Wouldn’t it be sad if EXG announced very positive news, and no one read it because it came out late on a Friday? And yet, given the absence of recognition for such good news, that’s what appears to have occurred last week.
The company is now primed for success, as financing issues appear to have been put to bed for the last time. Operationally the company is poised to crank out positive cash flow as the couple of months of waste mining rolls off.
Think about the positive news in Friday’s announcement:
* EXG Board has successfully raised $6.8m, when originally they were seeking $4.8m and may indeed have achieved less in the current environment. That is an outstanding result. Perhaps some dilution involved (albeit less than the original GWR agreement), but at this point we should be very happy & comfortable with the increased head-room;
* 79% acceptance rate versus some initial fears by some of c.25%;
* After a slow start in the underwriting race (only one party displaying conviction), management was obviously bombarded with requests, with the high rights acceptance rate validating the underwriting demand;
* Further applications to provide funds (e.g. Carmichaels);
* Current shareholders accommodated regarding requests for extra shares via the rights issue (and don’t we love this board for trying to accommodate reasonable requests!);
That’s the good news on the corporate / funding side.
How about the mining outlook? Note that Ore production during August is scheduled to be approx. 104,000 tonnes @ 1.4g/t Au containing 4,600 ounces.
Are you looking forward to reading the constant stream of market updates as drilling at Bulletin South commences in a week or two, to expand open pit mine life?
* Staged program of RC drilling in a week or two to expand resources at Bulletin South. This is very positive as increased ounce resources means improved share value & increased mine life.
* Bulletin South mining scheduled to commence May 2017. The reminder of the strong mineralisation demonstrates the potential to expand and improve the resource and to expand the current proposed open pit design.
With the new funds to go towards mining operations at Zoroastrian & resource expansion drilling programs, and importantly the operating issues done & dusted at a time when they’re almost through the waste-stripping, we can look forward to reaping the rewards of their labour.
I would get even more excited if management secures a well-respected, high-profile individual to join the board to promote the merits of EXG to the institutional community, with obvious positive outcomes.
The current board has effectively recalibrated and reset the direction, & the turn-around that we have all been patiently anticipating for some time is now underway.
The biggest risk IMHO? When a company reaches this point - finally on the cusp of success - those who possess an insatiable greed for control could be tempted to make a challenge, robbing incumbents of the opportunity to get on with running the company versus being distracted by fending off unwarranted challenges. Are we likely to have to contend with this possibly catastrophic behaviour? With the likelihood of a constant stream of good news from here on, including seeing a bank balance by end-FY17 that will make investors and would-be acquirers salivate, acting on those desires becomes urgent & will have to be actioned in the immediate short term. Why? Because the credibility of any who nurture a desire to control the board and register will rapidly evaporate as the good news flows, thwarting their ambitions. And (IMHO) we can have confidence: positive news is about to start flowing! The risk - if such short-sightedness becomes manifest - is that key men like David Hamlyn become so tired of fending off those desiring to be the puppeteer(s) that he walks….and then where will the share price go?
These gentlemen have got us to this point despite the handicap of severe lack of capital (which exacerbates any hiccups). We should be grateful! They deserve a chance to enjoy the exciting phase we have now entered. If there are any such characters eager to wrest control from the current board, without regard for the financial consequences (though no doubt such behaviour would be sold to those who lend them an ear as ostensibly for their own financial benefit), then we will likely see their hand soon. Let’s hope reasonableness and common sense prevail, rather than lust for power, because the unintended consequence of any such grab for control doesn’t bear contemplating. If anyone wants a change of control, let them pay the control premium by making a takeover bid, rather than orchestrate a Machiavellian ploy. Meanwhile, I hope my fears are misplaced…
EXG Price at posting:
5.0¢ Sentiment: Buy Disclosure: Held
