I agree that there will be a dilutionary threat to consider. There always is for any project moving to construction - projects have to be funded and part of it will always come from shareholders pockets. You can't expect to buy shares in a junior explorer, especially in early stages and not have to consider dilution. This is lesson 101 for dabbling in the specs.
Practically speaking though the response to dilution is what counts. Keeping it pretty simple, the way I can see it an investor can:
i. Do nothing. Ie weigh up the value of their shares against the potential final value of their shares. If the end price is sufficiently above the current price then doing nothing could be a rational choice - just accept whatever return does come.
ii. Sell. Weigh up the current value against the future value and if not's good enough it's rational to sell.
iii. Support capital raising. Participating according to your rights will ensure that you maintain your relative weighting in the project. Your new investment will have a separate risk/reward scenario but will have the dual role of insuring your original investment somewhat.
iv. Don't support capital raising but instead buy in the market. This would be a choice to let the big boys carry the weight under the premise that capital raising MAY (but not guaranteed) lead to a subsequent fall in the price and thus an opportunity to increase your weighting relatively cheaper at the big boys expense. Doing this is still a support to the company as it can help strengthen the secondary market.
My philosophy on this is to predominantly let the big boys carry the can and seek to exploit any opportunity that might arise. So I will probably support the capital raising to some extent but look to have capital in reserve to buy on market.
The key to the hold or buy strategies is of course the quality of the project being considered. Is it a goer? Will it make money for the long term? Does it have margins of safety built in to ride the peaks and troughs of commodity cycles? I like to think Sandpiper qualifies but we need the final approvals to lock in confidence.
UCL Price at posting:
14.5¢ Sentiment: Hold Disclosure: Held
