The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Lenders are in control here, on the priority list they come first. They can demand their money back and can put it in administration. But problem is they will have to take a hug cut on their debt. Whatever other funding options are they would wipe out equity.
I think it is worst that Iog, as with Iog we knew what sort of money is needed and IOG was already producing. It is a different story here, company is not producing, they don't know how much cash they need and last update cast a huge doubt on production targets and cash flow prediction. If we knew money requited, we could have looked at different options but no figure is given. A trader's share where traders would try to pump and dump it occasionally.
Problem is no buyer would touch it with this mess, as we still don't know what sort of money we need. Whoever would stump up cash would take a big chunk of equity. It looks like lenders would take a heavy loss too as they would need to spend more money to let it get through to the production and then recoup their money, but highly unlikely as financial institutions don't tend to get into that sort of game. Not an ideal situation, glencore seems to be likely candidate as it has money and technical expertise to run it.
I suspect there is more than one institutional seller and we will only hear about them when they go below a certain threshold and some don't even bother reporting until they are done selling. I suggested this on Tuesday and some people claimed otherwise as it was relentless selling. They paused selling yesterday as there was no buying to absorb that sort of selling and we had mug punters jumping up and down. I suspect institutional sellers would use any volume and there is way these mug punters can match that sort of sell off.
That is wrong, as noone has a clue, company needs at least 35% of capex and it can go up to 40%,50% and even more. By the way it did have 26 millions in case costs overrun. Time will tell but equity is toast here.
Is more than one seller here, selling was relentless. RNS was released to let institutional get out before pulling the plug. These sellers needed volume so mug punters provided with with opportunity to sell into. Along this a usual suspects on twitter have pumped and dumped it and their followers are trapped here. Equity is toast, why would an institutional seller would sell if it can climb back to 50/100 as some people here claimed.
They had 25 million restricted cash in costs overrun and raised 61 millions last year as well. They need to meet certain conditions and if found to be in breach lenders can pull remaining funds and ask for their money back. No put this into context cost has nearly doubled, mine is not finished, management don't seem to have a clue and we have heavy debt to pay. I suspect shareholders are not the onlyones who would be shafted here, lenders would lose out too and ultimately winner would be someone who has got this mine, which I suspect would be Glencore. It sounds like a great plan, sell your asset to a junior miner, have it financed and built and then buy it back at a heavily discounted rate.
Management does not know itself what sort of money it needs, they have already raised money before as capex increased. Worst thing is they must be sitting on this news for quite sometime, they can't find out Sunday night that they need 200 millions or more. Secondly lenders must have been monitoring this situation closely and they must be in talks with company.
If it is found to be £175 million then raising it through placing at current share price would eventually wipe out existing shareholders as anyone putting in money would want huge discount. Going through updates company had some restricted cash 29 millions in case cost exceeds the allocated budget. Wording used was they needed minimum 35% of additional funding and it can go up to 40,50,60 and 70% noone knows. Thirdly future cash flow and debt repayment is heavily reliant on production and company hitting them, how can you trust this incompetent management with hitting production target and paying off debt? Gross incompetent or corruption of highest order. Glencore are known to be predatory and ruthless vultures who push juniors into corner and then screw them and sadly this is a Godsent opportunity for them to take advantage of. Time will tell but I don't see a way out. It looks like quite a few traders have their fingers cut while chasing this falling knife. It has lost more than 80% value in two days and looks like market is expecting worst case scenario.
BOD has sold shareholders down the river. RNS was vague and lacked details. Cynical in me says that it was a deliberate attempt to let institutional holder's get out at the expense of shareholders. This is only traders share and share price is going nowhere until financing is sorted which can wipe out shareholders. Glencoe has played a master stoke here, they sold this mine when they were in financial trouble, shareholders financed it and they will have it back developed and ready to produce. Sometimes we have got to love aim
It had hall marks of a large institution seller as there was no bounce. It kept going down and down. Besides that market git spooked by extra 35% as no institutional investor was going to provide that sort of money and all of other options would have led to shareholders being very very heavily diluted or in worst case wiped out.