market folly

Two big name hedge funds have recently set their sights on the same investment. John Paulson's firm Paulson & Co and George Soros' hedge fund firm Soros Fund Management are set to purchase shares of NovaGold Resources (NG) in separate offerings by the company.

This morning (March 8th), NovaGold announced that it is proposing to issue 16,636,364 shares at a price of $5.50 to Quantum Partners, Ltd., an investment fund ran by Soros Fund Management. This comes at a substantial discount to current prices as NG currently trades around $6.48. The purchase would mean Soros' hedge fund is buying $75 million worth of NG shares. The company said they planned to use the net proceeds to fund exploration and development and for general corporate purposes (including possible future acquisitions). This offering is expected to close on March 11th. In addition to this position, we recently took a look at the rest of Soros' equity portfolio.

Prior to Soros' offering, NovaGold announced on March 4th that it is proposing to issue 18,181,818 shares priced at $5.50 to John Paulson's hedge funds. This means Paulson would have nearly a $100 million stake in the company. NovaGold's offering for Paulson is expected to close on March 9th. The press release noted that Paulson acquired shares for several investment funds. We would assume that the majority of these shares though would go into his new gold fund as the strategy for that venture has been to acquire equity stakes in gold miners. We've previously taken a look at Paulson's equity portfolio as well for those interested.

Definitely an interesting development here as we see more hedgies ramp up their exposure to gold mining. The terms of the deal were definitely favorable for the hedge funds as they're already sitting on a nice paper gain given shares are trading much higher than the offering price. Regarding the hedge fund purchases, Rick Van Nieuwenhuyse, President & CEO of NovaGold said that, "These groups have been following NovaGold for some time, recognizing both the near term and long-term strategic value of our world-class gold and copper-gold assets. With the $175 million raised through these financings, we have fulfilled our current equity objectives and are exceptionally well positioned to advance and maximize the value of our projects for the benefit of all NovaGold shareholders."

Taken from Google Finance, NovaGold Resources is "a precious metals company, which is engaged in the exploration and development of mineral properties in Alaska, the United States and British Columbia, Canada. The Company conducts its operations through wholly owned subsidiaries, partnerships and joint ventures. The Company is primarily focused on gold properties, some of which also have copper, silver and zinc resources." Those of you wanting a technical look can view an instant analysis of NG's chart here from MarketClub.