I find the decision to raise another A$34m exclusively for...

I find the decision to raise another A$34m exclusively for drilling at this point in time curious. At the Sydney presentation on 14 September Chris Evans said that on that day Winsome had A$42m in the kitty, that the company was "well financed", that the release of the maiden MRE in January / February next year would put the Adina project among the top 5 ore bodies in Quebec and Winsome would transform from a company currently with a market cap of $300m into one with a market cap of over $1b next year. His words. Clearly CE was suggesting that he expects the WR1 share price to treble from its current price after the release of the maiden MRE. So why raise now? Why not just wait until next year to raise at a much higher price?

The idea that Winsome is going off chasing stars rather than getting on with developing a revenue flow from Adina is ludicrous in my view. If CE cannot deliver a first phase mine and plant based on a 100Mt resource then he should give the game away. Assuming they do deliver a 100 Mt MRE by February next year CE does not need a bigger resource than that for him to get on with a preliminary economic assessment and commence the permitting process.

Maybe he is chasing stars because he thinks Winsome will be taken over before they can get Adina into production and the best thing he can do is deliver as large a MRE as he can. If that is CE's thinking then that would make more sense to me.

The other angle I'm looking at is Winsome's relationship with Power Metals Group (TSXV: PWM). Winsome first bought a 5% stake in PWM in November last year, then increased that stake to a bit over 10% in March through a flow-through share transaction by PWM. Then in August Winsome swapped a couple of properties it had in southern Quebec for a bit under another 10% holding in Power Metals. So currently Winsome owns about 19.5% of Power Metals and Canada has a similar takeover rule to Australia where 20% is the maximum someone can own of a company without being required to mount a takeover.

Some notes about Power Metals: Winsome not only owns 19.5% of the company it also owns the offtake rights, Chris Evans is on the Power Metals board, Chris Evans said in the Sydney presentation that Power Metals will "soon have its own resource", Power Metals has a market cap the equivalent of about A$46.6m.

I've an inkling that Winsome has eyes for Power Metals and that this current equity raise is intended to free up some of the non-FTS funds raised back in February (back then they raised $19m FTS, $31m from a placement and $2.1m from a SPP). Effectively this raise of $34m FTS frees up the $33m or so of non-FTS funds from February. Why do they need to free up the cash? Power Metals trades on the TSX Venture exchange while WR1 is on the AXS so offering Power Metal holders WR1 ASX scrip might be unattractive to many of those holders. Perhaps Winsome could start trading on the TSXV to better facilitate the use of WR1 scrip. Or another way for Winsome to buy the 80% of the Power Metals share registry that it does not already own is by offering the holders cash consideration. Maybe a mix of both. At current prices with no takeover premium the 80% of Power Metals that Winsome does not already own has a market cap the equivalent of about A$37.3m.

Why would Winsome acquire Power Metals when they have such a winner as Adina? Not sure, but clearly the Winsome Board has been actively pursuing Power Metals for close to a year now: going on the August deal obviously they continue to like what they see. A couple of possible reasons: Power Metals' Case Lake project is in Ontario, not Quebec, and away from the bat-shit crazy regulators in Quebec who take 5-7 years to permit a project; Case Lake is is accessible year-round by road via the Translimit Road which connects Ontario and Quebec and more importantly links into southern Ontario where the Canadian car industry is mainly based; Lithium at the moment sucks so pretty much all lithium plays are a bargain, but for how much longer?; and, Case Lake is a bit more advanced than Adina and could be in a position to generate cash flows earlier than Adina.

I don't know if I like the idea of Winsome acquiring Power Metals or not. I would need convincing as my base position is for Winsome to stop mucking around and get on with developing Adina. But I do think a move on Power Metals might explain why Winsome went for a shotgun cap raise at this point in time.