1. The potential dilution if the notes are converted (at a future date) is around 10%, to me not that significant given the degree of certainty that some cash will give to planned development at Engenho.
2. With some cash in the bank and if management are able to achieve the stated targets of ensuring the ramp up at Engenho, the need to raise capital in the future may be reduced as future developments could be partially funded from cashflow. To me a benefit to holders.
3. It was good to receive confirmation that there is a plan in place for the next 18 months and in particular includes a focus on enhancing management skills (something I identified as a risk in a previous post).
On the flip side, there is still a reasonable element of risk associated with the company in particular,
1. It is currently and will be for the near term a single mine company with the all the associated risks although this will be mitigated somewhat by the commencement of mining the Christa anomaly;
2. There is, as with any start up a risk around delivery of the planned strategy which may face delays for various reasosn eg. timing of equioment purchases, securing of staff and dealing with regulatory and permitting issues.
For mine I am currently willing to trade off the future potential against the risks and hopefully the future return. I will however watch closely, in particular around the delivery of the strategy over the next 12 to 18 months as I see this as key to the future of the company ad the associated sentiment that this will generate in the market.
TW
MUN Price at posting:
28.2¢ Sentiment: LT Buy Disclosure: Held
