Prospectus for the rights issue. Reads quite well with two things immediately standing out to me:
1. The board is proposing that directors be issued shares at the prospectus issue price in lieu of 3 months worth of directors fees. It has been a real bugbear to me and something I have raised directly to the company and at last year's AGM that only one board member has shares in the company. While I'm a little disgruntled that they are getting them at a low price with dilution for existing shareholders I think I will support this proposal as it potentially achieves several things:
gets all the directors holding shares with some skin in the game as their fees are effectively paying for it. This gives them something to lose and places them in the same position as shareholders.
it saves some cash - effectively a $90k cash contribution to general account.
is a statement of confidence from the directors in the quality, potential and security of the Sandpiper project. It's been a long time since UCL has had this type of statement being made. The market probably won't pick this up for now but with any luck this may prove to be a game changing statement of confidence.
while I would love to see them buying on market it does at least remove the potential risks of 'insider trading' accusations that often accompany directors buying in on market in periods leading up to significant announcements.
2. This interesting passage.
"The Board wishes to advise Shareholders that while rock phosphate prices are currently at near record levels, we do not anticipate that this will continue once the Ma’aden phosphate project in Saudi Arabia commences production which is expected to occur in the fourth quarter of 2010. It is therefore important that the Company works as quickly as possible to bring the Sandpiper Phosphate Project into production prior to this date. The Board sees the completion of the additional further work and confirmation of key historical data which will be funded by the proceeds of this entitlement issue as a fundamental step to achieving this objective."
Some reflections from this quote:
They are taking a conservative perspective on the future fundamentals of the phosphate market. Dr Reid is obviously very well acquainted with Ma'aden as his previous employer. I assume he is in contact with developments there.
It appears that UCL are of the opinion that Sandpiper can be up and running and presumably generating cash flow before the 4th quarter of 2010. If their conservative assessment of future phosphate price projections is correct then it will need to be to: a. generate maximum early profits b. maximise finance feasibility when looking for funding in a tight marketplace. The early movers will have best chance of getting
If they are correct about the price changing fundamentals then most current phosphate explorers have little chance of being up and running in time to capitalise on historically high prices. I would say from this it looks like UCL and BON do indeed have an edge. MAK may also have a chance with some of the richer portions of their NT deposits which may be suitable for direct shipping. Looks like most others that need to fund and set up land based mines and processing plants, transport infrastructure etc will have trouble.
UCL Price at posting:
0.9¢ Sentiment: Buy Disclosure: Held
