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Trek, thanks for the analysis. Very generous of you to share your research on here.
Your breakdown interestingly is in line with my thinking/expectation although my calculations are a lot more simplistic.
Assuming there’s 400m shares in issue - current shares/CLN/warrants/directors options/drilling contractor shares etc.
This is the simplistic/speculative part!
Assuming 1m oz at £20 per oz = £20m market cap.
£20m/400m = 5p.
However cash available should be around £2.5m if all the 2p warrants and directors options are bought.
Hopefully the £2.5m cash can be used to expand the 1m oz and/or target an IOCG deposit and if they do hit what looks like an IOCG deposit the SP most certainly won’t be 5p!!
Wow Trek that is some work you have put in there!
So, if we move up to around 4p that is a 50% SP increase and will take us to around a £7.5 million market cap.
But because of the subsequent flood of new shares coming to market (as SP moves up) due to past capital raising etc, we will probably push over 20 million in market cap at around 4p assuming everyone exercises and converts. Broadly correct?
So, that’s a 4 x market cap increase with only a .5 uplift in SP.
And in my view at £20 million, we will need some decent results from the drilling to push us up further as we are moving out of minnow territory on that market cap. At least we have the cash and will get more in through some of the conversions. The assets are good, let’s hope they are good enough! Love the potential here but the way they have raised capital will hopefully not need to be repeated in such a generous manner when we have the results to enable the BOD to drive a harder bargain in negotiations.
So buying shares around the current price looks like a winner. But as we approach 4p there may be a longer wait for further SP uplift don’t you think?
But with all the cash and the great assets, there is plenty of potential to multi bag if the overall positive trajectory continues. I will hold and add more.
Part 1
My capital structure notes.
From 13th August 2020, RNS...
Let’s assume the prospectus gets published, we don’t know what set up costs to deduct as they are not specified!
Placing £1.5 million, 1,500,000 zero coupon CLN 2.3p maturity within 1yr from Aug 2020. (Approx 65.2m shares)
Ass warrants = 1 share of 3p each by Aug 2023 or whichever earlier if 5 day VWAP >4.5 pence then mandatory exercise applies. (Approx 50m shares)
Dilution. Note Co have the £1.5m in cash but shares not converted yet. Assume all convert that’s an additional 115.2m shares.
From Aug 220 ppt the quote is approx 98m ‘warrants’ at 2p so difference could be costs? I don’t know. The detail is not broken down.
I can’t fathom 98m ‘warrants’ at 2p from the presentations. Whilst RNS is specific it seems the presentation assumes CLN and warrants are the ‘same beast’ which is confusing. If they were issued for costs then that would have been a conversion disclosure. So we have a potential gap but will assume the difference is set aside.
115.2m - 98m = 17.2m (the unknown difference!)
17m/2 = 8.6m
65.2m-8.6m= 56.6m at 2.3p (£1.5m placing)
50m-8.6m=41.4m (ass warrants, assume 4.5p reached)
Part 2
Incremental shares outstanding = 56.6m (at 2.3p) + 41.4m (at 4.5p)
Total shares as of 18/09/20 = 187,269,317 x 2.8p = £5,243.540 mcap
So 56.6m at 2.3p, assume imminent = £1,301,800 additional mcap.
= 187,269,317 + 56,000,000 = 243,269,317 shares
Assume conversion within 1 year shares = 243,869,317
Assume 4.5p reached and no other warrants (unlikely) so......
By Aug 2023 = 243,869,317 + 50,000,000 = 293,869,317 shares
So assuming my approx calcs add up....
100-(293,869,317/187,269,317*100)= which is 57% more shares.
293,869,317 x 4.5p = 13,224,119.2 mcap
Which triggers, Director Options of 15m shares at 10m MCAP or 1moz resource
So 308,869,317 x 4.5p = £13,899,119.2 mcap.
Current mcap = 187,269,317 x 2.8p = £5,243,540.87
So buying now at 2.8p is an assumption that 2.3p shares are converted but we have the cash. Whilst obviously that is dilutive it is dependent on if the drill, cash expenditure is accretive. i.e. adds assets.
If it does the assumption is the SP will reach 4.5p and the director options are triggered. The concern is that the shares will be forward sold. The 56.6m (placing shares) can be once the prospectus is released but some would be hedged for the 4.5p conversion. The 4.5p warrants would ‘only’ be sold above 4.5p.
Part 3
There really isn’t enough data to be specific but the picture is the same and that is pretty much...
1. The drill results are paramount = the SP trajectory
2. Buying sub 4.5p = risk alignment with warrants
3. Disorderly selling placing shares would not benefit the warrants conversion
4. Gotta assume drill results will be good else no point in investing there are obvious trader buy sell points.
5. They may get an ADI cash injection. 50% of expo costs is described. However, that’s difficult to define, even £750k would be significant
6. There will be more placings, aim is to buy between the placing, 2.3p and the warrant trigger 4.5p.
7. Buys at sub 2.3p will do very well but that could be the same as buys sub 4.5p when the next placing is announced.
8. OR with risk money buy sub £10m MCAP (Director trigger)
INFO...Historical conversions....
8th June 2920....181,818
15th May 2020...1,500,000
11th May 2020....98,515,957 (aggregate blocklisting)
7th May 2020....30,095,354 (19% placing at 2.25p but 23.7% disc)
9th March 2020..1,745,007
5th March...Jim Nominees Pty Ltd of the exercise 333,334 warrants at 2p.
5th March.... previous director share issue. 654,600 (Ken Watson) and 757,073 (Lady Alice Mines) Ltd.
Part 4
16th Jan 2020....placing capital structure. 153,747,138 = 67,233,532 Existing Ordinary Shares; 61,330,000 Placing Shares; 10,058,224 Initial Consideration Shares; 6,066,632 First Reimbursement Shares; 5,818,750 Fee Shares and 3,240,000 Ordinary shares for fees. The Company raised gross cash proceeds of £613,330 and settled £90,587 of immediate cash liabilities in shares.
No other outstanding warrants.
Corporate from RTO...
23 Dec 2019
Cobra RTO of Lady Alice Mines Pty Ltd and its re listing on LSE..
Lady Alice Mines Pty Ltd is the sole owner of:
- 100% of right title and interest in South Australian Exploration Licence Number 6016 (the "Prince Alfred Licence") a formerly producing copper mine (the "Prince Alfred Mine"); and
- an entitlement to earn a 75% equity interest in 5 large tenements near Wudinna in South Australia (the "Wudinna Project") for gold exploration. (Assuming 25% Andromeda)
7th April 2020 RNS -stage 2 completed (as/terms) ADI financing.
“The Company is earning a 75% interest in the Project by spending A$5 million over a 6-year period”
“The Company is also pleased to announce that it was requested to submit a second-round proposal for the South Australian Department of Mining and Energy's Advanced Discovery Initiative (ADI). The ADI programme provides funding of up to 50% of direct exploration costs for new exploration initiatives, including identifying new mineralised terrains.”
The ADI is still pending and reflects a significant inflection point
Part 5
Financial Perspective...
DTR for the six months ended 30 June 2019 loss of £361,284, actually small numbers for what has been achieved.
For the finals to 5th June 2020, loss of £668,900. Have to go through the balance sheet, should be headlined in the RNS. As expected admin was biggest expense £544k, IPO costs xtra £124k.
On these numbers it’s NOT a lifestyle company!!
Pay inc fees, 2019, Craig Moulton £118.5k, Rolf Gerritsen £160.3k. In line with mcap and options are aligned.
Geo see corporate ppt, new tech, driller paid 33% equity. IOCG Huge!!
https://w32.3eb.myftpupload.com/wp-content/uploads/2020/09/Cobra-Resources-plc-Company-Overview.pdf
Trek