@eshmun Now, let’s talk about dilution, liquidity, share prices,...

@eshmun

Now, let’s talk about dilution, liquidity, share prices, comparisons.....

In response to one of your previous posts: we all understand ‘dilution’, you don’t have to worry about that, and there are no lessons to be learnt. Here is the impact of a dilutive Capital Raise in a recent Change of Shareholding Notice:



Van Eck bought more shares and ends up owning less of the Company, meaning it is entitled to a lower share of all future profits (or losses) blah, blah, blah.

Moving on,
You’ve made comparisons of our share price to other Gold Miners and asked why we haven’t moved with the rising POG. Have DCN, GOR, RSG gone anywhere the last couple of months? RSG has made a little recent comeback (more connected to some solid Announcements) but all still languishing well below yearly highs.

Let’s talk about your favourite subject - DILUTION.

Imagine (if you will) this discovery - M1South in particular, was made in Australia. Imagine also, that M1 was discovered early on, so no mid-life direction changes (with associated cost and delays to timeline).

How much hype around this Project if it were in Australia? Imagine the liquidity, the Institutions fighting to take a piece of the action early on. Having bought in, are Investors more likely to hold onto their shares or sell out at every opportunity to limit risks? Would Investors be worried they would not be able to re-enter at a later time at lower prices if they sold down, or would they be de-risking every chance they got? Would the shares become overpriced like most quality assets on the ASX or would the shares be avoided due to deteriorating sovereign risks?

Now, how do you compare the shares on issue at, say, Dacian to the shares on issue at WAF?

At all stages in its life, over many years, Institutions are more likely to compete for, and invest in DCN shares because of perceived risks, and just as important, because of the liquidity available in its shares. If M1 were discovered in Australia it is quite conceivable that the Company’s share price would quickly climb to the one dollar mark with low shares on issue.

Let me repeat this:
At all points in the Company’s life, over many years, the share price would be materially higher in Australia than it would for the same discovery in Burkina Faso!!! I’m talking multiples better! The effect is cumulative and devastating on the number of shares metered out to raise funds.

You tell me, M1 discovered in Australia, could already have a MC of $500 mill. with as low as 100mill shares on issue. That’s a share price of $5! With early and sustained hype would that not be possible? So to raise $50mill you would be issuing 10 mill shares in Australia vs 200 mill in BF. As I said, cumulative and devastating.

Now, maybe things haven’t worked out as you expected. I assume you wanted the opportunity to de-risk having gambled that we would be getting a lot of good news and share price would rise strongly. It didn’t happen. The only way Sprott could get a decent parcel of shares was to do it off market, as part of a Capital Raise. Was the Capital Raise a condition of the debt funding. I think that’s obvious. You yourself have said that some level of Equity raising would be prudent and desirable. The Financiers would have required it, just as the Banks require someone taking out a big mortgage to put up a big deposit. We were forewarned that the Company would also be taking a prudent approach (see Macquarie Analyst Report back in June I think).

Though the share price of the Capital Raise is low, and the number of shares issued excessive, this is the price we paid for playing in BF. The risks are being managed effectively in my opinion, some chips were left on the table, we raised an extraordinary amount of money at a difficult time, and we move on. It’s way too early to right this Company off. Do the rewards justify the risks, that’s a matter of opinion, but I’m more than happy with Management and our progress at this time.

P.S. Sorry if my post is jumbled or doesn’t make sense as I’m very tired and in need of a good sleep.

P.S.S. Sorry if I was condescending to you by saying ‘it will be ok’ to you in my posts a few weeks back. It just seemed you were experiencing some level of mental anguish at that moment. Either that or too many wines on a Friday night.

Cheers,
Just my opinions.