I thought I would share the reason as to why I sold out this morning.
1) The company will need to raise capital to explore the tenements
2) Fully diluted (including performance rights) the market cap (at 0.5c) is about $40mill so there is a lot of catch up to be made. Whats most concerning is the performance rights at each hurdle. They could significantly drain any share holder value as the shares will be issued at whatever the SP is at the time. Imagine the last 250Mill shares being issued at say 30c. That will wipe out any profits from what the last 100M tonnes of coal will bring.
3) Lastly and most concerning, the company will have to comply with Chapters 1 and 2 in May. Do people realise what this means? The company has been cleaver to not scare people by saying "consolidation as part of chapter 1 and 2 recompliance procedure at a ratio to be determined in the future". Well let me tell you what the ratio is going to be- 100:1. Yep that's right. For every 100 shares you will get 1. Your underlying value will not change but it is difficult for a speculative company to trade well with a high share price. I have just been through it with CEO (now DRG) and its not pretty. The reason for the 100:1 is the fact that all shares and exercise prices on options need to be over 20c when changing operations. Given the strike price on the options is 0.2c, they will need to consolidate 100:1 to comply.
4) There is no serious exploration to commence until after the aquisition in May so another long wait.
5) They haven't got one drill hole in any of the licenses. The transaction value has been determined based on nearology. Crazy to say the least!
That's my two cents worth. The management have looked after their own interests only and people should research further to see if they should support this deal or not at the next shareholder meeting.
SLT Price at posting:
0.5¢ Sentiment: None Disclosure: Not Held
