Nice to wake up knowing the likelihood of going broke before we get started is no longer a major concern. How good is it to own a smaller chunk of a going concern than a bigger bit of a vague possibility.
I have been trying to digest a couple of bits of the puzzle.
The Issue Price :
I guess we view the 5.3c as a figure driven by the current share price which on that basis would likely have been higher had the New Mine plan been released a week before the price was set.
I am inclined to think the issue price like all investment decisions is driven by the investors hurdle rate of return. Its relationship to the asset values and market price is of no real world significance.
The SPP:
There are a couple of issues with a SPP. The big negative in comparison to a placement is of course the lack of certainty. Sufficient funds to do the job comfortably need to be raised with certainty in the placement. The size of the SPP is a real balancing act because unlike a rights issue it further dilutes larger shareholders because of the maximum individual shareholder contribution of $30,000.
In this instance share holders who own less than 850,000 shares can possibly get ahead if they buy $30,000 worth.
Shareholders with more than 850,000 shares are forced to suffer more dilution.
As the SPP is raising extra cash that is considered unnecessary to get the job done a big SPP issue is not good from a total business perspective. Hopefully $3m is enough to get the small shareholders set and not enough to unnecessarily further dilute larger shareholders.
HGO Price at posting:
6.4¢ Sentiment: None Disclosure: Held
