitalization that will strengthen the Company and enhance the long-term viability of our business without impacting our continued operations,” said Dr. John Clarke, President and CEO of Banro Corporation. “The recapitalization will result in an improved balance sheet and position us to improve working capital, continue optimizing the current operations and advance the development projects, all of which are expected to contribute substantially to the long term value of the Company.”

Prior to this, Banro Corporation has plored a number of potential alternatives to refinance outstanding instruments with upcoming maturities while improving its capital structure. It concluded that recapitalization is the best available alternative to maximize and preserve value for the company and its stakeholders. Under their plan, Banro Corporation will continue to operate in the ordinary course of business; trade payables, employees, banks and operations in the DRC and Canada will be unaffected by the Recapitalization and the Plan.

In particular, it contemplates the refinancing of the maturing US$175 million senior secured notes and US$22.5 million loan with new US$197.5 million senior secured notes with a 4-year maturity, the conversion of the outstanding exchangeable preferred shares and gold-linked preferred shares of Banro and certain of its subsidiaries into common shares of the company, the execution of a gold forward sale agreement to raise US$45 million to be used for working capital and general corporate purposes, including to fund transaction costs and repay an interim loan facility, and the extension of the maturity dates on an existing US$10 million loan from July 15, 2018 and September 1, 2018 to March 1, 2020.

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.