Ann: Pause in Trading, page-70

I don't imagine people in the "doomers and gloomers" category would be "puffing out their chests" or claiming authority. Maybe they're relieved to have sold for a profit when they could (I certainly am), but most people measure their success in the market by the amount of money they make, not by how many likes they get on Hot Copper. Having been through serious financial loss myself, my thoughts are with those who are now sitting on big paper or real losses and facing further ones soon.

There is no enemy here, although it is popular to ascribe that role to people who are negative on AZY. If one is really needed to create a sense of "us vs them", I would look to the people who constantly say how great an investment AZY is. They're the ones who have encouraged buying shares and that's what has resulted in people now sitting on paper or real losses. Advocates for trading or selling down (e.g me) are not the authors of the share price decline. Nor are those talking up the stock. But I would sooner point fingers at the latter group for any losses incurred. Like a broken clock that's spot on twice per day, they may also be proved right in time.

Those who say "if you don't like the company, just sell out" are so silly and insensitive that it's only worth commenting on the obvious fact: Investors might desperately want to get out but can't afford to realise their loss.

The sucker at the table is, as usual, the retail shareholder. If you don't buy shares in the CR, your existing ones are diluted and you'll lose that amount of value which, together with the ongoing decline of the share price, will see your investment hit hard. Other than selling out and taking a loss, what choice is there but to outlay more money on this high-risk company just to try to maintain the value of your current investment? However, at least if you wait and buy on-market and not through the CR, you'll get a better price to lower your average.

So I would and will resist the temptation to buy shares in the CR. Don't get sucked in by the idea that the shares are now cheap because they've been discounted. They will go down below the offer price, as they did last time. There is a reason why fundies, sub holders and insiders have not been buying shares even as the price plummets.

The board probably did the right thing by going for two CRs – another will surely be needed before the end of 2023 as this one is not sufficient even for normal operations. Personally, I’d rather get it out of the way in one hit and it was on that basis that I thought 30-40% discount would be the offer. No doubt the discount required to raise the real amount needed would have scared off many investors. It’s bad as it is, but there will still be enough people who think it’s worth a punt simply because it's discounted. If they’d announced a CR for $20 million at 2c, it would have caused panic, and no one wants an under-subscribed CR.

But let’s think beyond “normal operations”. In order to raise about $10 million, the board is offering a share price of 2.7c. What will the share price be when $275 million is needed to build a mine and processing plant? Hmmm. That’s quite a few zeros to the right of the decimal point. Maybe the reason the board chose to do a CR now, rather than let the year play out in the hope of a big discovery that might lift the share price, is because they know the chances of that happening, and each passing week brings further share price loss. So doing the CR now – even while there's enough cash at hand to last to the end of the year – was considered smarter than waiting. It's better to offer a discount on 3.1 than wait a few weeks and discount 2.6. But it's a sobering thought for shareholders who were expecting good news from the rest of the drilling season.

The only positive I see is that it improves the chance of a takeover. That's what I'm banking on, with a one-year horizon and buying in the low 2s. I figure that within that timeframe, shareholders will not only accept, but demand a takeover rather than stick around for the next CR, and will happily vote for whatever NCM offers.