There seems to be a lot of drilling for equity occurring with many of the explorers lately. Whilst I agree in principal, particularly if there is an escrow period so they are not dumped on market, I can't help being a bit dubious. I want to make it very clear my comments are in general only and not specifically targeted at K-Drill as we are not privy to the facts of the deal.
I compare it to a car yard taking a cheap trade-in and inflating the price of the new car so they in effect get the trade-in for free. So, when paying 20% of drilling costs in equity, what's to stop a driller from inflating the price so that the equity becomes more of a bonus. It might sound appealing in terms of a cost saving measure, but could the company negotiate a better deal if paying all in cash? At current share price we would be giving away a lot of shares to cover 20%.
Whilst on the subject of share price I expect the price will jump if we get a decent price for the station. What if Red make an offer that is unacceptable to us, are we compelled to accept it and what if it is a good offer and we don't accept? If they make an offer and we don't accept do we have to return the $250k? If we kept the $250k when they twice failed to meet the terms the money would have easily funded this drilling program.
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