RE: rns14 Aug 2019 11:00
The missing factor not being noted here is the total amount of the raise. These relatively small raises typically attract higher discounts because otherwise there's little incentive to take them over buying on the open market. Very large placings offer unique chances to own chunks of a company not usually practicable to acquire in any reasonable time frame (without the price being pushed up by the incremental purchases to reach the target equity sum). But this amount could have been acquired reasonably easily. So a steeper discount is required.
The fact that they only raised such a small amount is indicative of how close they feel they are to full funding. Note that with a backer like CEZ publicly sniffing, EMH could have raised substantially more and thus at a lower discount. But ultimately this was a small parcel of necessary cash to get across the finish line.
Those moaning about dilution from CEZ's eventual buy-in must realise that this was always inevitable with this and indeed any junior mining project taking on a large resource. How else did you expect them to fund the damn thing? As always, if you're going to use metaphors make sure you bear in mind that even if the pie is sliced into more slices, if it's a bigger pie, then your personal take changes proportionally.
Thus, full government investment (which is what this is) has several effects. First of all, it opens up a far bigger pie in terms of the project being approachable without multiple piecemeal funding agreements (see many other mines that did not get state backing around the world). And this partner opens doors (read: permits) which would be problematic in any territory given the sheer size of Cinovec, an aspect that investors continue to underestimate despite it being central to a national political debate (again: Cinovec is HUUUUUUUGE). Secondly, state involvement has a carry-forward effect of derisking further development of the mine. The lithium ain't going anywhere, and once the state is financially-tied to its success, watch the doors fly open. Thirdly, state involvement opens doors to top-tier offtakers like the big car manufacturers and battery plants. Fourthly, the added confidence that all this brings should send the shares soaring after the issue of equity for CEZ. When assessing the investment case, knowing all of the above is secure is a major, major boon. This is what powers equities like this forward.
No doubt many of you are selling/have sold to await the 'dilution' of the CEZ issue, but I'm not bothering and indeed have increased my position in the last few weeks. Because the announcement will come out of the blue, and the share price is already depressed. The market cap currently stands at approximately £28.6m, which is paltry by even the most conservative estimates of Cinovec's worth.
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