I agree with you that could have been a good strategy. Following is my email on the 19th August 2014 to John Sanders, Sam Middlemas and the 2 biggest ELM shareholders from South Africa. I did not receive a response from any of them.
"Hi Gents,
Given where the share price sits and resulting inevitable dilution if a strategic partner were to come on board, a strategy worth considering in my opinion is to try and sell Kola to Dingyi or the Brazilians.
We are in tough market times but we have the unique opportunity where we have a proven, feasible asset that can realise us cash and at the same time massive exploration upside potential.
If we can get ~$60 - $70 million for Kola only and part of the deal if sold to Dingyi is that they relinquish all their ELM shares back to the company for no consideration.
The market doesn't believe we can build the mine and has punished us as a result.
But by selling Kola, we lift the CAPEX burden off our back and we can then revert back to being a cashed up exploration company, heavily drill Dougou and look at a smaller scale ISL mine targeting production of 250,000 - 500,000 tonnes per annum. That way the CAPEX costs will be significantly smaller and the market may believe we can build the mine.
With no danger of any upcoming capital raisings and a high probability of exploration success, we would be perceived as a low risk exploration play again by the market and have a higher chance of the market re-rating our share price.
HFR has a market cap of $161 million because of the low Capex costs due to existing infrastructure yet they have ordinary grades.
If we sell to Dingyi, the Brazilian market would continue to be our target.
By getting back Dingyi's shares, we get back to ~292 million shares and with $60 million in the bank we would have a cash backing of 20 cents.
We would be perceived as a standout exploration company on the ASX as almost all explorers are struggling to raise funds.
No more capital raisings, learn from our mistakes by running a leaner operation, much simpler feasibility, no more pressure to meet the mining license, Dingyi off our back.
My concern is that we could be about to go into a death spiral where our price trends lower, issuing more shares and more dilution and the cycle continues until future share price appreciation is evaporated forever.
The market is what it is and we need to adapt to it.
Just my view.
Radioactive"
K2P Price at posting:
18.5¢ Sentiment: None Disclosure: Held
