I posted this chart a couple of weeks ago on the TA thread but got whipped as usual, apparently FA observations to substantiate and TA opinion is a no no. The chart highlights some of the longer term problems for MRQ if they cannot find something better than KM imo. 1c is both long term support (last CR and pre-Dec results resitance) but also exerts strong gravitational pull downwards because of a mid-year CR that looks needed and the huge amount of options exerciseable at 1c in Dec 2020.
The market knows that a CR after the Mar/Apr Resource Estimate roadshow is coming, and although management will be desperate to not do it cheaper than 1c the market is waiting for it. Likewise, +600M 1c oppies need funding in Dec and I doubt many want to tip more money into an already long position unless things have really taken off. Experience tells me many oppie holders will sell their heads to either fund the oppies, or buy back heads cheaper if the price falls under 1c, or just walk away. That will be a lot of selling in the couple of months leading up to mid Dec.
To support the price and try to soak up selling I expect the Scoping Study, flagged as a 6 month job, to be released close to option expiry. Build high expectations in the lead up, then hope enough of the sausage matches the sizzle on release. Similar to the MRE news, it's a fight between the news release supporting the price and an imminent CR pulling it down (600M 1c oppies is the same a a CR of 600M shares at 1c). The whole year is a battle to get the share price above 1c while old holders, early buyers, CR buyers with a free option, even vendors look to take risk off the table and lock in some profits. It's always the same with juniors, just got to hope exploration success brings in enough new buyers to balance the books. I thought the last release might have seen the price challenge 1.4c resistance but it seems 1.2c pre-release was too strong and now looks the new strong resistance line (above chart 2 weeks old)
Drilling results from KM obviously confirm a resource of >350Mt @ >5% THM so there is 160M vendor shares issued. Scoping study will be economically positive on what I see a KM (though positive economic does not mean sufficiently economic to carry debt and justify development) so there is another 360M vendor shares issued. Mid-year CR maybe 150M shares at 1c but whatever, a few more SOI. That's almost approx 1.7B shares on issue leading up to the option exercise date. Two ways things go from there. Either 600M oppies are exercised and $6M hits the bank to fund the PFS and into the DFS maybe, or another CR at much lower than 1c is required (ie share price falls below 1c so options lapse un-exercised). The price MRQ will have to pitch another CR if the market has lost enough confidence to hold above 1c will surely be much lower, which just means less funds raised for the issue of another 600M new shares. Just no other way to raise money.
Even if exploration success can drive the price up to escape the gravitational pull of 1c, it's hard to see MRQ not having approx 2.2B shares on issue in 12 months time. At 1c that is a market cap of ~$20M, at 2c $40M etc. What is the value of a junior if the exploration and scoping study if market decides results aren't good enough to attract funding or a TO? Probably $10M is too much in that case, or 0.5c. IMO this is the risk and reason sellers have kept coming at what looks on the surface such a cheap price. Even if holders from 0.5c or whatever sell at 1c they lock in 100% profit and take risk off the table. Last CR plcaement holders have a free option, so sell the heads for 1c, get your money back and sit back until Dec to see how things pan out. Vendors might also start getting cold feet with 570M shares and 90M oppies, a lot of money all riding the exploration risk train even at 1c.
MRQ remains what it has always been, a risky exploration play with market price discovery balancing the risk-reward outlook.
MRQ Price at posting:
1.0¢ Sentiment: None Disclosure: Not Held
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