I do believe that CC (or "Helicopter Chris" (HC) as I now think of him) is well intended and isn't deliberately trying to marginalise shareholders - I'm just not sure I agree with the order in which things have been done over the past year or so.
HC is conservative by nature and capital is the life blood of a business, and less than 12 months ago capital was extremely hard to come by. HC also has an exploration bent and I can see that he wants to have the exploration slush fund well stocked while the mining progress is in place.
But apart from the direct impact of the dilution on share price and market capitalisation, there are a couple of other factors that worry me here.
Firstly when a business is flush with cash then tight capital management can often take a back seat and it becomes easy to squander money rather than carefully prioritise both corporate expenditure and focus.
Secondly while I appreciate a conservative approach to business as being important, it is also true that a level of innovation and risk taking are often a significant part of growing an exceptional business - so I hope that we're not being too conservative/cautious here.
In the announcement there was mention of potentially constructing a maxwells decline - there are other areas of potential early expansion that we know of as well - so if this funding gives them the ability to take a more aggressive approach to the mine development (as well as a focused and carefully managed exploration program) then that will reap its own rewards.
From a logistical perspective it will be important to have the right people focused on both areas in order to ensure maximum effect for minimum capital. Installing the right people into these sorts of roles is always a challenge but if they succeed then there is certainly room to get good bang for buck out of this additional capital.
On the operational side the potential opportunities include: * Utilising higher gold prices to kick off with a larger pit footprint at Salt Creek * Putting the second ball mill into the plant much sooner * Feeding the expanded plant not only with Salt Creek and Maxwells open pit ore but also Maxwells and potentially other underground ore - as well as developing other satellite pits early.
To enact an aggressive production program like this does involve a level of risk taking because an expanded mining and production program from the outset also means that reserves will be depleted at a more rapid rate thus meaning taking a punt that exploration success will ensue - but they would arguably be taking far less risk on this front than some of the others in the area like FML, SLR, RMS etc.
Still I worry the risks of trying to run a focused exploration program alongside a focused mine development program. Although I still believe that this will turn out to be one of the best gold projects in Australia, the dilution, combined with the debt and possible hedging, means that it may take longer for value to be realised here.
IGR Price at posting:
25.5¢ Sentiment: None Disclosure: Held
