cash in the bank, page-2

Hi Crisis

I am also a long term MHLer and hold high hopes this one willlet me retire early!!

I am not smart enough to answer your question but read what I thought was a really good post by 'Profit Taker' over at VMS thread. Copy below and thought the last paragraph was interesting re juniors and capital raising strategies.

Would be interested in any comments from some of you more intelligent types.

Cheers

TT


Profit Taker
Post #: 2510365
In Reply to msg: #2509795
IP: 165.228.xxx.xxx
Sentiment: Buy
Disclosure: Stock Held
Views: 88


Hi Shares

I can give you a corporate perspective with Opaline covering the geo side nicely as always.

Firstly, you should never expect to see any significant news in a quarterly report from an exploration company. The desire to maximise the effect of any significantly positive news necessitates specific announcements to be made. Quarterlies are simply an ASX requirement and are used to summarise announcements already released and introduce any new information that does not warrant specific release. Plus they got lost in the hundreds and hundreds of other quarterlies released. Bottom line - exploration quarterlies should have no share price effect.

Second, cash position. $2.4m at the end of December. Expecting to spend $1.5m in total or $500k a month on exploration for the current quarter plus ~$250 in total or $83k a month on admin. So we should currently have ~$1.8m in the bank and will have ~$650k in the bank at the beginning of May, two months short of the option expiry date of 30 June.

VMS management will be very much aware of the cash position-share price-option expiry relationship. As Opaline suggested, they are focusing on the project that has the greatest chance to produce results and maximium share price appreciation. Good strategy to sit on the higher risk projects at this point in time.

If they get a +20MT resource out prior to option expiry, along with other results for aeromag work and met studies, then I am confident we will see +50c by option expiry. So two months out from option expiry we should hope to see a 35c to 40c share price, if not more. Timing will be good with respect to the expected iron ore price negotiations and +30% price rise to be concluded in April.

A 35c to 40c share price will result in +90% take up of the options - the options in total will bring in another $3.75m. If at the beginning of May cash is getting tight and iron ore results are coming in as expected, expect to see management and friendly shareholders paying up the exercise of their options early to bridge the funding gap.

Point to note - as a rule of thumb, juniors will start to develop a capital raising strategy when cash reserves reach $1.5m to $2m. VMS has the luxury of the option strategy to avoid this, which is a lot easier than having to do a roadshow or prepare a prospectus. In addition, with a tight capital structure and rising share price, shareholders should not get too concerned with small capital raisings along the way. Corporately, things are very good for VMS - just need the results to support it!

So, no need to panic re the cash position!

Hope this helps.


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My posts are my thoughts only and are not investment advice - do your own research