I was at first pissed off with the lack of warning that more cash was needed.
I was very disappointed like everyone else to see the trading halt announced so quickly after the very positive first cash flow announcement and presentation. I was comforted by the fact they were not market sensitive which I thought was telling us not to worry about the fault reducing the mining inventory.
On reflection I think they were telling us not to get too excited, while informing the market where things were at.
After a stiff drink I thought how could they have done it differently. Would we have been better served if they had said we will need to raise a bit of capital to get the best out of this, not sure yet, how much we need and how much we can raise without smashing the price right down, but will get back to you as soon as we know. It was too early for a trading halt and mum is the only word until then.
Hi Ebor,
Sorry you are not seeing the benefits of having 8.7% more punters fully funding the search for the big one. There a fair chance we might catch it. Sharing twice as big a catch with 8.7% more punters is a no brainer. The other way of looking at it is share price was 9c in December and would likely have fallen well below 6c if we hadn't bought in more investors. the rise after the announcement was a blip that disappeared after the few who were excited by it ran out of cash.
Hi AFD
I forgot to express a view on the future need for CR's.
It depends how the board decides to skin the cat.
There is no apparent need for more capital raising to get to 40% capacity if all goes to plan.
Increasing production to circa 60% capacity will likely involve developing Emily Star and North Kavanagh. Thats far enough down the track to accumulate enough free cash flow from operations to fund it.
Ditto Increasing production further by developing the deeps.
With only $10m in the bank the unexpected could pop up. The further along the track we get the better able the company will be to digest the odd set back when they occur without raising capital. One of the measures of a good mining investment is a decent rainy day cash reserve.
One of the major benefits of being listed is almost immediate access to capital. That was demonstrated in march last year and again today with $10m hitting the bank.
Going forward there is of course the question. Are shareholders better off not getting a dividend so the company can invest profits in expansion?
If that means hoarding franking credits shareholders may be better served if they pay a high proportion of profit in dividends and raise capital for expansion.
Companies who pay dividends backed by underwritten reinvestment plans have decided getting the franking credits out by paying the dividends is in shareholders best interest. And it is for shareholders who are taxed at less than the company rate and a zero sum game for companies who are invested. Very few people pay more than the company tax rate. Maybe a few more after Chalmers broken promise.
Companies who don't have franking credits are probably best not paying dividends and saving their share holders tax provided they can invest the before tax cash better than the shareholders can do investing whats left after tax..
Sorry there is no simple answer but isn't it good to have options and not be driven by necessity.
HGO Price at posting:
6.1¢ Sentiment: Hold Disclosure: Held
