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Here's Why Gold Standard Ventures Corp.'s Stock Is Sinking Today

What happened

Shares of Gold Standard Ventures Corp. (NYSEMKT: GSV) slipped on Friday and were down 11% at 12:45 p.m. EST after the gold miner announced the pricing of an equity offering.

So what

On Thursday, Gold Standard Ventures announced that it had agreed to sell more than 9.7 million shares in a public offering. The company would receive 20 million Canadian dollars ($16.2 million) after pricing shares at CA$2.05 ($1.66) apiece. The miner plans to use that cash to continue exploration and early-stage development at its Railroad-Pinion Project.

A close up of a gold nugget in a person's hand.
A close up of a gold nugget in a person's hand.

Image source: Getty Images.

In addition to that public offering, Gold Standard said that leading gold miner Goldcorp (NYSE: GG) would increase its ownership position in the company to 9.99% in a private placement. Furthermore, the company noted that OceanaGold (TSX: OGC) has the right to either maintain its ownership interest at 15.8% or acquire up to 19.9% of the company.

Gold Standard Ventures announced today that OceanaGold has agreed to maintain its 15.8% interest in the company and would pay CA$4.4 million ($3.6 million) in a private placement to keep that ownership level. In addition, Goldcorp would pay CA$3.7 million ($3 million) to boost its stake to 9.99%. That pushes the total gross proceeds from these offerings up to around CA$28 million ($22.6 million), giving the company more cash to finance the Railroad-Pinion Project.

Now what

It's typical for an early-stage mining company like Gold Standard Ventures to dilute investors so it can raise the cash needed to invest in development projects. While that money can enable the company to open a new gold mine that eventually rewards investors, the dilution can weigh on shares in the near term. That's why investors who are seeking to invest in stocks that rise more directly with the price of gold might want to instead consider a top gold miner like Goldcorp.

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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.