supports and resistances: mhm, page-8

On the 1st of October, I have sent a letter presented further below to the company and Tasmanian newspaper.

That day, I have been informed by the company that the wording of the announcement was to ensure the resolution to issue shares can be passed but it does not necessarily mean the shares will be issues to retail investors. I understood this to mean that some of the project partners ( Wacker and aluminium ) may wish to have a major stake in the company.

Note that the request shareholders to issue shares at a 20% discount was made when the share price was around 10 cents. This was two weeks before the news hit the fan and the stock was placed in a trading halt. The rest is history.

Therefore, the Tasmanian journalists have helped us to increase the share price issued to “sophisticated” investors from approx. 8 to 20 cents. I have been a shareholder since the IPO and have added to my significant position in the company at much lower prices. I cannot complain and understand that some individuals critical to the success of the projects may need to be rewarded and it is convenient to call them “sophisticated” investors. IMO there is nothing sophisticated about them.

If the company DID NOT have extremely good future prospects, the shares would be offered to existing shareholders. We would not be seeing large blocks worth tens of thousand dollars being bought at current prices.

I am not in a hurry to sell and believe that the TA principles - suggesting to sell MHM at 52 cents, do not work 100% of time. E.g. MOL price went from 50 cents to $1.90 within two weeks in August. Without knowing the facts and reading the announcement regarding the aluminium and silica projects it is foolish to sell – unless you are one of those sophisticated investors and are privy to information about imminent plans of the companies involved in the projects.


The letter of 1 st October:

Inconvenience of pesky journalists.

The release of information about the potential major investment from a European company regarding silica processing and offtake arrangements was not supposed to happen until the well born and well connected could get on the act.

In September the company announced a general meeting to be held in mid October asking shareholders to approve capital raising through the issue of shares of up to 36% of the current shares. The company has the right to issue further 15% of company’s shares issued without shareholders vote. This is potentially over 50% of the current shares on issue – a significant capital injection and dilution of current shareholders.

In the notice of the General Meeting (p4) we read the following: “The proposed allottees of the Placement Shares have not yet been confirmed. It is anticipated that they will comprise clients of broking firms with whom the Company has an ongoing relationship. The allottees will not be related parties of the Company.”

I wonder who are those sophisticated investors, who were to get to the trough and gorge themselves on cheap shares? Was the share placement planned for the high society of Perth or from Tasmania? Perhaps it is for the greenies and other politicians to keep them on our side?
Substantial capital gains could be expected for shareholders since the company’s current market value is only $4 million.

I believe the directors of the company have not fully informed shareholders about the company’s progress and are asking them to approve the issue of shares to other parties at a price that does not fully reflect the potential impact that the successful conclusion of the silica mining project would have on the company status.

As a shareholder of MHM since the IPO, I am disappointed but not surprised, since only a few can get rich at the expense of the majority – in this case the current MHM shareholders.

It is expected the directors will be in full damage control mode, and in the next announcement will be pouring cold water on the latest news. The share price must be managed to stay low before the share placement to the “unrelated” parties.