HZM24 Aug 2020 16:37
Post by Salmonn1 on ADVFN
It's been fun watching progress on the SP since the bank syndicate announcement. And interesting to read various views on where this is going. My take tends to be based around, my limited understanding of, economics 1-0-1, classical and marginal. So for me it's hard for the market to put a value on the company until the equity is raised, i.e. the percentage of the $440 million as equity and the SP at the time of the raise. So bearing that in mind I have listened again to what JM has said about this and taken into account the past history on company announcements. JM is careful to say that this is a traditional finance package of debt, equity and off-take. He's also careful not to say the equity portion will be less than the total amount to be raised minus the debt. In the last Proactive webinar I asked JM if the SP on the equity portion will be less than 7p a share and he replied that the company were aware of dilution to existing shareholders and are in discussions about the share price point (SP premium if SP too low?). Elsewhere, Re the off-take, he does say apart from that they are tier one nickel users based in Europe and or (North America?) that the the off-take might include an upfront payment.
To me the above means, firstly that JM is as usual not over promising or giving out new information outside of formal news releases. Two that the company really do take dilution into account and try to keep it as low as possible consistent with moving the project forward. I ask the dilution question at every AGM and get the same reply which they seem to have followed through with. And most encouragingly, if feasible, of the possibility of an upfront payment on an off-take. If so it has the dual benefit of lowering the amount of cash needed to be raised from equity and will most likely raise the share price. So less money to raise at a higher SP equals less dilution. Not certain to happen but a welcome possibility.
However this plays out I've been happy since the Orion royalty that Araguaia is going to get built, and we now have a reasonably reliable time line, i.e. two years starting in Q1 2021 (subject to covid) for construction and production.
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