Current cash burn rate estimate MEL - $3.0M per quarter (my humble estimate) GGG - $2.5M per quarter (my humble estimate)
Planning MEL - development of CSG and convential gas field GGG - development of the Kvanefjeld rare earth element, uranium oxide and zinc field. Intention is to move to 100% ownership (by purchasing outstanding 39%) of Kvanefjeld in October 2012 with the issue of a further 74.8M shares and paying $5M cash. This will reduce cash on hand to around $17M and reduce cash backing per share from 4.5 cents to around 3.0 cents
Both companies have projects with 'lengthy' timelines. Both in my opnion are going to need to raise more cash in the not too distant future.
The intersting thing is that current minor shareholders of both MEL and GGG would appear to have received very similar treatment. MEL minor shareholders may have received better treatment even though it was still second-rate treatment.
GGG minor shareholders appear to have been given less regard than MEL minor shareholders. In the case of MEL the SPP issue was double the size of the CR while with GGG the SPP issue is one third that of the CR. There was an announcement by GGG on 25/09 to say that Bell Potter Securities had initiated Research Coverage of GGG. In the five days prior to that the shares closed in the 34-35c range. On the day of this announcement they closed at 37c after trading in a range of 35.5 to 39.5c during the day. Two days later GGG announces a CR and SPP with Bell Potter 'handling' the CR issue.
I, like so may other MEL shareholders, believe that the CR by MEL wasn't correctly priced. What is of more concern to me, however, is the continued practise of disregarding minor shareholders to their financial detriment while giving institutions and 'sophisticated' investors a free pass to (what is in most cases) easy money with minimal downside - particularly with CR issues. In the case of GGG free options were part of the CR deal but not for those participating in the SPP. These options may end up being worthless but the downside risk is NIL - it is all upside potential. I believe with any capital raising or share issue, an even-handed approach both as regards pricing and timing is needed and like compuerised algorithmic trading, action by ASIC is well overdue.
Sorry about the rant..... just wanted to share my thoughts.
These comarisons are my own research - don't rely on them for your investment decisions - DYOR.
MEL Price at posting:
20.0¢ Sentiment: Hold Disclosure: Held
