Given my other post seems to be aging well, I thought I might be bold enough to post on my next price prediction and the reasons for it. In part, just to put my thoughts out there and see what discussion it sparks (and hopefully get some researched responses if I have overlooked anything significant).
So, why something as specific as 7.7 cents? That was the price of the last capital raise back on 1 February 2023.
Whilst we will never understand the inner workings of Regal and their motivations, I work on the theory that they do the things they do because they think it will make money. Therefore, when they agree to acquire $7.8 million of shares at 7.7 cents, they must have thought there was some upside from that price based on what they knew "then". We will never know what made them start selling. Maybe they wanted some funds elsewhere? Maybe they got impatient? Maybe part of their investment strategy is to immediately start selling down large holdings so they hold less than X%?What we do know, is that when Regal start selling, many buyers stay away and the price can become oversold.
So what I thought I would do was a bit of a "then" and "now" comparison. What were the circumstances back “then” on 1 February 2023 when Regal thought HIO was good value at 7.7 cents and where HIO is at "now". Those who were holding then might remember that on 1 February 2023, HIO announced both the placement to Regal and the outcome of their strategic review. So I have used that strategic review announcement as part of the "then" base.
·Plant Design and cost reduction –back then, the strategic review said they were going to conduct a deeper analysis of the processing plant design to reduce capital costs. Now, we have the results of that analysis which are both reduced capital costs and reduced processing costs.
·Improve mine economics and start up cash flow – back then, we knew they were going to look for higher grade ore at shallower depths, but didn’t know if what was there. Now, we know have shallower grade ore which will lead to better start up cash flow (and combined with lower processing costs from point above).
·General economic conditions –back then, we had inflation that was not under control, increasing interest rates and capital cost estimates that were either abnormally high or had abnormally large variances (+/- 50% instead +/- 20%) that meant it was hard to forecast the future. Now, we have capital costs that have come down and I presume a more normal range of variances.
·Project economics – back then, we had the uncertainty from the sudden BFS slowdown where we did not know what the economics of the project looked like. Whilst not now, but very soon, we will have an investor memorandum that will provide more details on the project economics based on the work that management have been doing – and I presume that they would not be getting ready to release that unless there was something positive to announce about the project economics.
So, if HIO was worth 7.7 cents at the start of the year when there was so much uncertainty, given what we know now, shouldn’t the value now be more than 7.7 cents?
