It was because he was worried about the market tanking . I talked with him in the street in West Perth , only few days after it was announced . We have had number of people calling/ predicting a major correction on Wall Street for some time now . He felt a bird in the hand is better than ten in the bush and who knows where the Capital markets would be next year when the funds will actually be required .
The biggest thing that kills a company in development is cashflow . We are still come years from being cashflow positive and there is a lot of costs we need to incur to advance these projects even before we get to a dfs situation and are actually building the mines/ plants / ponds . Better to take a known offer now even if it meant a little extra dilution then not take it then face maybe risk of running out when capital markets could be frozen up with fear , if a major correction did occur .
Resource Project development is a high risk game enough around exploration, firming up reserves , offtakes , process design , operating costs etc etc without being dumb enough to add extra risk to that profile by ignoring a pretty attractive capital offering so some retail shareholders can feel we haven’t been diluted as much as we otherwise could be .
Even if he had held out and maybe saved 30M shares on the register by raising at a later stage , do the maths on that if we end up with a 1.50 - 2.0 BN project plus , it’s not a big number in the scheme of things and our SOI is still tiny compared to some of our peers . It’s only a problem if your looking to trade this share for a short term profit because it took the momentum out of the stock for two months , but if your a long term holder like me , your focus is getting to the production finish line .
Now with the passing of time that scenario of a market meltdown is looking less likely and the whole lithium sector has gone even more nuts in the last 1-2 months , and likely even with a significant market correction we will still have people lining up to fund lithium projects in the pipeline given the growth in ev sales and the enormous lift in the lithium spot price , but very easy to be a genius in hindsight . He had to make a call without certainty about the future , and he and he did right thing in my view .
If you don’t think he did the right thing , spare a moment to reflect on the shareholders of altura . They had right sector and a good resource but in the context of last years prices, high operating costs . They ran out of cash and their shares went to nothing and they were sold off via receivership to Pilbara minerals ( Pls) . Pls has gone up about 800% in the last year and the very spodumene they are now selling off on the bmx auction for 2350 usd is the stuff coming from previously alturas mine that altura couldn’t even get 400 usd per tonne for last year . They went bust because they ran out of cash but if they would have survived probably just another 6 months those shareholders would probably wouldn’t have lost everything and would be like other companies now in this space well up over the last 12 months . Point of my little side story is Cash is King , and even more so when you have negative cashflow .
GLN Price at posting:
$1.31 Sentiment: Buy Disclosure: Held
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