RE: The Calm Before the Boom… Literally 💨🚀7 Jan 2025 11:12
Taken from a new article from today.....
Despite all this good news, the company’s going to need to raise more money. This isn’t intended as a criticism. It’s a fact. And that’s why I don’t want to invest.
Although the company’s “fully funded” at its present level of activity for the next 12 months, it’s going to need a substantial sum to get gas out of the ground in Africa.
At Helium One’s annual general meeting in December, the directors said that it’ll cost “in the region of” $75m-$100m (£60m-£80m at current exchange rates) to fully develop the mine in Tanzania. Of course, this assumes the government approves the company’s mining licence application that was submitted in September.
And these funds can only come from debt providers, shareholders, or customers (or a combination of the three).
The company’s directors have revealed they’re in discussions with banks regarding securing loan finance. Initial contact has also been made with potential customers about paying in advance.
The company says it has no plans to raise more money from shareholders. That’s good news for long-standing investors who’ve already been heavily diluted. When the company first listed, it had 497m shares in issue. Today, there are 5.92bn in circulation — nearly 12 times more.
And the share price is now less than 1p, compared to 2.84p at IPO.Why not invest then?
But mining’s possibly the most difficult industry in which to operate successfully. And if things go wrong in Africa, I think it’s highly likely that $100m won’t be enough to commercialise operations.
Also, there’s no guarantee that banks or customers will agree to provide finance.
In these circumstances, it’ll be shareholders that have to pick up the pieces and put in more money to avoid being diluted further. Therefore, at the moment, an investment’s too risky for me.