Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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I really cannot understand Assaubayev's motives right now but their oversized holding is certainly negatively impacting on the value of this company. I think they should offer to list 12m new shares at £2.50. That would still leave them with 50% of the enlarged capital, but would give a new investor 30%. It would also enable them to pay-off almost all of the long term debt saving £5m annually in interest expense. Market would almost certainly re-rate to that new price instantly. 40m shares, £100m mkt cap - still a p/e of 6 on current production with lower financing costs. Assaubayev holding valued at £50m instead of under £25m (which is about their av cost) and much more liquidity in the shares, since either they or the new investor could sell for a profit if they choose
"I think they should offer to list 12m new shares at £2.50."
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RB, I don't understand how they would do that. Who would buy those 12million shares and why would they pay £2.50 for shares they could get for circa £1.10.
I agree that having a shareholder that owns 70% of the company isn't good.....but I'm not sure how they could dilute that holding without people who want to purchase.
Hopefully if the company start to get near 100,000 oz per year then investors will start to take the company seriously and the Assabeyeu family can start to sell into that interest.
There's no way somebody could come into the market and buy 12m shares without the price going way beyond £2.50......
It's not possible for a start, that's more than the free float...
I agree RB, simple solution....
"There's no way somebody could come into the market and buy 12m shares without the price going way beyond £2.50......"
Yeah, but it isn't likely to happen, or are we living on Fantasy island?....although sometimes in the UK it feels like it.
"It's not possible for a start....I agree RB, simple solution...."
That's as clear as mud.
PS. This is the same company who changed their name but forgot to secure the rights to the new name....so they had to pay some person in a small village in Wales who read the RNS and licensed the name before they did. I don't think they do fine detail....hole in the ground needed, buy big machines to dig it!
Bald Eagle - my whole point is that they issue new shares to enable such a transaction to happen.
Right now somebody trying to buy 10k shares would probably move the market, 50k would definitely, so 1mm shares would see price rise rapidly. I believe a small to mid sized fund manager would be prepared to pay £30m for 12mm shares and a 30% stake in a miner with every prospect of reaching 100k oz within 2-3yrs. At that point this could be a $200m+ revenue producer with $50m+ net profit ...Mkt Cap rises from £100m to £200m and the new investor as well as Assaubayev's and us have all doubled our money to £5 per share and we're still only on a p/e of 5 !
RB, is there a name for this sort of a deal?
I've not heard of UK companies doing this before....it sounds too good to be true. Basically they are creating new shares and valuing those new shares above market rate. So they are creating value out of nothing. In a normal market the new shares would dilute the value of existing shares. Sounds odd to me.
I do remember that a long time ago the company issued new shares and the Assabayeu family bought those shares for something like the equivalent of £3....which turns out to have been a poor investment. At the time the SP did increase quite a lot....but that could have been the confidence the market got that the company had sufficient funds to invest in the mine (unfortunately they needed a lot more).
I don't see any fund manager paying 100% above market rate for new shares.
BaldEagle - this is a quote from an RNS by Savannah Resources this morning "AMG has invested GBP16m in Savannah through a subscription for 342,612,420 new ordinary shares of 1 pence each in the Company ("Ordinary Shares") at a price of 4.67p (representing a 35% premium to the 30-day VWAP) to become the Company's largest shareholder".
i.e The investor paid 35% above market in order to get 16% stake in the company ... I'm suggesting Assaubayevs are more aggressive / generous ... offer 30% of the company for 100% premium. It would make economic sense and make all of us much better off as well as the company more financially secure to expand
RB, I agree they need to do something to dilute their holding below 50%. If they can do what you say then I would be all for it. But I suspect they are much more likely to take it private, which would be bad for investors.