Thank you for your answers, in particular about the Chinese capital markets requiring 51%, which is the only alternative explanation to my takeover hypothesis for that 51% stake. Can you verify that with a reference, and have you also checked on Shandong regarding their intention to finance this with a loan?
I am not sure about your comment on balance, doing the tally on this thread I see a lot more positive comments on the deal than negative, and I am not sure what you mean asking for more positive comments. I did give you a thumbs up for the financing answer though.
On the other hand if you look in the news relating to Chinese investment in Australian gold companies, there are more examples where they have taken a much smaller holding <40%, at a greater premium, and the share price has gained 25% instead of falling 25%. (I forget the name but it was on google finance news relating to FML, it was a distressed company and not as good an investment but treated better than FML)
You comment that the retail investors are selling. That was all I needed to know really, if there was still money to be made they would be buying now at prices heavily discounted to their original investment. Why on earth would they sell if there was a chance that FML was going up past 7c in the next 6 months as some people on HC have posted? The retail investors will be privy to more information than we are on Shandong and Chinese investment.
Other comments relating to how beneficial the money will be, I can not disagree with, and I think I posted that before. However you assume Shandong has no interest at all in owning the whole company, and will invest to the benefit of all shareholders and we will all share the rewards. I think if FML is going to benefit so much from the financial injection, and Shandong believe this, they would be fools not to step in before the profits come and take it all for themselves.
If the Australian management is important for the success they can be kept on with generous retainers no matter who owns the company. If FML is going to do well and Shandong know this and want to be able to take over then they will not want the share price to go up or any returns passed on to investors before they own the whole company. I can only conclude that if the share price continues to fall, it is unwise to hold on anticipating the generosity of another company.
I am also unsure what the rush for capital is, if the company is still forecast to be cash positive to the tune of $300M over the next year anyhow there will be no further capital raising without some solid exploration results from that $300M. Looking at the sentiment history of most people who are and always have been positive, they appear to have been holding since the price was 7c or more. Expecting a modest 50% return on a high risk investment you must have expected the share price 10c+ or more. Buying now, with the dilution from Shandong and a price of 3.8c you are now requiring your investment to gain 200% to make the same return, or if holding you have already lost close to half your investment capital without changing your opinion on the company.
Looking at what has happened since CRL takeover, even though the company has met its targets regrading production and cash costs, and is now cash positive at all mines. The company is saying it requires a huge capital raising, in addition to spending the $300M cash it plans to earn from operations over the next 2 years. In this time the share price has halved, investors are loosing money big time using a hold no matter what strategy. If the share price continues to fall much below where it is holding at 3.8c then I am out again until another opportunity arises. There may well be an opportunity to come back in later.
We will see, but until then I guess we agree to disagree until the hand plays out.
FML Price at posting:
3.8¢ Sentiment: Hold Disclosure: Held
(20min delay)