IMO, JV brings experiences, technical knowledge, and skills in the area of domain, reduce risks, and give extra financial support. It also speed up the drilling process and add value to company much quicker. TPL has vast area to explore and hard to do it alone. It will take several years to be a producer and generate cash-flow. It requires over 100s of million to explore, and develop coal mining fields. The company itself can't do any progress without debt or dilution or form-out.
The chance of obtaining debt/loan is very minimum due to worst market situation and no banks will come forward to make offer to small company like TPL, which is yet to prove their assets. It is totally ruled out.
The dilution is another possibility and it can be done anytime. However, it affects long-term shareholder if they don't buy equivalent shares on every placement. Moreover, there are already 700millions shares on market. More dilution mean less return to shareholders and more risk. They still carry 100% expense(risks) on every drill activities. I think company is planning first drilling on cy01012. The costing for drilling should be around 5-8million. To raise this much amount, they have to dilute over 50% to the existing shares. I think this is the reason they are going for JV.
The JV looks more suitable under current circumstance. The company own 100% in most of tenants. This will help company get most beneficial deal from JV. It is very good SP re-rating option in short-term. Don't you all want SP in 10+cents without anymore dilution in 6 months? Once we prove reserve, company can go for capital raise or SPP at higher SP than now.
TPL Price at posting:
1.9¢ Sentiment: None Disclosure: Held
