TORONTO, March 7 (Reuters) - Small mineral exploration companies live by a simple mantra: raise cash or perish. But in today's tight financing market, that can make for some difficult choices for those lucky enough to attract investor interest.

That's why Canada's Eagle Hill Exploration jumped at the chance last month to raise equity capital at a price barely above its stock's 52-week low, even though it faced criticism in the blogosphere for diluting its shares.

The 36-million share issue on Valentine's Day raised C$7.2 million ($7.2 million) for the tiny Quebec explorer at 16.5 cents a share, just up from the stock's 52-week low of 11.5 cents, hit on Feb. 9, and less than half its year-earlier high of 34.5 cents.

"We're not a bank - we're an exploration company. Our job is to grow and add ounces to our asset," Eagle Hill Chief Executive Brad Kitchen told Reuters in an interview this week. "So, when given the opportunity to raise that much cash, even in today's market, it was more important to raise the money and do the drilling,"

For exploration companies such as Eagle Hill, the market for equity financing has improved this year after being almost slammed shut in the middle of 2011, when even proven producers had difficulty raising money and share prices slid.

Timing is everything for companies that tend to burn through cash quickly in a rush to prove out sufficient resources to make them attractive acquisition targets for producers.

With its window of opportunity open, Eagle Hill felt it could not hesitate, Kitchen said on the sidelines of PDAC, a major mining industry conference in Toronto.

Eagle Hill means to sink its new cash into 45,000 meters of drill holes at Windfall Lake, a property near Val d'Or, a city in northern Quebec whose name means Valley of Gold in French.



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The top buyer in Eagle Hill's February financing was Dundee Corp, a major investor in Canadian mining exploration. It took a 19 percent stake in the company.

"For us, that was a huge win," said Kitchen, adding that the company is also talking to an aboriginal group in the community surrounding the mine that wants to invest, as well as some Quebec pension funds.

"From a corporate perspective, we wanted more institutional investors; we wanted some named players."

In November, Eagle Hill announced its first official resource study on the property, showing a resource containing 700,000 ounces of gold at 7.6 grams per tonne.

Kitchen said last week the company drilled its first long hole, over 1,100 meters deep, showing its gold resource extends beyond a non-mineralized zone at around 400 meters.

In recent weeks, some large Canadian miners have expressed interest in the property, which Eagle Hill acquired in 2009 from Toronto-based explorer Noront Resources, which spent about C$25 million on drilling on the property.

"We're talking to some ... very significant players in the Canadian gold scene," Kitchen told Reuters this week at PDAC, a four-day industry conference in Toronto organized by the Prospectors and Developers Association of Canada.