Hi Dr
As a fellow AVZ holder, I could not disagree more with your analysis in 3) above, even though it seems there are many others who do.
By your own calculations, AVZ will be left with just $6.75m (I too like to ignore any conversion of options). The following is the more recent quarterly cashflow profile of AVZ:
30 09 2016 -$0.112m
31 12 2016 -$0.163m
31 03 2017 -$0.961m
30 06 2017 -$1.548m
30 09 2017 -$1.288m
31 12 2017 -$3.623m
31 03 2018 -$6.550m (projected cashflow)
To what level exactly do you expect cashflows to drop back down to for Q2 '18 , Q3 '18 and Q4 '18, to come to the conclusion that AVZ currently is not in need of a CR?
As for myself, even if cash outflows fell back to as low as ~$1.5m/qtr, which I think is unlikely, I think a CR now is the prudent thing to do. Without any change in AVZ's "fundamentals", we recently saw the share price drop from a high of 37 cents in mid-January to a low of 23.5 cents during the recent "market wobble" (-36.5%). This tells me that even if AVZ's fundamentals are bullet proof, its share price is not. It will react to future market ructions.
I also know, that a company that has to raise funds when financially it has its back against the wall, gets screwed in the most unimaginable and despicable ways. People forget that funding can dry up even faster than liquidity and just how badly minority shareholders can get screwed in such situations.
So, unless I had an iron clad guarantee that global share markets and Australian house price are only ever going to move up over the next 9-12 months or so, I think it is high time for AVZ to raise capital and build a cash buffer, to see it through to the next few phases of exploration and development.
Risk always works both ways. By raising funds now, we might be giving up some of our hoped for SP up-side, but I for one will certainly sleep better, if I do not have to worry too much about my SP downside.
Just looking at the bulk of the posts here on HC and at point 2) in your post, it seems that market expectation is for future drilling to deliver nothing short of spectacular results. The more people talk about this, the more this is already baked into the current SP. To me this suggests that even a few disappointing drill results (or merely "good" drill results, instead of "spectacular" ones) could see the AVZ SP get slapped down - even if only temporarily.
Combine further market jitters with unexpectedly disappointing drilling results, and all of a sudden you might be looking at raising capital at prices that really really hurt.
As for whether or not this capital raising involves a new JV, off-take partners buying in, pricing of the CR, etc. - who knows? I hope that I as a nano-shareholder get to participate.
DYOT
Expand
